Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
The Fed Can't Stop the Commodity Bear Market - 1st Aug 15
Meet the Leader Who Turned Google Into a “Buy” - 1st Aug 15
The Greek Coup: Liquidity as a Weapon of Coercion - 1st Aug 15
Gold’s Amazing Resiliency - 31st July 15
Silver – A Century of Prices - 31st July 15
Demand for Gold Bullion Surges – Perth Mint, and U.S. Mint Cannot Meet Demand - 31st July 15
Reasons Why the Greek Crisis Will Only Get Worse - 30th July 15
The War On Cash: Why Now? - 30th July 15
Greece - The IMF Experts Flunk, Again - 30th July 15
Threat Of Cyber Warfare the “Other Reason To Own Physical Gold” Warns Rickards - 30th July 15
The 5 Biggest Myths and Lies about the Middle East - 30th July 15
Greece, Diversion, and the New World Order - 30th July 15
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15
Will Crude Oil Price Decline Continue? -Video - 28th July 15
Gold & Silver Money Has Devolved Into Debt and Plastic - 28th July 15
Buy and "Own Gold Krugerrands" Says Money Expert Jim Grant, Very Bullish on Gold - 28th July 15
How to Protect Yourself from China's Crashing Stock Market - 28th July 15
Quantum Geopolitics - 28th July 15
Gold Mining Stocks to Weather the Storm - 28th July 15
Stock Market Bulls Beware! - 28th July 15
Will Chinese Stock Market Crash Affect the US? - 27th July 15
Crude Oil Price Under $48! - 27th July 15
Are We Seeing a Trend Reversal with U.S. Interest Rates? - 27th July 15
How to Know When the Gold Bear Market is Over - 27th July 15
Gold Bear Market Phase III - 27th July 15
Silver Bull Hammer Buy Signal - 27th July 15
Gold Cracks Support and Plunges to New Lows - How Low Will Price Go? - 27th July 15
Commodity Markets Breakdown Of 2015 Is Now A Fact - 26th July 15
Gold Price at a Five-Year Low: Here’s What to Do - 26th July 15
Stock Market Primary III Inflection Point - 26th July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

Gold Prepares for Breakout as Stock Market Trends Towards a Crash

Stock-Markets / Financial Markets 2012 Nov 12, 2012 - 05:44 AM GMT

By: Clive_Maund

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleWe exited our short positions in gold for a modest but useful profit when it broke out of its downtrend towards the end of October. It then broke sharply lower on heavy turnover in a move that looks capitulative, but afterwards turned and rose quite sharply over the past week. So the question now is “has it bottomed?” Although the answer to this question is “Yes, it looks like it has”, it also looks like it may back and fill for a little while to complete a base pattern before a sustained advance can get underway. COTs, particularly for silver, continue to give grounds for caution and warn that the current turn may be the B-wave trap of a A-B-C correction. We are aware of this danger and place stops accordingly to protect us from it.


We can see the latest action on the 6-month chart for gold below. Gold didn’t quite make it as far down as our earlier defined downside target at $1660 in the vicinity of its 200-day moving average, but reversed at a good point for it to do so, just above this key average. Action last week certainly looks positive, with it rising day after day on good volume, but by Friday it was looking a bit tired with a “doji” forming just beneath its 50-day moving average. This implies that it may take a breather here and back off a little to form the Right Shoulder of a small potential Head-and-Shoulders bottom. This would be a “nice” thing for it do technically, as it would set it up for a strong rise, and it will be nicer still if it does just that and we buy on such a short-term dip. We therefore look to buy or increase positions on a short-term dip towards $1700, say in the $1705 area, with a stop below $1695 to protect us from the C-wave risk mentioned above, or alternatively on a closing break above $1742 if the advance continues, with a closing stop at about $1718, which reduces the risk of a whipsaw – unless that is the dastardly cartel are reading this.

On the 3-year chart for gold we can see that overall it remains stuck in a large trading range bounded by the nearest support and resistance shown, although the way it has reversed near its 200-day moving average looks positive. This chart makes clear the importance of the resistance approaching the $1800 level, as this level has turned the price back 3 times already over the past year. What this implies is that if it can succeed in breaking above this level it should then act as a foundation for a breakout to new highs leading to a major new uptrend.

The latest COT chart for gold shows Commercial short and Large Spec long positions continuing to ease from the extreme levels of a few weeks back which all but prohibited further advance. Positions are not yet at levels which can be described as bullish, but at least there is now room for renewed advance. Other than this observation, the latest gold COTs are not much use in predicting the immediate outlook, although the silver COTs continue to give grounds for caution.

Precious Metals stocks are still in a clearly defined downtrend that began in mid-September, as we can see on the 6-month chart for the HUI index below, and would be buyers should generally wait until we see a clear breakout from this downtrend before moving into the sector, and then quite close stops should be set to guard against the risk that the breakout is false move.

Of crucial importance for gold and silver, and just about everything else, is the outlook for the dollar. It has been picking up in recent weeks, as we had expected, but now it is showing signs that its recovery may be petering out at a somewhat lower level than we had earlier expected. We had earlier figured that the dollar index would rally to a target at about 81.70, close to its high of last January, to complete the Right Shoulder of a Head-and-Shoulders top as shown on its 1-year chart below, and it still could, but the action in gold in recent days suggests that it may be about to top out here, just beneath the zone of resistance shown.

If the dollar rolls over and drops here, in addition to giving the Precious Metals a boost it is likely to trigger a sharp rebound in the broad stockmarket, which is now quite deeply oversold as we can see on the 6-month chart for the S&P500 index below. This was why we hastily took profits in our broad market bear ETFs on Friday.

Although such a rebound may now occur, the longer-term charts for the broad US stockmarket look pretty awful, which is hardly surprising considering the prospect for shriveling corporate profits and the looming Fiscal Cliff, so it the broad market rallies we will probably go back into our shorts.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2012 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2015 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

Biggest Debt Bomb in History