.::Gold Technical Analysis::.

Why Gold Is Shining Bright & What the Fed is Doing

2012-02-02T07:52:00.000-08:00

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

~ Thomas Jefferson ~

As the weekly chart of gold futures illustrates below, gold has recently pulled back sharply and has broken out. I will likely be looking for any pullbacks in gold as buying opportunities as long as support holds.

Gold Weekly Chart

In closing, for longer term investors the stock market might have some serious short term juice as cheap money and artificially low interest rates should juice returns. However, eventually equities will start to underperform. At that point, gold will be in the final stages of its bubble and the term parabolic could likely be applied.

If central banks around the world continue to print money there are only a few places to hide. Precious metals and other commodities like oil will vastly outperform stocks in the long run if the Dollar continues to slide. The real question we should be asking is who will win the race to debase, Draghi or Bernanke?

January 30th, 2012 at 12:24 pm

By: Chris Vermeulen – Free Weekly ETF Reports & Analysis: www.GoldAndOilGuy.com
Co-Author: JW Jones – Free Weekly Options Reports & Analysis: www.Optionnacci.com

Tun Mahathir comments on printing more money to recover economic problems.

The Governor of the Bank of England has advised printing money to overcome Britain’s financial crisis. This is a great idea. When you lose money just print money to make up for the losses. The United States had printed 300 billion USD to bail out banks and overcome the crisis. Of course if Malaysia had printed Ringgits to pay off debts during the financial crisis we would be soundly condemned. No one would accept our Ringgit and we would be bankrupted. But rich countries apparently can print money to pay debts.

It's A Time, Major Uptrend - Clive Maund

2012-01-31T00:58:00.000-08:00

This Gold Market update is going to be short and to the point for 2 reasons. One is that I am too busy writing up stocks for subscribers to devote much time to the world at large - they are being written up as fast as possible, for reasons that will become obvious as you read on. The other reason is that for the 1st time in many months, the situation is nice and clear, and doesn't require a time wasting diatribe.

On the 7-month chart for gold we can see that on Wednesday it broke out from the consolidation pattern that it has been stuck in since it peaked last August-September. This was a strong move on significantly increased turnover, which is bullish, and was a move confirmed by a massive upblast by PM stocks. This breakout is therefore viewed as marking the end of what has turned out to be a period of consolidation, and the start of a major uptrend that should take gold MUCH higher - comfortably to new highs.

The 5-year chart for gold is most interesting as it reveals that its bullmarket advance from the 2008 low is defined by an inner normal channel, and an outer extreme one. As we can see, the recent recovery from the December lows has defined the lower boundary of the outer channel for the 1st time, and it is interesting to observe how the already defined upper channel boundary could have been used to predict the exact low in gold at its recent bottom. Not only has this parallel outer boundary held, but with last week's breakout, the price has regained a foothold back within the inner channel this past week, and now, having broken out from its downchannel in force from September, it is in position to advance towards the upper channels boundaries again. The target zone given assumes that it will make a run at the outer channel boudary again - but it may instead be content to advance within the confines of the inner channel, which will still result in new highs and very worthwhile gains from here.

Although PM stocks have not yet broken out - to do that they will have to rise clear above the broad zone of resistance at the apex of the Fish Head Triangle in the indices that they broke down from in December, shown on the 7-month chart for the HUI index shown below - the massive up day on Wednesday is a sign that they have gathered the strength to do just that, and the fact that this up day occurred as gold broke out upside is of course no coincidence.

The Fish Head Triangle makes up the final stages of a large Diamond pattern that can be seen to advantage on the 2-year chart for the HUI index (it is also evident on the GDX chart). Diamond patterns are normally, although not always, bearish, which is a big reason why we were wary earlier, but in this modern age of market manipulation and meddling, politicians are not prepared to give the forces of capitalism free rein to do their necessary work of straightening out distortions, since that conflicts with their agenda. Thus, instead of letting European banks collapse, the Fed has decided to rescue them with "back door" QE dressed up as swaps etc - the reason is, as you might expect, not altruistic - if the European banks collapse, they will drag down the US banks, and as the US banks are the Fed's masters and the bosses of the entire system, that cannot be allowed to happen, whatever the cost elsewhere. That is why the markets are rallying again across a broad front and why the outlook for gold and silver, and commodities generally, is once again bright, for the European bailout means money creation - and inflation.

The breakouts in gold and silver are bad news for the dollar - and that implies a recovery in the euro. Thus it is interesting to observe that a lot of market players are still gambling on an all-out collapse by the euro, if the latest COT chart for the euro fx, shown below, is anything to go by. One thing is for sure, it isn't the Commercials gambling on a collapse in the euro - just the opposite, so once again it looks like the hapless Large Specs have set themselves up to be royally fleeced. This COT chart looks like the final stages of a big tuna hunt where the nets are pulled together and the catch is finally hauled aboard.

Conclusion - a major uptrend is just starting in gold, gold ETFs and Precious Metals stocks. Good time to buy if you haven't already.

Source : www.clivemaund.com | Gold Market Update originally published January 29th, 2012

Comex Gold Soars to Record high of $1,697.70

2011-08-07T19:17:00.001-07:00

Comex Gold Soars to Record high of $1,697.70 in early Sunday Evening Trade, as Crude Oil, U.S. Stock Indexes Plummet

07 August 2011, 06:26 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) -The early sentiment from the market place is not good following the late-Friday Standard & Poors downgrade of the U.S. credit rating and the latest pronouncements from European Union officials Sunday, regarding their own more serious debt situation. December Comex gold futures soared to a fresh all-time record high of $1,697.70 in early Sunday evening trading, up over $40.00 an ounce from Friday's close, while Dow futures were down over 300 points and crude oil prices were $2.80 a barrel lower, trading around $84.00 a barrel, basis September Nymex futures. The U.S. dollar index was only modestly lower in very early dealings Sunday. While it's still very early in the week's trading activity and many markets have not even opened for electronic trading, there is an ominous early tone to upcoming price action in the market place Monday.

By Jim Wyckoff contributing to Kitco News; jim@jimwyckoff.com

A Mega Day of Gold and Silver (Aug-Sept 2011)

2011-04-05T01:18:00.000-07:00

Above graph shows the next cycle peak on August or September 2011. The cycle run every 22 - 23 weeks and the increment of each cycle around USD550. If the next peak is USD1700, it's about RM175/gram. Prepare our portfolio based on these prediction. More detail information, take a time to view next video.

Thanks, INO Market Club.

Metal's Overbought?

Lind-Waldock Senior Strategist Phil Streible in letstalkfutures.com post gives his insights on gold and silver in this interview with The Street tv. He says gold and silver may be overbought short-term, but still look bullish long-term

USD1700 New Gold Parabolic Projection

2011-03-11T01:13:00.000-08:00

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.

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.

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.

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

Preparation for Pullback and Long Run

2011-03-08T22:23:00.000-08:00

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

The Periodic Table of Gold And Silver Returns

2011-01-14T14:00:00.000-08:00

Natural resources are the building blocks of the world, essential to progress and prosperity. These commodities, like all investments, can have wide price fluctuations over time. This table shows the ebb and flow of commodity prices over the past decade and illustrates the principal of mean reversion—the concept that returns eventually move back towards their mean or average. The price movement of commodities is historically both seasonal and cyclical. That’s why when investing in natural resources, we believe it is important for your portfolio to hold a diversified basket of commodities and to be actively managed by professionals who understand these specialized assets and the global trends impacting them. As with all investments, diversification does not protect an investor from market risks and does not assure a profit, and of course, past performance does not guarantee future results.

The Gold Performance and Returns

The Silver Performance and Returns

Sources: Bloomberg and U.S. Global Investors Research. Returns are based on historical spot prices of futures prices.

Outlook 2011: Fear and Love in Gold Trading

2011-01-14T13:41:00.000-08:00

Wall Street has been calling gold a bubble since 2005 when it hit $500. Some media naysayers remained negative even as they wrote the headlines proclaiming record highs and saw gold rise almost 30 percent in the past 12 months.

Interestingly, despite gold’s latest run, it was still a laggard compared to many other commodities. In the commodity world, gold didn’t even place in the top half in 2010. Against a basket of 14 commodities that includes everything from aluminum to wheat, gold’s 29.52 percent return places it eighth. Palladium took the top spot with a 96.6 percent return, followed by silver with an 83.21 percent return. Natural gas continued its cellar-dwelling ways, dropping 21.28 percent to become the worst-performing commodity of the basket.

There are two main drivers of gold demand: The Fear Trade and the Love Trade.

Fear Trade: The fear trade is what you often hear about from the media and the gloom-and-doomers. The fear trade is driven by negative real interest rates—where inflation is greater than the nominal interest rate—and deficit spending. Whenever you have negative real interest rates coupled with increased deficit spending, gold tends to rise in that country’s currency.

In the U.S., we’re in the middle of an extended period of negative real interest rates that will likely last through the year. The Federal Reserve is acutely aware that if interest rates should spike, it would be catastrophic for the economic recovery.

