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Friday, March 11, 2011

USD1700 New Gold Parabolic Projection

As you will discover from the charts and information in this article, the previous three gold and silver parabolics (2004, 2006 and 2008) had a common characteristic. Each exhibited a midpoint consolidation - a resting place that separated the character of the first half and second half of the parabolic move. This observation is particularly relevant at this time, as both gold and silver have presently completed this midpoint consolidation and are already on their way to concluding the 2011 parabolic.

This now brings us to our current 2011 gold and silver parabolic.

https://lh4.googleusercontent.com/-yfvs0yvIwlI/TXgodgjV19I/AAAAAAAABbg/1yyAblRUv-M/s640/XGLD2011.png

So here is our present situation with gold. It appears to me that the midpoint price consolidation area has occurred beneath the $1425 price level. Gold appears ready to rocket launch into the upper half of its parabolic move. Price is projected to the $1700 area.

This current week appears as a red candle breather, similar to the price action of the preceding intermediate cycle. The True Strength Index (TSI) momentum indicator is rising above ZERO and I expect it will continue to rise.

https://lh6.googleusercontent.com/-umvvPMMru10/TXgq9Nfhl1I/AAAAAAAABbk/HOBLWmk_2eI/s640/xslv.png

Silver is a step ahead of gold in that it has already broken above its midpoint consolidation price area of $32, and is presently trading near $36. The weekly TSI indicator as yielded a bullish trend line break buy signal and I expect silver to continue higher week after week, as it has in the 2nd half of each previous parabolic move. Using the midpoint consolidation concept, price is projected some 40% higher to around $48.

https://lh3.googleusercontent.com/-YxaZp27ZIf4/TXgsWpcEnNI/AAAAAAAABbo/bbXhXqRE7Dg/s640/uup.png

Finally, here is a weekly chart of PowerShares DB US Dollar Index Bullish Fund (UUP) which I am using as a proxy for the chart of the US Dollar.

We can see that the US Dollar is literally on the precipice of a waterfall decline below key support at 22. This roughly translates into 76 on the US Dollar Index.

The TSI momentum indicator is below ZERO and falling. This is bad news for the US Dollar and I view it highly unlikely it will be able to rebound, let alone hold this level. Once the US Dollar begins to fall below support it will trigger both panic and a flight to gold and silver. And I believe this will power the concluding leg of the 2011 gold and silver parabolics.

John Townsend | tsiTrader@gmail.com | thetsitrader.blogspot.com

Tuesday, March 8, 2011

Preparation for Pullback and Long Run

Both gold and silver have made new highs but after such a run I expect we see a quick pullback before they go higher. Gold and silver are the two investments I think everyone should hold a core position for the long run no matter what happens to the price. But, if we do get a nice quick pullback into the key moving averages then I think it’s a great spot get involved with more money.

US Dollar Index – Weekly Chart
The dollar is trading down at a key support level which I am keeping a close eye on. If we get a close below this trend line then we should see the dollar sell off sharply which in turn will trigger another leg higher in commodities (INCLUDED GOLD) across the board.

Mid-Week Trend Report:

In short, I am bullish on stocks and commodities and bearish on the dollar and bonds. The one issue I see going forward is that if the dollar breaks down it will most likely help boost oil prices which in turn puts downward pressure on stocks… So depending on how things unfold in the Middle East and a falling dollar, we may not see higher stock prices. Some individuals are forecasting $150-220 per barrel and I know if it gets back up there it will definitely slow the economy and stock prices down…

Chris Vermeulen | thegoldandoilguy.com