Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold September Trend Forecast For Huge Rally Following Mid Month Low

Commodities / Gold and Silver 2010 Sep 08, 2010 - 02:01 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleLike the song says - See you in September - the ninth month has notoriously been the strongest calendar month for gold. Rather than accept this blindly as Gospel Truth, we have decided to delve into this in detail to see what factors could be used to explain this phenomenon.  After all, statistics can sometimes be misleading, for instance if someone owns a dog that does not mean that they both on average have three legs.


We studied the charts for a ten-year history of gold prices. The most obvious pattern through the decade is the presence of an August corrections in nearly every one of the ten years. So is the September rally nothing more than a reversal of the August downturn? Not necessarily, as there are also fundamental patterns involved, but the move is generally amplified by the fact that gold was correcting in August, and that it is ready to rally. If so, then the September effect could not play out in the way many investors expect it to (immediate surge in prices).

The months of August and September have been outlined as the focal points. Please take a look at the Gold chart for 2002, for example (charts courtesy by http://stockcharts.com.)

Now let’s take a look at 2003 below. There was clearly no August correction in that year, and there was no clear rally in September. In fact, the August rally resulted in a September correction. Does this seem at all similar to 2010? Have we not seen gold rally for the entire month of August?

Now, let’s examine another possibility. Perhaps investors have been waiting to see a September rally based on historical trends. The thinking might go something like this:  if there is going to be a huge September rally then why would I sell just before it? It is quite possible that if higher prices are not seen very soon, these investors will reluctantly liquidate their positions and this could be the impetus for a bigger correction in gold’s price. The outlook for gold appears to be more bearish than bullish - taking the next 1-3 weeks into account - when all these factors are considered.

There is another fact that simply cannot be omitted. On average, the rally starts in the middle of the month, as you can see this clearly on the chart below.

Please note that even if we agree that gold is to rally in September and the rally will be strong - the odds still favor that taking place in the second half of the month.

Having briefly commented on the situation in the yellow metal itself, let's move to the mining stocks.
 
Last week we've seen that gold stocks again failed to move above the rising resistance line. This is quite similar to the scenario for gold itself in recent days. No decisive - although impressive on a day-to-day basis - move higher has been accomplished either. The prices of precious metals stocks did move higher in the past days, but they did not break above significant resistance levels yet. We will look at the short-term chart for more details.

In this week’s short-term GDX chart we see that mining stocks are right at the multi-month resistance level, which is indicated by a red line on this week’s chart. In addition, the rising resistance line was also not broken. The indication here, therefore, is that lower prices are likely before any additional rally can materialize. Furthermore, lower volume levels may be an indication that buying power is drying up which would further support a likely decline in prices.

There seems to be some indication at this time that points to the possibility of a huge rally following the likely correction which we have been discussing. One factor, which supports this hypothesis, is the possible formation of a cup-and-handle pattern in our chart. The cup portion of this pattern would actually be where we are today and the handle would be formed by a correction, which we see as a real possibility very soon. The likely bottom would then follow in mid-September with a subsequent rally in the weeks to follow.

Although this is quite speculative as of now, we are looking at all possibilities and feel that this is worth mentioning due to the positive risk-reward ratio, which it would present.

This week we showed Subscribers to our Premium Service the Gold Miners Bullish Percent Index, which we find to be a reliable way to analyze current trends. The Williams' %R and RSI showed us that we are in the overbought territory. The indicators gave our Subscribers the timing for what we believe will likely be the local top.

Signals coming from the mining stocks indicate that a correction is very possible and may be seen very soon. This will quite possibly provide excellent opportunities for investors to enter the market with favorable risk-reward ratios and tremendous profit potential. We will continue to watch for these developments daily and inform our Subscribers accordingly when the situation warrants.

This week we received an interesting question from one of our Subscribers. He wanted to know if technical analysis is still reliable when global fundamentals are changing, things like quantitative easing, Europe's problems, China's rapid growth, etc.

The most important fundamental that does not change over time is human psychology and emotional behavior of individual investors. This is something by far more stable than even several bouts of quantitative easings. China's growth will not cause people to stop being greedy when they see higher prices and fearful when they see them decline.  Europe's problems will not cause people to act by means of cold logic alone. Technical Analysis's foundations are based on real mechanisms, which are inherent part of human nature, and that is not something that is going to change anytime soon.

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

© 2005-2019 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

6 Critical Money Making Rules