Looking back over the past 400 years, there has been a major currency or credit crisis every decade and, historically, it takes approximately four years to heal from the contraction. The U.S. economy is on the road to recovery, however the elevated number of home foreclosures and high unemployment make it unlikely the Fed will risk a relapse by raising interest rates any time soon. The government is also unlikely to cut spending or welfare support during the healing process.

As for deficit spending, we still have an oversized government, creating regulatory traffic jams for business development and hurdles for economic trade.

Love Trade: The love trade is significant and unique to gold. People buy gold out of love and those in emerging markets are especially amorous of the metal. We refer to the most populous seven of the emerging economies as the E-7. Currently, the E-7 countries hold nearly half of the world’s population but make up less than 20 percent of global GDP. The G-7 industrialized nations are a mirror of this; they host 11 percent of the world’s population but control more than 50 percent of the global economy.

But things are changing.

I’ve discussed this many times but it’s important to grasp how today’s world looks a lot different than yesterday’s. Many of these emerging economies are averaging over 6 percent GDP growth and personal incomes are rising around 8 percent. In addition, emerging economies are home to 27 percent of the world’s purchasing power, according to economic research firm ISI.

It is customary in most emerging countries to give gold as a gift to friends and relatives for birthdays, weddings, and to celebrate religious holidays.

In December, the Shanghai Gold Exchange reported that China imported five times more gold in 2010 than 2009 and that was just during the first 10 months of the year. In India, spending on gold rose 100 percent on a year-over-year basis through September, according to Morgan Stanley. Russia’s central bank holdings of gold rose 7 percent in 2010.

What is important to remember when looking at the history of gold is that in the 1970s, China, India and Russia were isolationists with no significant global economic footprint. The world’s population was 3 billion and today we have witnessed an awakening of epic proportions.

These countries are growing with free market policies and massive infrastructure spending. In the 1970s, gold rose on the fear trade and the cold war. Today the world is significantly different and the love trade drives gold.

If QE2 was the fuel that sent gold prices to the moon, the gold holiday season was the vehicle they rode in. Gold prices rose steadily as Ramadan came early, which then carried into the Diwali season of lights in India. Then came Christmas, with shoppers around the world spending more than they had in years.

Next is the Chinese New Year—the Year of the Rabbit—on February 3. It’s believed that people born in the Year of the Rabbit are wise, financially lucky and have a gift for making the right decision—similar to how gold investors are feeling these days.

Looking Ahead

It’s impossible to predict where gold prices will be 12 months from now but we think gold prices could double over the next five years. This would mean roughly a 15 percent return, if you compounded it annually.

However, it will by no means be a straight line. Volatility is always inherent in commodity investing. It’s a non-event for gold to go up or down 15 percent in a year—this happens 68 percent of the time. For gold stocks, the volatility is even more dramatic—plus or minus 40 percent, historically.

We have always suggested that investors consider a 10 percent weight in gold funds and rebalance their portfolio each year to capture the volatility and not chase return. Since gold was up almost 30 percent last year, it could easily correct from its peak by 10 to 15 percent. This is why we believe gold stock investors need to be active, not passive, when it comes to managing portfolios.

Investors looking to either add to or initiate new positions in gold must be aware of this volatility and use it their advantage. Use sharp selloffs as cheap entry points and make sure to rebalance those portfolios in order to lock in profits from 2010’s big gains.

By Frank Holmes as Jan 10 2011 9:48AM
CEO and Chief Investment Officer
U.S. Global Investors

Where Next? With gold well into record territory, investor enthusiasm is boiling over.

2011-01-09T15:48:00.000-08:00

There is a wide range of opinions on the outlook for metals, reflecting the uncertainty in nearly all of the variables that impact metal prices.

The sovereign debt and worries and fears of a double dip recession still cloud the outlook for some investors. Another round of quantitative easing will inject another $600 billion into the global money supply. The announcement of QE2 built confidence that the American economy will remain in positive territory. It also re-ignited inflation concerns, pushing gold to a further record high.

Investors were already buying gold for its safe-haven status. The gold market enjoyed a further boost as investors seek cover from looming inflation (read “currency devaluation”).

The high price of bullion has attracted a significant amount of media attention and drawn in a great many investors who might not otherwise be investing in gold. Many gold companies have followed gold higher: certainly, the big producers and the better-known among the developers and explorers have enjoyed big gains.

As the present gold rush is driven largely by investors seeking safety, the majors and the mid-tier producers trade at premium prices. An inordinately large discount is applied to the next level down. A development-stage gold company clearly carries more risk than an established producer. The flip side is that the developers and advanced explorers offer a great deal more upside. The higher potential rewards arise in part from the higher leverage to the gold price offered by the smaller companies. A second benefit is that select companies will appreciate in value as their projects evolve toward production.

Gold is capturing the headlines, but other aspects of the mining industry deserve a share of the attention. North American and European investors continue to shun the base metal juniors for fear of further economic slowdowns. Those investors seem to have missed copper’s stealth march toward its previous record highs. Tin is now at an all-time record high. Other metals have also moved higher. That strength in the base metal markets is being propelled by demand from the developing world. The Asian mining companies are scouring the planet in search of metal deposits on which to develop new mines. The takeover activity is set to accelerate and to become far more visible.

The United States government continues its efforts to push down the value of the dollar. On one level, a cheaper dollar would benefit American exporters. Secondly, devaluing the currency reduces the real value of the multi-trillion dollar debt owing to foreigners. Of course, downward pressure on the dollar is quickly matched by other nations seeking to keep their export industries competitive.

On any given day, pundits could put together a string of headlines to support a case for any direction for any of the metals. Instead of simply speculating on metal prices, investors can instead put their money into companies that are adding value for shareholders. The gains from successfully executing mineral development projects far exceed any realistic outlook for moves in metal prices.

Lawrence Roulston

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More Commentaries

Daily Analytical Charts for Gold, Silver and Platinum and Palladium

2011-01-05T18:18:00.000-08:00

Understanding the charts:

Due to popular demand, we have added Palladium to the list of Analytical Charts that Metals Analyst Jim Wyckoff features.

Sharpening Your Trading Skills: Using Bollinger Bands

The Bollinger Bands (B-Bands) technical study was created by John Bollinger, the president of Bollinger Capital Management Inc., based in Manhattan Beach, California. Bollinger is well respected in the futures and equities industries.

Traders generally use B-Bands to determine overbought and oversold zones, to confirm divergences between prices and other technical indicators, and to project price targets. The wider the B-bands on a chart, the greater the market volatility; the narrower the bands, the less market volatility.

B-Bands are lines plotted on a chart at an interval around a moving average. They consist of a moving average and two standard deviations charted as one line above and one line below the moving average. The line above is two standard deviations added to the moving average. The line below is two standard deviations subtracted from the moving average.

Some traders use B-Bands in conjunction with another indicator, such as the Relative Strength Index (RSI). If the market price touches the upper B-band and the RSI does not confirm the upward move (i.e. there is divergence between the indicators), a sell signal is generated. If the indicator confirms the upward move, no sell signal is generated, and in fact, a buy signal may be indicated.

If the price touches the lower B-band and the RSI does not confirm the downward move, a buy signal is generated. If the indicator confirms the downward move, no buy signal is generated, and in fact, a sell signal may be indicated.

Another strategy uses the Bollinger Bands without another indicator. In this approach, a chart top occurring above the upper band followed by a top below the upper band generates a sell signal. Likewise, a chart bottom occurring below the lower band followed by a bottom above the lower band generates a buy signal.

B-Bands also help determine overbought and oversold markets. When prices move closer to the upper band, the market is becoming overbought, and as the prices move closer to the lower band, the market is becoming oversold.

Importantly, the market’s price momentum should also be taken into account. When a market enters an overbought or oversold area, it may become even more so before it reverses. You should always look for evidence of price weakening or strengthening before anticipating a market reversal.

Bollinger Bands can be applied to any type of chart, although this indicator works best with daily and weekly charts. When applied to a weekly chart, the Bands carry more significance for long-term market changes. John Bollinger says periods of less than 10 days do not work well for B-Bands. He says that the optimal period is 20 or 21 days.

Like most computer-generated technical indicators, I use B-Bands as mostly an indicator of overbought and oversold conditions, or for divergence--but not as a specific generator of buy and sell signals for my trading opportunities. It's just one more "secondary" trading tool, as opposed to my "primary" trading tools that include chart patterns and trend lines and fundamental analysis.

Sharpening Your Trading Skills: The MACD Indicator

The Moving Average Convergence Divergence (MACD) indicator has the past few years become one of the more popular computer-generated technical indicators.

The MACD, developed by Gerald Appel, is both a trend follower and a market momentum indicator (an oscillator). The MACD is the difference between a fast exponential moving average and a slow exponential moving average. An exponential moving average is a weighted moving average that usually assigns a greater weight to more recent price action.

The name “Moving Average Convergence Divergence” originated from the fact that the fast exponential moving average is continually converging toward or diverging away from the slow exponential moving average. A third, dotted exponential moving average of the MACD (the "trigger" or the signal line) is then plotted on top of the MACD.

