Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Breakout Stalls

Commodities / Gold and Silver 2010 Apr 18, 2010 - 04:00 PM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleFor a while gold looked like it was breaking out, but several of the important conditions for a successful upside breakout that were explained in the last update 2 weeks ago were not met and on Friday gold turned sharply lower. Although Friday's drop is thought to mark the start of a reactive phase, it is considered likely that it will prove short-lived as the overall picture for gold remains positive.


On its 6-month chart we can see that after a 2-week rally gold stalled out near the upper boundary of the zone of resistance capping the trading range of recent months, and it can be argued that after two weeks of good gains it is entitled to a reaction, which - provided it doesn't carry too far - will put it in better technical condition for a successful breakout and sustained advance. It looks like it is starting to advance away from a Head-and-Shoulders bottom and moving averages are in bullish alignment, so the time is right for a major uptrend to begin, once the current reaction is done.

If we run through the conditions that require to be met for a successful gold breakout, that were set out in the last update, we find that none of them - so far - has been conclusively. Silver needed to break above its downsloping line of peaks of recent months. It has failed to do so and broke lower again on Friday and has further short-term weakness in prospect.

The dollar has broken down from its uptrend, but the break thus far remains marginal. Action in the dollar suggests that it may be forming a top area following its substantial rally from early December through mid-late February. If true this augers well for gold which generally has the wind at its back due to global money supply expansion.

PM stocks have been unable thus far to break back above the lower boundary of their uptrend and of course dropped significantly on Friday along with the market as a whole. However, sentiment towards the sector remains awful, which is bullish, and moving averages have swung into bullish alignment, so we could see dramatic upside action once gold and silver turn up again. Certainly the charts of many PM stocks look most auspicious at this time, which is why a clutch of them were recommended on the site over the past week or so, despite the HUI index not breaking back into trend.

In the last update the point was made that a genuine upside breakout by gold should be accompanied by a high volume breakout by thje GLD ETF. This never happened, so the champagne is still on ice. Instead GLD dropped on increased volume on Friday, so we might see some downside follow through before the sector turns higher again, although probably nowhere near as much as many as now expecting.

Finally we should note that gold did break out upside from a 3-arc fan correction pattern. It very often happens with these patterns that following a breakout, prices react back to support at the 3rd fanline boundary. This is certainly worth knowing as it gives us a potential target for the current reaction, which if reached should prove to be an excellent entry point. The short-term reaction scenarios for both gold and silver should synchronize with the fallout reaction anticipated in the broad market as a result of the impact of the Goldman Sachs scandal, as set out in the article on the site on this subject.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2010 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

© 2005-2022 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