Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
This New Currency Could Wipe Out the Euro - 28th May 15
US Housing Market - Something Smells Fishy - 28th May 15
US Economy – Semi b2b Amps Up its Trend - 28th May 15
U.S. Fed Exported QE Travesty: Meet The BLICS Nations - 28th May 15
World War D—Deflation - Secular Bear Markets Analysis - 28th May 15
George Soros Warns of “Third World War” - 28th May 15
Why You Shouldn't Try to Invest Like Warren Buffett - 28th May 15
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

COT Warning of possible near-term top in Gold and Breakdown in Resource Stocks

Commodities / Gold & Silver Apr 23, 2007 - 11:40 AM GMT

By: Clive_Maund

Commodities

Resource Stock investors have become increasingly excited as gold, silver and oil have advanced over the past 7 weeks or so, with the usual cheerleaders advancing plausible reasons why gold and silver will soon break out to new highs. However, as we will shortly see, big money is positioning itself to fleece the little guy yet again, with the same old music playing over, as it has done countless times in the past.

On shorter-term charts all seems to be OK - gold and silver were wildly overbought after their strong run in late 2005 and early last year, and were entitled to take a lengthy breather to let the extremely overbought condition unwind, and as they now approach the highs of last year they are nowhere near as overbought, and thus on the face of it, they appear to be ready to break to new highs at last.


On the 2-year silver chart, however, although the uptrend shown can be seen to be holding thus far, there is a clear loss of upside momentum indicated by the succession of lower peaks made by the MACD indicator shown at the bottom of the chart, and on the 10-year silver chart included in latest Silver Market update the uptrend from September 2005 looks unsustainably steep, as does the parallel uptrend in gold. This increases the risk of a breakdown, which would lead at least to a more protracted period of consolidation before prices can challenge the highs, and it must be acknowledged that there is some risk of both gold and silver double-topping here with their highs of last year.

We are clearly at a pivotal juncture, with both gold and silver poised to either break out soon to new highs, or top out at or near those highs and break down, which would lead at best to more protracted period of consolidation before the highs could be challenged again, or at worst a bear market. So, which is it likely to be? - there must be something that can assist us in making a decision as to which of these scenarios is most probable. Fortunately, there is - the COT charts.

We have already observed the decidedly bearish COT chart for crude oil in the latest Oil Market update published yesterday, and as Precious Metals and Oil have a marked tendency to move in tandem, this is not a good omen. Bearing this in mind, we will now look at the COT chart for gold. On this chart we can see that the Large Spec long positions and Commercials' short positions are at their highest level since July last year, with the exception of a point late in February, which preceded a brief but quite severe plunge by gold and silver late in February and early in March. The writer does not know of an instance where such a setup was not followed by a significant reversal. It is viewed as VERY BEARISH, and the most that can be hoped for is that gold and silver edge still higher over the short-term towards last year's peaks, or even stage false breakouts above them, before the trap closes. The COT chart for silver is similar although it is not as bearish as the gold COT.

On the 2-year XAU index chart, we can see that although it has just backed off again from a key resistance level, good prices are still on offer for most gold and silver stocks. On the basis of what is written above and what is staring you in the face from the COT charts, you don't have to be Jesse Livermore to figure out the right course of action with regard to holdings in the sector.

Advice relating to specific stocks and Traded Options follows for subscribers…

 

By Clive Maund
CliveMaund.com

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.


© 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