Parameters:

Mov1: The time period for the first exponential moving average. The default value is usually 12, referring to 12 bars of whatever timeframe plotted on the chart. (This is the fast moving average.)

Mov2: The time period for the subtracted exponential moving average. The default value is usually 26, referring to 26 bars. (This is the slow moving average.)

Trigger: The period of 9 bars for the signal line representing an additional exponential moving average.

(Note: For a graphic example of the MACD indicator, send me an email at jim@jimwyckoff.com and I will email you back with the picture example.)

The MACD study can be interpreted like any other trend-following analysis: One line crossing another indicates either a buy or sell signal. When the MACD crosses above the signal line, an uptrend may be starting, suggesting a buy. Conversely, the crossing below the signal line may indicate a downtrend and a sell signal. The crossover signals are more reliable when applied to weekly charts, though this indicator may be applied to daily charts for short-term trading.

The MACD can signal overbought and oversold trends, if analyzed as an oscillator that fluctuates above and below a zero line. The market is oversold (buy signal) when both lines are below zero, and it is overbought (sell signal) when the two lines are above the zero line.

The MACD can also help identify divergences between the indicator and price activity, which may signal trend reversals or trend losing momentum. A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows. This can be an early signal of a downtrend losing momentum. A bullish divergence occurs when the MACD is making new highs while prices fail to reach new highs. Both of these signals are most serious when they occur at relatively overbought/oversold levels. Weekly charts are more reliable than daily for divergence analysis with the MACD indicator.

For more details on the MACD, Appel has a book in print, entitled: "The Moving Average Convergence-Divergence Trading Method."

As with most other computer-generated technical indicators, the MACD is a "secondary" indicator in my trading toolbox. It is not as important as my "primary" technical indicators, such as trend lines, chart gaps, chart patterns and fundamental analysis. I use the MACD to help me confirm signals that my primary indicators may be sending.

That's it for now. Next time, we'll examine another important topic on your road to increased trading success.

Sharpening Your Trading Skills: Moving Averages

I take a “toolbox” approach to analyzing and trading markets. The more technical and analytical tools I have in my trading toolbox at my disposal, the better my chances for success in trading. One of my favorite "secondary" trading tools is moving averages. First, let me give you an explanation of moving averages, and then I’ll tell you how I use them.

Moving averages are one of the most commonly used technical tools. In a simple moving average, the mathematical median of the underlying price is calculated over an observation period. Prices (usually closing prices) over this period are added and then divided by the total number of time periods. Every day of the observation period is given the same weighting in simple moving averages. Some moving averages give greater weight to more recent prices in the observation period. These are called exponential or weighted moving averages. In this educational feature, I’ll only discuss simple moving averages.

The length of time (the number of bars) calculated in a moving average is very important. Moving averages with shorter time periods normally fluctuate and are likely to give more trading signals. Slower moving averages use longer time periods and display a smoother moving average. The slower averages, however, may be too slow to enable you to establish a long or short position effectively.

Moving averages follow the trend while smoothing the price movement. The simple moving average is most commonly combined with other simple moving averages to indicate buy and sell signals. Some traders use three moving averages. Their lengths typically consist of short, intermediate, and long-term moving averages. A commonly used system in futures trading is 4-, 9-, and 18-period moving averages. Keep in mind a time interval may be ticks, minutes, days, weeks, or even months. Typically, moving averages are used in the shorter time periods, and not on the longer-term weekly and monthly bar charts.

The normal moving average “crossover” buy/sell signals are as follows: A buy signal is produced when the shorter-term average crosses from below to above the longer-term average. Conversely, a sell signal is issued when the shorter-term average crosses from above to below the longer-term average.

Another trading approach is to use closing prices with the moving averages. When the closing price is above the moving average, maintain a long position. If the closing price falls below the moving average, liquidate any long position and establish a short position.

Here is the important caveat about using moving averages when trading futures markets: They do not work well in choppy or non-trending markets. You can develop a severe case of whiplash using moving averages in choppy, sideways markets. Conversely, in trending markets, moving averages can work very well.

In futures markets, my favorite moving averages are the 9- and 18-day. I have also used the 4-, 9- and 18-day moving averages on occasion.

When looking at a daily bar chart, you can plot different moving averages (provided you have the proper charting software) and immediately see if they have worked well at providing buy and sell signals during the past few months of price history on the chart.

I said I like the 9-day and 18-day moving averages for futures markets. For individual stocks, I have used (and other successful veterans have told me they use) the 100-day moving average to determine if a stock is bullish or bearish. If the stock is above the 100-day moving average, it is bullish. If the stock is below the 100-day moving average, it is bearish. I also use the 100-day moving average to gauge the health of stock index futures markets.

One more bit of sage advice: A veteran market watcher told me the “commodity funds” (the big trading funds that many times seem to dominate futures market trading) follow the 40-day moving average very closely--especially in the grain futures. Thus, if you see a market that is getting ready to cross above or below the 40-day moving average, it just may be that the funds could become more active.

I said earlier that simple moving averages are a "secondary" tool in my trading toolbox. My primary (most important) tools are basic chart patterns, trend lines and fundamental analysis.

Sharpening Your Trading Skills: The Relative Strength Index (RSI)

One of the more popular computer-generated technical indicators is the Relative Strength Index (RSI) oscillator. (An oscillator, defined in market terms, is a technical study that attempts to measure market price momentum—such as a market being overbought or oversold.)

I’ll define and briefly discuss the RSI, and then I’ll tell you how I use it in my market analysis and trading decisions.

The Relative Strength Index (RSI ) is a J. Welles Wilder, Jr. trading tool. The main purpose of the study is to measure the market's strength or weakness. A high RSI, above 70, suggests an overbought or weakening bull market. Conversely, a low RSI, below 30, implies an oversold market or dying bear market. While you can use the RSI as an overbought and oversold indicator, it works best when a failure swing occurs between the RSI and market prices. For example, the market makes new highs after a bull market setback, but the RSI fails to exceed its previous highs.

Another use of the RSI is divergence. Market prices continue to move higher/lower while the RSI fails to move higher/lower during the same time period. Divergence may occur in a few trading intervals, but true divergence usually requires a lengthy time frame, perhaps as much as 20 to 60 trading intervals.

Selling when the RSI is above 70 or buying when the RSI is below 30 can be an expensive trading system. A move to those levels is a signal that market conditions are ripe for a market top or bottom. But it does not, in itself, indicate a top or a bottom. A failure swing or divergence accompanies the best trading signals.

The RSI exhibits chart formations as well. Common bar chart formations readily appear on the RSI study. They are trendlines, head and shoulders, and double tops and bottoms. In addition, the study can highlight support and resistance zones.

How I employ the RSI

As you just read above, some traders use these oscillators to generate buy and sell signals in markets-—and even as an overall trading system. However, I treat the RSI as just one trading tool in my trading toolbox. I use it in certain situations, but only as a “secondary” tool. I tend to use most computer-generated technical indicators as secondary tools when I am analyzing a market or considering a trade. My “primary” trading tools include chart patterns, fundamental analysis and trend lines.

Oscillators tend not to work well in markets that are in a strong trend. They can show a market at either an overbought or oversold reading, while the market continues to trend strongly. Another example of oscillators not working well is when a market trades into the upper boundary of a congestion area on the chart and then breaks out on the upside of the congestion area. At that point, it’s likely that an oscillator such as the RSI would show the market as being overbought and possibly generate a sell signal—when in fact, the market is just beginning to show its real upside power.

I do look at oscillators when a market has been in a decent trend for a period of time, but not an overly strong trend. I can pretty much tell by looking at a bar chart if a market is “extended” (overbought or oversold), but will employ the RSI to confirm my thinking. I also like to look at the oscillators when a market has been in a longer-term downtrend. If the readings are extreme-—say a reading of 10 or below on the RSI-—that is a good signal the market is well oversold and could be due for at least an upside correction. However, I still would not use an oscillator, under this circumstance, to enter a long-side trade in straight futures, as that would be trying to bottom-pick.

Oscillators are not perfect and are certainly not the “Holy Grail” that some traders continually seek. However, the RSI is a useful tool to employ under certain market conditions.

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Thank Jim and Kitco News. I backup here.

2011 : Gold Forecast To Rise, Buyers Have Multiple Investment Options

2010-12-30T07:09:00.000-08:00

The 2011 gold outlook from most analysts, simply put, is higher.

But for new investors wanting to join the gold rush, there is still some homework to do. They might want to familiarize themselves with the many ways in which they can invest--from coins to exchange-traded funds to mining stocks--to decide which are most suited for them.

