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Gold - The Correction is NOT Over !

Commodities / Gold & Silver Aug 15, 2006 - 09:35 PM GMT

By: Nadeem_Walayat

Commodities

After peaking at over $730, Gold corrected to 540, and the subsquent rally brought gold right to the 61.8% Fibanacii retracement which held ! This strongly suggests that gold has further downside to go, before it can resume the bullmarket.....


1. Trend lines- Likes along the uptrend line along the June lows currently at 545. If this breaks then along the peaks at 510, with the major uptrend line support at 470, which has to hold for gold to stay intact.
2. MACD
- (Bottom indicator) Clearly shows the overbought state that gold has been working off, the trend suggests that the MACD would need to get to zero before that overbought state would be fully worked off and a resumption of the uptrend is possible.
3. 40 week Moving Average
- Gold has already once held the 40week average during the June low, with the current the current level at approx 590.
4. Support -
Key support levels on the chart are 530 and 455.
5. Resistance -
Is along the downtrend along the highs in gold.

Technical Analysis - Given the rallies failure at 61.8%, the gold price strongly suggests an 100% move from the 680 peak down to 480. Thus is implying a break of the June low and targeting the main support trend line presently at 470. Now the strength of subsquent action will be gauged on exactly where the current correction bottoms i.e. above the June lows or not. But whatever gold does it MUST hold the uptrend line cutting in at 470 for the bull market to stay intact. But in the meantime does represent a good shorting opportunity, especially when all one hears is how everyone should be buying gold now !

Trade Point
GOLD is a SELL
- At current market prices of $625.
Stop-Loss - With a trailing stop loss $5 above the downtrend line from the 735 peak, currently at $660.
Target - Immediate target would have to be the uptrend line along the June low + $5, presently that indicates $550, Should that trend line break than $500 would be the next target for gold.

Nadeem Walayat

(c) MarketOracle.co.uk 2005 - 2006

Disclaimer - This Forecast / Trade Scenerio is provided for general information purposes only and not a solicitation or recommendation to enter into any market position, and you are reminded to seek independent professional advice before entering into any investments or trading positions.
The Market Oracle is a FREE Financial Markets Forecasting & Analysis online publication. We aim to cut through the noise cluttering traditional sources of market analysis and get to the key points of where the markets are at and where they are expected to move to next
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