Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14
Sheffield Roma Crisis School Place Application's Fraud Perfect Storm - 17th Oct 14
Stock Markets, Commodities and Indicators - 17th Oct 14
“Save Our Swiss Gold ” - Game Changer For Gold? - 17th Oct 14
How to Trade the Ebola Stock Market Sell-Off - 17th Oct 14
When... Not if... Crude Oil Price Drops Below $70 - 17th Oct 14
Either You're The Butcher or You're The Cattle - 17th Oct 14
Gold Benefits from Market Uncertainty - 17th Oct 14
Stock Market Pullback Underway, Euro downside, Commodities - 17th Oct 14
Stock Market Seven Year Cycle and A Correction Ahead? - 17th Oct 14
Three Ways to Play Uranium: Top Stock Picks - 17th Oct 14
America Flirts With Deflation - 17th Oct 14
Why the Fed Should Consider Delaying the End of QE - 16th Oct 14
Gold Prices Since 9-11 - 16th Oct 14
The Inflation Imputation, Dear Saver, May You RIP - 16th Oct 14
Flight To Safety - Gold Rises As Stocks, European Bonds Sink - 16th Oct 14
The March Of History And The End Of Nations - 16th Oct 14
Stocks Bear Markets Move Fast and Are Intensely Emotional - 16th Oct 14
Stocks Got Their Piece – Now It’s Our Turn - 16th Oct 14
Why This Stock Market Selloff Is the Next "Buy the Dip" Opportunity in Stocks - 15th Oct 14
Possible Stock Market Runing Correction - 15th Oct 14
Get Your Tactics Ready for the Ebola Stock Market Event - 15th Oct 14
Secret Scheme To Manipulate Silver Price - Lawsuits Against Banks Proceed - 15th Oct 14
Stocks Bull Market Over? Trend Forecast to End Jan 2015 - Video - 15th Oct 14
Stock Market Dow The Contrarian Play - 15th Oct 14
The Ukraine, As We Know It, Is Gone Forever - 15th Oct 14
We Can Police the Dark Web / Bitcoin - 15th Oct 14
The Safest Stocks in the World - 14th Oct 14
Building an Ark: How to Protect Public Revenues From the Next Financial Meltdown - 14th Oct 14
9 Ways to Retire Rich - 14th Oct 14
Silver, Warfare and Welfare - 14th Oct 14
Swiss Gold Referendum “Propaganda War” Begins - 14th Oct 14
What Happened To The Fourth Estate? - 14th Oct 14
How To Blow Up OPEC In 3 Easy Steps - 14th Oct 14
Investment Myth - Wars are bullish/bearish for Stocks - 14th Oct 14
Powerful Reversal and Shakeout in the Junior Gold Mining Stocks at May Lows Around $33 - 13th Oct 14
When The Economy Went Ponzi - 13th Oct 14
Stock Markets Get Ugly – and May Be Getting Uglier - 13th Oct 14
Cycle Failures Point to a Stock Market Correction - 13th Oct 14
Bill Ackman: I'm not a Crybaby Shareholder - 13th Oct 14
U.S. and World Stock Markets Chartology - 13th Oct 14
Stock Market Intermediate Downtrend Confirmed - 13th Oct 14
Gold and Silver Price To Rally Or Not To Rally - 13th Oct 14
Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - 12th Oct 14
Has Obama Changed His Mind About Syria? - 12th Oct 14
New Zero Bound Only Game In Town - 12th Oct 14
The 5–Year U.S. Treasury Bond is Emblematic of Careless Risk Taking in Bond Markets - 12th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Gold and USD Index Analysis Again Provides Key Trading Signals

Commodities / Gold and Silver 2010 Apr 04, 2010 - 11:13 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleIn the March 26th commentary we wrote that given the historical significance of the RSI being at 70 and the fact that the USD Index has just touched the 50% retracement of the previous rally leads us to anticipate that the recent USD Index rally will stall out and retrace. In addition, a rally for PMs and PM stocks is looking more and more probable.


Since this is exactly what happened, we believe you might want to read our thoughts regarding U.S. Dollar's and gold's next move. Let's begin with the long-term USD Index chart (charts courtesy of http://stockcharts.com), which is once again the main driver of PM prices (we will write more about that particular topic in the following part of this update).

In the previous Premium Update we emphasized that the Fibonacci 50 percent retracement level of the previous (2009 Mar - Dec) decline. Key Fibonacci levels have historically been reliable in identifying key support and resistance, especially on the U.S. Dollar market.

Consequently, the U.S. Dollar moved considerably lower - visibly below the trading channel. This non-confirmation of a breakout is a bearish sign for the USD Index, and a bullish one for the PMs. Please note that once again the RSI at 70 meant a local top in the U.S. Dollar and a local bottom in gold and silver.

Another bullish signal for gold comes from the analysis of its correlation with the U.S. Dollar.

The correlations of the U.S dollar is starting to become more and more aligned with the metals sector, which is something we were looking to see develop as this is what we've seen in the gold / USD markets right before the huge September - December 2009 rally.

Please take a look at the 30-day column at the values of correlation coefficients for USD and gold / gold stocks - they are significantly negative for the first time in the last several weeks. Moreover, at the same time, the correlation between gold / gold stocks and S&P 500 is much lower. This means that gold and corresponding equities are once again mostly USD-driven in the short run.

Silver is still highly correlated with the general stock market, but it doesn't invalidate points made above, as silver tends to move closely with stocks because it has multiple industrial uses.

Therefore, the correlation matrix shows further evidence of the return of the highly negative correlation between USD and PMs. Additionally, the link between gold, mining stocks and the general stock market is much weaker than it was the case during the past several weeks. As mentioned earlier, this is positive news for PMs, because the return of this correlation is what we expected to see before the next big move up.

In our previous commentary we've summarized that the bullish analysis of gold is definitely still intact given the strikingly similar pattern in place back in August of 2009 where we had some consolidation followed by a significant rally.

Please note that the similarity is visible not only in the price itself but also in the RSI and Stochastic indicators. Based on the above chart it seems that even if we are going to see gold move a little lower from here, it will not change the bullish implications of the pattern. Let's take a look at the short-term chart for more details.

Looking at the short-term chart do not anticipate for the move to be immediate. Sure, it may be the case that gold rallies right away (that's why we had mentioned opening long positions in metals), but based on the similarity to the late August 2009, it seems that we may see gold moving slowly higher instead of rallying immediately. This means that if we see a small correction that takes gold $20 lower or so, it should not make you worried. We will let our Subscribers know if we believe that higher prices are not to be expected in the short- and medium-term.

Summing up, the situation in gold is still bullish - the technical analysis patterns are in place, and the strong negative correlation with the U.S. Dollar serves as a confirmation. Over 6-times bigger version of this essay with many important charts, ranking of juniors, comments on the physical PM market, and - most of all - timing details for the end of the current rally in PMs is available to our Subscribers.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014