Gold has been in a decade-long bull market, rising from roughly $250 an ounce to a recent record of $1,431. Many look for still more gains. BNP Paribas has forecast an average of $1,500 in 2011, while Goldman Sachs has a 12-month target of $1,690 (but also cautioned that gold could peak in 2012)

A : January 8th, 2010

1126.75 - January 8th, 2010 - Precious metals price action turned positive on this day in New York, following weaker dollar values in the wake of dismal employment data. The dollar appeared to be anticipating tomorrow's US payroll figures which are expected to show that the economy has shed jobs during every single month of 2008 and likely pushed unemployment to 7% for a 16-year high. Crude oil fell to under $42 per barrel on apprehensions generated by the employment situation and was only marginally supported by Russia's failure to come to terms with the Ukraine in the gas impasse.
B :January 11th, 2010

1153.00 - January 11th, 2010 - The U.S. economy lost 524,000 jobs in December, closing out the worst year for job losses since World War II, the Labor Department said this date. Nearly 2.6 million jobs were lost in 2008, with 1.9 million destroyed in just the past four months, according to a survey of work places. It's the biggest job loss in any calendar year since 1945. The unemployment rate rose to 7.2%, the highest in 16 years. Unemployment increased by 632,000 to 11.1 million, according to the survey of households.
C : May 7th, 2010

1202.25 - May 7th, 2010 - Gold prices hovered around the $1200 mark early this morning, as their after-hours rise to five-month highs above that round figure on the back of spreading fears about Greek contagion and the Dow's 'air pocket incident' prompted profit-takers to do just that. The U.S. economy added 290,000 jobs in April, the biggest gain in four years. However, the unemployment rate rose slightly, from 9.7% to 9.9%. This is mostly due to people who had previously given up looking for work restarting their job search.
D : May 7th, 2010

1202.25 - May 7th, 2010 - Gold prices hovered around the $1200 mark early this morning, as their after-hours rise to five-month highs above that round figure on the back of spreading fears about Greek contagion and the Dow's 'air pocket incident' prompted profit-takers to do just that. The U.S. economy added 290,000 jobs in April, the biggest gain in four years. However, the unemployment rate rose slightly, from 9.7% to 9.9%. This is mostly due to people who had previously given up looking for work restarting their job search.
E : November 4th, 2010

1381.00 - November 4th, 2010 - As was largely expected the GOP took control of the US House of Representatives and gained Senate seats as well. Gold futures at one point rocketed ahead by nearly $60 an ounce this day compared to their low from the previous afternoon, when the market was initially choppy in the wake of a Federal Open Market Committee announcement of another $600 billion in quantitative easing.
F : November 9th, 2010

1421.00 - November 9th, 2010 - Commodity markets were on fire early this day, led by surging precious metals prices that saw gold futures hit a fresh record high and silver futures hit a fresh 30-year high. Gold's surge in price continued from the mid-term election and QE2 announcement on November 4.
G : November 25th, 2010

1373.25 - November 25th, 2010 - South Korea deployed additional long-range artillery missiles on a border island and vowed to make North Korea “pay the price” for its first direct assault on the country since 1953. Although an armistice has been in place since that time, the two Koreas are still technically at war with each other. A top Chinese emissary met with President Lee on Sunday, after China called for a multilateral emergency meeting aimed at defusing the aggravating crisis.
H : December 6th, 2010

1415.25 - December 6th, 2010 - China and its anti-inflation/anti-bubble combat took centre stage in the market news flows once again on this date, as its People's Bank announced a half percent hike in reserve requirements (to 18%) for the country's banks. The move represented the sixth such tightening this year. Polled analysts believe that inflation may have risen further, possibly to as high a level as 4.6%, and that the PBOC might raise interest rates even as soon as Sunday if it feels that the inflation dragon is growing yet another unwelcome head and getting ready for a menacing flight.

Source : Kitco News

Gold May Advance to Record After Drop, Barclays Says: Technical Analysis

2010-11-18T06:11:00.000-08:00

By Luzi Ann Javier - Nov 18, 2010 4:47 PM GMT+0800

Gold may advance 9.6 percent to a record $1,485 an ounce by the end of the year, according to technical analysts at Barclays Capital.

“Strategically, we are bullish,” the bank said. “Medium- term trend followers are unlikely to have been panicked out of their positions given that important support between $1,314 and $1,331 is still holding,” according to a report dated yesterday by analysts including Philip Roberts.

Gold for immediate delivery gained 1.4 percent to $1,354.95 an ounce today after losing 5.2 percent in the previous four days. The metal climbed to a record $1,424.60 on Nov. 9. Hedge- fund managers and other large speculators increased their net- long positions in New York gold futures by 7 percent in the week ended Nov. 9, ending four weeks of declines, according to U.S. Commodity Futures Trading Commission data.

“A bearish divergence signal on weekly charts, though, warns of downside risk throughout the month, and we still fear an important clearout below $1,314 to $1,250 before gold recovers,” the bank said. “We would be bargain-hunting as the price approaches $1,250.”

Resistance levels are at $1,387, $1,377 and $1,364 an ounce and support is at $1,314, $1,297 and $1,250, it said.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

The Fed's gold problem

2010-09-21T21:19:00.000-07:00

&amp;amp;amp;amp;lt;a href='http://www.hiddenlevers.com'&amp;amp;amp;amp;gt;Economic Analysis And Charting By HiddenLevers&amp;amp;amp;amp;lt;/a&amp;amp;amp;amp;gt;
By Paul R. La Monica, editor at largeSeptember 21, 2010: 9:04 AM ET

The Buzz is now on Twitter! Follow me @LaMonicaBuzz

NEW YORK (CNNMoney.com) -- When the Federal Reserve's policy-making committee meets Tuesday, there will be no mystery as to what they will do. Nothing.

But what will the Fed say? That's where things get interesting.

Click the chart to keep track of other rising commodity prices

In the past few weeks, fears of a double-dip recession have ebbed. August retail sales were better than expected. The number of people filing for unemployment claims has fallen for two weeks in a row.

The trade deficit for July was much narrower than forecasts. That's crucial since a ballooning trade gap in June was the primary reason why the nation's gross domestic product in the second quarter was revised lower.

Still, the economy is not healthy. The latest bits of manufacturing data have been disappointing. The housing market may not have hit bottom yet. Builder Beazer Homes USA (BZH) lowered its forecast for new home orders on Wednesday.

And even with jobless claims falling, companies don't seem to be comfortable enough to start hiring again. Some are still getting rid of workers. FedEx (FDX, Fortune 500) said Thursday it was cutting 1,700 jobs.

For these reasons, the Fed is likely to stress -- as it has since March 2009 -- that it expects to keep interest rates "exceptionally low" for "an extended period of time." (Rates have been near 0% since December 2008.)

It may also talk more about its commitment to purchase long-term bonds as it sees fit. In its last meeting, the Fed said it would reinvest the principal from mortgage-backed securities it holds into long-term Treasurys.

But it stopped short of announcing a new plan to buy bonds, a practice known as quantitative easing.

David Joy, chief market strategist with Columbia Management in Boston, said the economy doesn't appear to be so weak that the Fed should step up its bond buying yet. But it can't afford to be complacent either.

"The message we are left with from all the recent data is that this is a sluggish recovery," Joy said. "The Fed may feel a little better about the economy since they last met in August -- but not much."

But if the economy takes a sudden turn for the worse again -- Jon Stewart recently joked that "the 'Summer of Recovery' is quickly sliding into the 'Autumn of Nothing but Ramen Noodles For Dinner,' " -- then the Fed will have to give specifics about its plans to buy more bonds.

"The Fed may have to be aggressive," said Anthony Valeri, market strategist with LPL Financial in San Diego. "What people are looking for is a dollar amount. It could be $500 billion to $1 trillion."

Valeri doubted the Fed would make such an announcement on Tuesday but said it was possible it would unveil more concrete plans at its November 3 meeting.

Still, some think the Fed may have to think more about pulling back on its easy money policies. That's because there are still niggling worries about inflation.

Yes, inflation.

Deflation may be the big buzz word as economists fret about whether the United States is heading for its own version of Japan's Lost Decade during the 1990's.

Goldman Sachs expects more Fed easing

But have you looked at what commodity prices are doing? The Fed may soon need to start worrying about that dreaded 1970's throwback of stagflation: the combination of anemic growth and rising prices.

Gold is hitting record highs. Agricultural commodities are soaring and in some cases, such as bacon and coffee, producers are passing higher costs onto consumers. And the dollar has been on a downward slide against the yen and euro.

While it would be foolish to suggest that the spike in commodities is entirely the Fed's fault, it is fair to say the central bank's more pessimistic take on the economy sparked worries that the Fed will be too slow to react to pricing pressures.

"The Fed may have jumped the gun last time and created the fear that things are worse then they actually believed," said Milton Ezrati, senior economist with Lord Abbett, an investment firm in Jersey City, N.J.

Ezrati said the increase in commodity prices is evidence that deflation and double-dip talk may be overblown. Along those lines, the latest figures on inflation on a wholesale level, the producer price index, rose more than expected in August. Consumer prices also were up a bit more than forecasts in August.

And even though the so-called core PPI number, which excludes food and energy costs, was in line with forecasts, the myopic focus on that number is sometimes silly.

People have to eat and drive. If fuel and food costs keep going up, try telling consumers they need to worry about deflation.

"You would think the Fed should mention the risk that commodity prices could go higher," said Andrew Busch, global currency and public policy strategist with BMO Capital Markets in Chicago. "The Fed needs to discuss the potential for inflation for the long term."

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

Gold edges up to a new record

2010-09-20T21:21:00.000-07:00

Click chart for more commodities prices. By Aaron Smith, staff writerSeptember 20, 2010: 2:31 PM ET

NEW YORK (CNNMoney.com) -- Gold continues to break records, hitting its fourth new high in a week Monday, fueled by economic jitters.

Gold futures for December delivery closed at $1,280.80 an ounce, up $3.30, or about 0.3%. That breaks the record close that was set on Sept. 17, when prices rose $3.70 to settle at $1,277.50 an ounce.

Gold futures for December delivery reached an intraday record that was even higher, at $1,285.20 per ounce. The prior intraday record was $1,284.40 an ounce, on Sept. 17.

Gold prices have been riding a wave of economic uncertainty. Jono Remington-Hobbs, a precious metals analyst for the TheBullionDesk in London, said the big drivers are economic uncertainty, volatility in the currency markets and the possibility of more quantitative easing -- meaning the buying of bonds by the U.S. government.

Despite the announcement by the National Bureau of Economic Research that the recession ended in June 2009, Remington-Hobbs said he believes that uncertainty will continue to drive gold prices.

"I think there's a strong chance that gold will get close to touching $1,300 [per ounce] in the next month or two, actually," he said.

Gold prices have climbed 26% over the last 12 months. But in actuality, prices are a far cry from their true record, when adjusted for inflation.

Gold hit its true peak on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation, that translates to an all-time record of $2,184.08 an ounce, in 2010 dollars.

Gold hits 3-month low on economic uncertainties

2010-02-06T19:52:00.000-08:00

Frank Tang and Jan Harvey

Fri Feb 5, 2010 3:17pm EST

An employee takes gold ingots to be weighed in a room for final weighing and packaging at the Krastsvetmet plant in the Siberian city of Krasnoyarsk November 16, 2009.

Credit: Reuters/Ilya Naymushin

NEW YORK/LONDON (Reuters) - Gold fell to its lowest in more than three months on Friday, ending the week 2 percent lower, as economic uncertainties led to heavy selling in gold and other investments perceived as riskier.

Bullion dropped further after posting its biggest one-day loss since 2008 on Thursday, hit by sovereign debt fears in Europe, and signs that economic recovery in United States and China has hit a rough patch.

On charts, gold is vulnerable to extending sharp losses to reach $1,020-1,030 an ounce if support at current levels fails to hold, and may face a deeper retracement below $1,000 if it breaks that level, technical analysts said.

The metal, however, could see support in the near term as investors bid up COMEX gold call options and gold miners' stock prices, floor traders and fund managers said.

"Investors are looking to some large-cap gold stocks as a way to hedge currency unrest and potential debt default in Europe," said Brian Hicks, co-manager of Global Resources Fund at U.S. Global Investors, which has over $2 billion in mutual fund assets.

Shares of the world's largest gold producer Barrick Gold (ABX.TO) and No. 2 Newmont Mining (NEM.N) are about 4 percent higher despite weaker gold prices and broad-based equities weakness.

Spot gold fell to a low of $1,043.75, and was last at $1,062.25 an ounce at 2:38 p.m. EST, against $1,062.60 late in New York on Thursday.

Spot bullion is about 2 percent lower from last Friday's close at $1,081.05 an ounce.

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange settled down $10.20 at $1,052.80 an ounce.

Gold is extending losses after prices fell 4 percent on Thursday after European Central Bank chief Jean-Claude Trichet predicted rising fiscal imbalances over the euro zone economy, and that knocked the euro.

The euro fell to its lowest level against the dollar since May on rising risk aversion, as the cost of insuring the debt of some euro zone nations against default hit record highs on worries over their fiscal positions.

CRUDE PLUNGES, ETF REPORTS OUTFLOWS

Oil prices briefly tumbled below $70 a barrel, as the stronger dollar and data showing additional U.S. job cuts weighed on the market.

Earlier on Friday, U.S. data showed that nonfarm payrolls fell unexpectedly in January, but unemployment rate surprisingly dropped to a five-month low.

"Gold is going to show higher volatility until there is more of a trend established in U.S. economic recovery," said Thomas Winmill, portfolio manager of Midas Fund. MIDSX.O

Investment in gold-backed exchange-traded funds was lackluster, with holdings of the world's biggest, New York's SPDR Gold Trust falling 5.8 tonnes or 0.5 percent on Thursday.

Silver also tumbled to its lowest since early September at $14.63, tracking losses in gold. It was later at $14.91 an ounce versus $15.23.

Platinum and palladium also hit 2010 lows at $1,444 an ounce and $379.50 an ounce respectively. Platinum was later at $1,471 an ounce versus $1,499.50, while palladium was at $394.50 against $406.50.

(Reporting by Frank Tang and Jan Harvey; Editing by Marguerita Choy)

Pivot Point Trading 101

2010-02-06T19:34:00.000-08:00

By Jeff Friedman

Pivot-trading has been around a long time, and is a favorite technical analysis tool for many professional traders. Learning how to use pivot points helps take the emotion out of trading, and gives you discipline. Pivots are useful in not only helping you to determine price direction, but also as a money management tool. You can apply the concepts to virtually any market, but I think the pivot methodology works particularly well in stock indexes, particularly the S&P and E-mini S&P 500 index futures.

The E-mini S&P is priced right for smaller investors, the volume is superb, and fills are nearly instantaneous. And, CME Group’s Globex platform offers trading nearly around the clock. So I’m going to use this market in my examples of how to apply the pivot methodology to real market conditions. But first, some background to understand what pivots are, and how they can be used as part of technical analysis.

Pure market technicians believe all the factors related to supply and demand are reflected in a market’s price, and therefore they don’t concern themselves with fundamental analysis. Technical analysis is the study of price and price behavior using charts and various other tools to help determine market trends, and to predict where prices could be headed next.

Chart patterns can be ambiguous and subject to interpretation, but pivots are not. They are defined price points. They tell me that when the market moves above a determined number I should be bullish, and when it moves below another determined number I should be bearish. And, if I’m already long (or short) because the market moved above (or below) one of my pivots, they can help me determine where to place my stops and exit my trades. Pivots also take volatility into account to show momentum.

Calculating Pivots
The traditional formula for calculating pivot points incorporates three data points: the previous day’s high, low and close. You can use other datasets and/or time frames to find what gives you a unique edge. Some traders like to use the open in their calculation. I like to calculate both weekly and daily pivot numbers, which can be used for swing trading or day trading. No matter which numbers you use, the value of using pivots is to tell you whether the market is pivoting to a higher-level value, or to a lower-level value. Pivot points also take volatility into account to show momentum. Do they always work perfectly? No. But will they give you guidance? Absolutely.

To calculate basic daily pivot points, you will add the high, low and close of the previous trading day, and divide by three. You want to do this before the market opens for the session you wish to trade, so you will have your levels and be ready. The first support (S1) is two times the pivot minus the high, while first resistance is two times the pivot minus the low. To find second support, take the difference between the high and low, then subtract that number from the pivot. Second resistance is the difference between the high and the low, added to the pivot.

Pivot Point = (H + L + C) / 3
1st Support = (2 x Pivot) - H
1st Resistance = (2 x Pivot) - L
2nd Support = Pivot – (H – L)
2nd Resistance= Pivot + (H – L)

As mentioned, there are also other variations of this basic analysis. Some traders will incorporate the opening of the next day, adding to the high, low and close of the prior day, and then dividing by four. Some traders believe the opening is more important than the prior day’s close, so they use the high and low of the prior day, and the new opening the next day divided by three. These traders probably wouldn’t trade during the first few minutes of the session as they calculate their pivots based on the current day’s open.

You might be asking yourself, which session do you I use in my calculations? Do you use the overnight session, or day session, or both combined? It’s really up to you to find a method that might give you an edge. I prefer the classic calculation using the regular day session, and use the opening range (roughly first hour of trade) as a separate pivot point by itself, as a breakout level.

Support and Resistance
There are two ways of using pivots. The core technique is based on support and resistance. We can use other technical indicators, such as moving averages, to support this analysis and help provide confirmation. The idea is to sell when prices violate support levels in a break and buy when prices push through resistance on the upside.

Support and resistance are key points to watch in chart patterns. Support occurs when increased demand for a particular futures market builds a floor under that market’s price. A support level or zone appears when buyers miss purchasing a futures contract and vow to buy it later should prices decline to the same, or nearly the same, level. Resistance occurs when selling pressure stops a market’s price rise. A resistance level is similar to a support level in that traders who buy the futures con¬tract just before it tumbles vow to sell if its price rallies back to their purchase price. In bull markets, old resistance often becomes future support and in bear markets, old support becomes new resistance.

Finding first and second resistance (R1 and R2) and first and second support (S1 and S2) can help you predict how far prices might climb and how far they might fall. These levels can also provide key stop-loss levels, a vital risk-management tool.

Look at support and resistance as floors and ceilings of a building. If you can break through the floor of the second story, you’ll fall through the ceiling of the first story, and probably land on the floor, now one story lower. Resistance numbers are always higher than your pivot, and your pivot is always higher than your support numbers. You can use these numbers without ever even looking at a chart.

Trading the Pivot
Pivot points can also be considered critical junctures in markets. If the market is flip-flopping around a pivot number, the market is trying to decide if that pivot is valid, and to what extent. The fact that so many traders watch these pivot numbers means they can be a self-fulfilling prophesy. If everyone believes some certain number is support, and the market starts to rise, they will think, “I need to buy.”

More day traders use pivot trading than swing traders, but the approach can be used successfully for either trading time horizon. If daily and weekly pivot numbers line up, they have an even stronger impact. You could even take the last three daily or weekly pivots and divide by three to get an average pivot.

Let’s take a look at how we calculate and use pivots to trade the E-mini S&P. First, let’s consider the weekly pivots for the week of February 1 – 2, 2010. We are using data from the prior trading week to calculate our pivot, support and resistance points as follows.

S&P 500 Weekly Pivots, February 1 - 5
High 1,103.30 Low 1,066.70 Close 1,070.40
R1 = 1,093.57 R2 = 1,116.73
Weekly Pivot = 1,080.13
S1 = 1,056.97 S2 = 1,043.53

If the market moved under my weekly pivot that would be bearish, and if the market moved above it, that would be bullish on a weekly basis. Even if the market falls under our pivot at 1,080, if you are a longer-term trader you might want to wait to sell until if falls under our S1 of 1,056. Short-term traders who got long at 1,082 on Monday would’ve caught a nice move higher that day, which was extended with another bullish session on Tuesday.

S&P 500 Daily Pivots, February 1
High 1,093 Low 1,066.70 Close 1,070.40
R1 = 1,086.70 R2 = 1,103.00
Daily Pivot 1,076.70
S1 = 1,060.40 S2 = 1,050.40

When the market rallied above our pivot on February 1, you would have considered buying. S1 The high on Monday was 1,086, close to our R1 at 1,086.70, and also where the market closed. That would be a good place to consider taking profits.

Playing the pivots can help you uncover opportunities, but this technique will not always work perfectly every day or week. However, pivots can be effective money management tools in volatile sessions, as you use your support and resistance points as levels to get you out of the market as need be, before heavier losses mount. Remember, you don’t have to be right 100 percent of the time to be a successful trader. Use your pivots to employ proper money management, and to find trades with attractive risk-reward profiles. Never risk more than you can afford to lose, or hope to make!

I welcome you to give me a call to discuss this technique in further detail, or to answer any other questions you have about the markets.

Jeff Friedman is a Senior Market Strategist with Lind Plus. He can be reached at 866-231-7811 or via email at jfriedman@lind-waldock.com. You can follow Jeff on Twitter at www.twitter.com/LWJFriedman. Join Jeff for his monthly webinar, Friedman’s Futures Forecast, by visiting Lind-Waldock’s events page. You can view an archived webinar of this forecast at www.lind-waldock.com/events, where Jeff covers even more detail.

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Paksu : Here are resistance, pivot dan support on 5 Feb 2010 from Hafeez Blog

Resistance 3: 1130.80
Resistance 2: 1111.05
Resistance 1: 1098.85

Pivot : 1079.00

Support 1: 1059.35
Support 2: 1047.15
Support 3: 1027.45

Silver in the Spotlight

2010-02-06T19:16:00.000-08:00

by Dennis Cajigas

Gold has been in the spotlight, but silver has been a hidden bull, and I expect it to rally for several reasons. Traders who are leery of buying gold at record-high prices might consider a silver play.

Dollar Weakness

Silver should find strength from expected continued weakness in the U.S. dollar. Commodities saw a broad-based rally on Monday, November 9, after the weekend G-20 meeting, where finance ministers agreed to continue global economic stimulus measures. The dollar weakened after the meeting and many commodities surged, including grains, energies and metals, as well as the stock market. The U.S. Federal Reserve left monetary policy unchanged at last week’s policy meeting, and rates look to remain near zero for some time. Therefore, I don’t see the dollar’s trend changing much anytime soon either.

There has been a fairly strong inverse relationship between the U.S. dollar and commodities. U.S. dollar-denominated commodities have been strengthening, as a cheaper U.S. dollar means cheaper prices for countries looking to import goods.

We have also been hearing rumblings of central banks trying to diversify away from the U.S. dollar and buying gold, and also perhaps a currency basket. While that trend could take some time on a large scale to occur, it would likely exacerbate dollar weakness, and silver and gold should both benefit.

Silver should follow rallies in other precious metals, including platinum and palladium, as these metals also benefit from increased industrial demand, both real and anticipated, as we exit of the recession.

Funds Net Long

Looking at the latest weekly data in the Commodity Futures Trading Commission’s Commitments of Traders report, fund buying and non-reportable (small speculators) were net long about a combined 64,800 silver contracts. Even though there is weakness in the economy (notably the employment situation) there is fund interest in commodities. Investors are interested in hard assets. Several funds have also been looking to rebalance some of their portfolios in compliance with CFTC regulationsI expect to see broader and deeper positions, perhaps moving out of gold and into other metals such as silver, which should benefit from this process.

Gold has hit a new record-high above $1,100 an ounce, but silver has been lagging. I expect silver may play some catch-up over the next few weeks or months, and should post even greater gains on a percentage basis than gold. Silver has not able to break through last month’s high, but I believe that should happen fairly soon.

Metal Ratios

Anticipated inflation should also prove a driver for metals prices in general, as a hedge. The monetary and non-monetary metal ratios (between silver and gold) are important to note. The historical peg for the monetary ratio of these metals is about 15-to-1. That means about 15 ½ ounces in silver is typically required to buy an ounce of gold. Currently, this ratio is at 63-to-1, or 63 ounces of silver are required to buy an ounce of gold. If this relationship reverts to historical norms, silver should rally significantly higher to catch up.

The non-monetary metal ratio on COMEX silver to gold contracts is 7-to-1. That means 7 contracts in silver are required to equal one gold contract. That effectively means that if gold moves to $1,200 (a move of $100), we should see silver at least $2 an ounce higher, with an objective of $19 in the medium-term.

Trading Silver with Moving Averages

The daily chart of the March COMEX silver contract shows the 50-day moving average in blue. We can see how the market has bounced off these supports. The 200-day moving average is in green. This chart shows an increase between the 50- and 200-day moving averages. There is an increase in the distance between these moving averages, indicating an increase in momentum, and in new buying coming in. The 50-day moving average is reacting and increasing its slope more so than the 200-day moving average. The differential suggests increasing strength and increasing buying. We haven’t broken resistance at $18, but if this trend continues, I expect a breakout in the next few days. The 50-day moving average, near $16.92, is holding as support and looks like a great place to establish a long position.

Looking at a weekly chart, we can see the uptrend extending from 2008. The 50-day moving average is showing strong buying coming in, and the 200-week average shows a smoother line. Similar strong support is seen near $17 on the weekly chart also. A $2 move in silver would give a target of $19.50, also a strong resistance level. If gold really does take off, I would expect even higher prices ahead for silver.

Please contact me to develop a customized strategy to fit your unique situation. I’d be happy to take your questions about this or other markets.

Dennis Cajigas is a Senior Market Strategist with Lind Plus, Lind-Waldock’s broker-assisted division. He can be reached at 866-631-6216 or via email at dcajigas@lind-waldock.com
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Paksu: Public Gold also sell silver kilo bar, be the first silver order. Call me.

Introduction to MACD

2010-02-06T18:54:00.000-08:00

by Dennis Cajigas

Moving Average Convergence/Divergence, otherwise known as MACD, was created by Gerald Appel in the 1960s as a way to analyze market momentum and strength. While it fell out of favor in the early 1980s, it experienced a resurgence of popularity with the development of the MACD histogram by Thomas Aspey in 1986. The histogram provided a way to anticipate crossovers in the MACD, providing another method of analysis that gave the MACD a renewed sense of relevance. Traders often use the histogram as a tool to anticipate trend and momentum shifts.

One of the most useful things about the MACD is that it allows traders the ability to identify market trend changes and strength of momentum in a single indicator. It is particularly popular among currency traders.

The MACD represents the difference between two (fast and slow) weighted moving averages of closing prices. The 12-day moving average is commonly used to represent the fast, while the 26-day moving average, the slow. A trigger line, or signal line, is created by smoothing the result with another weighted moving average. Most commonly, the 9-day is used. This creates a centered momentum oscillator, which visually indicates shifts in trend or changes in momentum.

Common Pitfalls
The MACD is a powerful and useful indicator, but it is a lagging indicator. Often there may be a delay between a signal in the MACD and price movement. The MACD may be used in all market condition types, but it is most useful in volatile markets when trend changes more frequently.

Traders should be careful not to mix signals when forming their trade strategies. For example, when entering a momentum-based trade, the exit strategy should be on a momentum indicator rather than a price, time or profit target.

Four Types of Signals

1. Moving Average Crossover. This occurs when the two moving averages (fast and slow) cross. It indicates a potential shift in trend; essentially more buying (or selling) is coming into the market. It is the most common type of signal, but should be reinforced with another type of signal as it can occur fairly often. A three-bar confirmation in the price action or in the MACD histogram can provide a confirmation signal.

In the chart examples that follow, you’ll see two red and blue lines at the bottom, representing the two moving average time periods (fast and slow). The histogram in the middle has a line running through the center, which creates a trigger or signal line.

The histogram visually shows the difference between the moving averages. It also smoothes out fluctuations. I’m using a candlestick chart, with down days designated by red candles and up days by green.

Let’s look at a daily chart of the U.S. dollar in 2009 as an example. In the lower part of the screen, there is a moving average crossover of the12-day and 26-day moving averages, represented by the tan circle. We see the shift in price reflected in the corresponding tan circle in the candlestick chart, as the market starts to decline. There is another crossover as the trend shifts to the positive side in the next set of light blue circles farther to the right of the chart, as buying comes into the market. You see the reflection of the price move in the MACD, and we have continued rallies going forward.

Chart 1, Moving Average Crossover

2. Centerline Crossover. This occurs when the MACD moves past the zero line and moves into the opposite territory. That is, going from positive to negative, or negative to positive. It can be combined with other types of indicators to confirm the signal. Traders will often also monitor the slope of the histogram or the two indicator lines to reveal increasing strength or weakness of the market momentum. How quickly is it moving, and how fast and strong?

In the next chart, we see the centerline crossover and the shift from negative to positive. The bars are steadily and slowly increasing, which shows more buying coming in, and increased positive momentum (represented by the beige ellipses). Notice the extreme slope on the histogram and the corresponding gaps in price action on the chart. A bit of a bullish pennant formation is seen in the price chart.

The purple bars (histograms) move below the zero line and then above as price rises (tan circles). We then see a negative crossover to the right on the chart. As the length of the histogram increases, the slope increases and we see that in bearish price action (indicated by the light blue circles).

3. Positive/Negative Divergence. This occurs when the strength or weakness of the MACD differs from the relative price action of the market. It is the least common of all the MACD signals, but is often the most reliable of the MACD signals, indicating a major trend shift.

On Chart 3, we see a high occur, and then a lower high on the MACD histogram, indicating weakening or exhausting buying pressure. The MACD is telling us the rally we are seeing is a weak one (see the orange line at top right). Afterward, we see a drop in price reinforced by the drop in the MACD and MACD histogram. The market’s bottom should be indicated by a drop in momentum.

Chart 3, Positive/Negative Divergence

4. Multiple Indicator Signal. If you have one indicator producing a signal, you might want to reinforce it. As the MACD crossover goes from bearish to bullish in Chart 4, it is reinforced later by a centerline crossover. We thus have two signals combining to reinforce the trade. We see an increasing histogram, indicating increasing bullish momentum entering into the market, and price action confirms the bullish shift. Within the light blue ellipses, we see multiple indicators. The MACD crossover gives indications of a possible shift, and the centerline crossover indicates increasing momentum.

Chart 4, Multiple Indicator Signal

Looking at a more current chart of the U.S. dollar in early 2010, the blue ellipse represents a positive (bullish) moving average crossover and it is reinforced by a positive centerline crossover. These bullish MACD signals are reflecting the shift in price action and you can see market trend change indicated by the blue ellipse on the price chart.

The beige rectangle is overlain on another positive moving average crossover and the MACD signaled a momentum shift within an already established trend. The MACD signal indicated a rally extension (micro-trend change) as opposed to a major trend shift.

U.S. Dollar Index, Early 2010

This is just a brief introduction to MACD, and I encourage you to do further research and to contact me with questions on how you might apply these techniques to your market analysis. I find the MACD to be useful for all markets to determine momentum and trend shifts.

Dennis G. Cajigas is a Senior Market Strategist with Lind Plus, Lind-Waldock’s broker-assisted division. He can be reached at (866) 631-6216 or by email at dcajigas@lind-waldock.com.

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Paksu : A lot of thing we should learn but this is the best tool for me to monitor gold price.

Fund managers tip Gold Investment as top for 2010

2009-12-30T08:58:00.000-08:00

The Gold Investment rush of 2009 is likely to continue into the new year, according to the Association of Investment Companies (AIC).

Annabel Brodie-Smith, the organization's communications director, said that the ongoing economic recovery means that resources are expected to be the best performing sector over the next year.

"Interestingly this year's 'gold rush' is tipped to continue with over a quarter of managers predicting that gold will be the top-performing asset," she added.

Ms Brodie-Smith was commenting on a poll for AIC which revealed 28 percent of investment fund managers think gold will be top in 2010.

The study also found that five percent of fund managers think all asset classes will perform well over the year, while none backed bonds and residential property to perform best.

Gold has enjoyed a strong year in 2009, with prices hitting a high of $1226.10 an ounce in early December.

While prices have fallen back slightly, Barclays Capital precious metal analyst Suki Cooper told the Telegraph recently that Gold Investment should be viewed over the long term.

"It wouldn't surprise me if we had a little correction in the gold price but our position remains stay long," she told the newspaper. "In terms of technical trends the prospects for gold look strong."

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Goldbug, 30 Dec '09

Get Exposure to Rising Gold

2009-12-30T08:47:00.000-08:00

The CPM consultancy's outlook for Gold Prices in 2010

WHAT'S THE OUTLOOK for Gold Prices going into 2010...?

Here Carlos Sanchez, associate director of research at New York's CPM Group speaks to Hard Assets Investor...

HAI: You guys are very much involved in metals – gold, precious metals – and gold has been on a tear. We had one of your colleagues here several months ago, Jeff Christian, at the time when gold was probably more or less around $900 an ounce. He was not that bullish at the time, looking at fundamentals such as actual physical demand, mine output, etc. Yet we have broken through; we've seen gold vault up above the $1100 figure. How high do you think it could go?

Sanchez: Well back then, we didn't expect prices to perhaps rally as high as it did so quickly. We had expected prices to move higher, but over the course of later this year and into the first quarter of next year.

Gold Investment demand has been the main driver behind prices over the past couple of years, and more so over the past several months. I think investors continue to be concerned over financial markets, economic conditions and political conditions as well. So I think with weak economic growth, with high unemployment, with what's going on in Afghanistan, Iran, etc., you have increased concern. And investors continue to rush to safe-haven assets such as gold.

HAI: Are investors coming up with new bullish-for-gold arguments, and bearish on the general economy, even though we're starting to see things improve?

Sanchez: Even despite the recent stabilization and the pickup in stock markets over the past several months, I think there's concern that stock markets remain vulnerable, not only in the US, but around the world. You also have increased concern over the economic conditions. There have been signs of stabilization, but they still remain vulnerable. Economic growth has not been as it was over the past several years

HAI: What about some of these extreme forecasts? I've heard people say, "We're going to $5,000. We're going to $10,000...$20,000..." Are those realistic?

Sanchez: I don't think they're realistic now. I think we'll have to wait to see what happens over the next several months. But I think $1,400, $1,500 is definitely a possibility, perhaps early next year. As far as $2,200, I think economic conditions will probably have to deteriorate from here going forward for us to see that price level.

HAI: Now if they don't deteriorate, if we continue to see the stock market improve and maybe even start to see some job creation at some point...don't forget, back in 2003, I remember very well the so-called jobless recovery turned into a recovery that actually created jobs. Can we have a scenario where gold continues to appreciate even though real economic conditions improve?

Sanchez: You know, if economic conditions do improve and you see a steady decline in unemployment, a stabilization in economic conditions and financial markets, you may see Gold Price gains capped. But at the same time, they will be supported. Because it will take several years for unemployment to move back to levels where it was prior to this recent financial calamity.

HAI: So from your perspective, there's no element of excess speculation or sort of a bubble environment right now when we talk about gold?

Sanchez: I think investors have helped push prices higher. They've been chasing prices higher, and that's helped sort of continue that cycle of rising prices. Perhaps once investors see that their price targets have been hit, there will be a pullback in prices. But at the same time, that pullback may not be as sharp as some expect. I think the pullback, as we've seen over the past several months, has been $30 to $40. But at the same time, the investors have been willing to Buy Gold at increasingly higher levels.

HAI: All right. So just quickly, would you say the new floor, what price level is that? $700, $800?

Sanchez: On a short-term basis, I think that price level is $1,100. If prices do fall below that, I think you could see increased buying. There's potential for prices to fall perhaps $40 to $50 lower. But that would, I think, pick up investor attitudes, and there could be some increased buying there. But next year the floor may be $1,000 if not $900.

More News

Gold Trends, Hot Commodities and the Major Indexes, Trade the Trend!

2009-12-23T00:25:00.000-08:00

Monday, December 21st, 2009

December 20, 2009
Gold Trends:
Gold has been leading the market for almost a year. Last week gold and gold stocks were trading at support looking ready to bottom but as you will see in my charts below, both broke support on heavy volume.

With gold now under performing the stocks market, I get the feeling we could see the broad market top. Topping is a process and after this strong climb I figure it will be choppy (tough to trade). Much like the price action on the Dow and S&P500 the past month, but this time it will be on a larger scale.

From a technical stand point the major indexes are trading at a key resistance zone from Oct 2008. This has been an amazing year for trading but I think the time has come for a correction or another melt down depending on how you view the US economy. It does not really matter which happens as we can play both directions.

As far as the fundamentals go, well the US economy in my opinion is scary. All I know is that if the markets start to melt down everyone better make BIG money on the way down because a severe correction will cripple the county as millions more will become unemployed. I am concerned that current recession may turn into a depression.

‘If’ we get another stock market meltdown, literally every asset class will go down with it. The only difference I think will be the trend of gold. Everyone has started to buy gold or at least thought about buying some.

‘If’ a meltdown occurs I think gold will go down in price at first with everything else, but if we are headed for another market collapse EVERYONE will turn to gold as the safe haven, triggering a massive parabolic spike straight up which could last years.

Enough of this negative talk, Lets take a look at the short term gold trends.

Gold Trend – Daily & 60 Minute Chart

The trend of gold broke down from the red rising channel a couple weeks back as expected. We were taking profits at the $115 level.

The more recent price action shows two technical breakdowns on the daily chart and the small 60 minute overlaid chart. The daily breakdown crashed through our support trend line and the 60 minute chart shows the breakdown below the previous low. The price is currently trading at resistance and the odds now favor lower prices.

Gold Trends

Silver Trend – Daily Chart

Silver is trading at support and has yet to break the previous low. I think we will see this happen in the next few days.

Trade Trends

Crude Oil Trend – Daily Chart

Oil had a great setup last week with many readers profiting from the oversold bounce off support which I pointed out on the daily chart last week. When buying into an oversold setup like this I scale in over 2-3 days in case prices dip lower as the selling dissipates. Average price was $35.75 and sold at first target of $37 for a 3.5% profit. Many of us still hold a core position with a tight stop.

The 60 minute chart shows this play and how the price popped once the sellers were cleared out.

Trading Trends

Natural Gas Trading Trend – Daily Chart

Trend lines provide excellent levels for support and resistance and this chart is a perfect example of that. Not much to say about this chart other than UNG is trading at resistance and volume is big. This tells me we could see lower prices from here or some sideways price action first.

Natural Gas Trends

Broad Market Index – Dow Jones ETF – Daily Chart

In short, the market is starting to correct as we thought. It still has more to go before testing support. But because this week is a holiday week, volume will be light and like volume favors higher prices. So we could see the highs tested or sideways action.

From looking at the monthly, weekly and daily charts of the major indices I think the market is about to have a sharp correction. If we get a breakdown then we are headed to the next support level which is about 9% down from the recent high in the DIA etf fund.

Major Index trends

Gold Trend and Technical Conclusion:

The trend of gold has been very predictable over the recent months and this correction seems to be text book pullback. I see the short term trend of gold still down but the longer and more powerful underlying trend is up. Let’s wait for the price of gold and silver to sort itself out and wait for low risk entry points before jumping back in.

Crude oil is in pinball mode. It’s just bouncing around between support and resistance levels now. Not much we can do but wait for another setup.

Natural gas is trading at resistance and if we get the proper price action in the next few days we could have a great short trade. Only time will tell.

The broad market trend is looking and feeling very toppy. A lot of money has been moving out of stocks the past 4 weeks and January could be a roller coaster. Last week I exited all my positions except XTR.TO (Energy and Financial dividend fund) which many of us took a position in late February and first week of March. I have set a tight stop and hoping to get the 4th dividend payout before it corrects.

I want to note that I am not going to be shorting the market until the bear trend is definitive. This could be 2-3 months down the road still. But after a great year of trading and the market and economy looking the way it does I am happy to be sitting in cash.

Tis the Season to Trade the Seasonal Charts, Dow, Gold, Silver, Oil and Gas

2009-12-08T15:40:00.000-08:00

Dec 2nd, 2009
The market has had a fantastic week so far for stocks and precious metals. The financial and energy sector are underperforming which is a concern, but we continue to hold our positions and will wait until a reversal to lock in our gains.

Things seem to be lining up for stocks and precious metals to take a breather, which is in line with the Dow Jones Seasonal chart below.

Let’s take a look…

Dow Jones ETF
You can see from looking at the chart the repeated pattern of price rallies, leading to exhaustion and a test of support, followed by another repeat of the pattern. It looks as if the broad market is setup for a test of support which could happen within 2-4 days. Then as we near the holiday prices will start to drift higher. This pattern occurs more often than not as seen on the Dow Jones Seasonal chart below.

Broad Market Holiday Rally

Dow Jones Seasonal Trends
This chart clearly shows weakness in the first half of December and continued strength moving forward. This has not really happened in the past two years which means we are overdue for continued strength. 

That being said, the previous two years were bear markets and we are now in a bull market. So the tendency is for buying to continue into year end.

Dow Jones Seasonal Trends

GLD ETF Fund
Gold continues to push higher surprising many of us. It seems as though money is rushing into metals and buyers are not particularly concern about price. While this is great for short term traders and those of us in the trade, we must remember that the faster things go up, the quicker they correct.

Don’t get me wrong, I don’t think gold is going to crash, I just think we could get a 10% correction before moving much higher. Gold is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market before pushing much higher.

GLD ETF Trading

SLV Exchange Traded Fund
Silver has been underperforming yellow gold but is still a solid investment. It is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market.

Silver ETF Trade

USO & UNG Funds
Oil continues to flag from its breakout back in October. This is a bullish pattern. Last Friday we saw oil open much lower then rally back into the trend channel. This is called an outside day and many times this happens to stocks and commodities as it shakes out the weak traders before starting another rally higher. We will keep a close eye for any low risk entry point.

Natural Gas had a nice rally last week which I mentioned looks a lot like a short covering rally. The price action this week suggests it was and has now made a new low. Today on CNBC it was reported that a new source of natural gas has been discovered. This resource is 20 times larger than the biggest source in the US. Enough gas to last the US over 100 years. This added to the selling on both natural gas and oil today.

Energy ETF Newsletter

Trading Conclusion:
Precious metals continue to perform well and it’s important to note that PM stocks are now moving higher with gold. They have been lagging for some time but are on fire again. Great to see!

The Dow Jones index and several others look ready for a breather. The timing of these overbought charts bodes well for the seasonal December pause before the holiday rally. Time will tell.

Energy and financials are both underperforming the market and without their participation we will not see the indexes move much higher.

Continue to hold precious metals positions but be ready to lock in profits if we see the market reverse sharply. I am watching energy for a play but no setups at this time.

Gold: Technical correction before the final frontier

2009-12-08T15:31:00.000-08:00

by prieur on Dec 8, 2009 published in http://www.traderplanet.com

This post is a guest contribution by Dian Chu*, market analyst, trader and author of the Economic Forecasts and Opinions blog.

Gold fell for the first time during last week, off 4% on Friday to $1,162.40 an ounce, the biggest drop since Dec. 1, 2008 after the new U.S. jobs data showed unexpected strength. The Dollar rallied against rival currencies while traders reversed the “Sell Dollar/Buy Gold” strategy. (Fig. 1)

The Dollar’s decline has been a key factor in the record rising gold price this year by boosting the metal’s appeal as an alternative investment along with other commodities and high-yielding currencies.

Though gold briefly touched a low of $1,136.80 during the Thanksgiving week on fears of a possible debt default in Dubai, the precious metal had otherwise continued its vertical ascend into uncharted territory advancing in 21 of the past 23 sessions.

While gold has some underlying support from central banks and investment funds, there are some indications suggesting gold is moving mostly on momentum, and that a deeper correction may be due.

India Leading the Gold Rush

Gold’s rally in the past couple weeks was largely on speculation that India’s central bank may buy more gold from the IMF adding to the 200 ton purchase it made last month.

This second purchase by India would be the fourth central bank sale this quarter of IMF bullion. The three prior sales were Sri Lanka’s $375 million purchase of 10 metric tons; India’s initial $6.7 billion purchase 200 metric tons, and Mauritius bought 2 tons for $71.7 million.

The three sales so far leave about 190 tons up for grabs from the 403.3 tons the IMF announced Sept. 18 it would divest to shore up its finances.

China, The New King of Gold

Private Chinese gold buying, for both jewelry and investment, will overtake Indian demand this year, predicts metals consultancy Gold Fields Mineral Services (GFMS). China is now the world’s No.1 gold mining nation. The People’s Bank is widely thought to have grown its gold reserves by buying domestic production direct.

In addition, China has cut the import tax on jewelry and allowed select commercial banks to sell gold bars, and gold is now traded freely on the Shanghai Gold Exchange.

Russia & Vietnam Not Far Behind

On Nov. 23, Russia’s central bank announced it had bought 15.6 metric tons of gold in October and has said it aims to increase gold’s share in its reserves this year to keep its investments diverse. The Russian central bank had been steadily building its gold stocks this year, which has been up 17% since Jan. 1 to 606.5 tons.

The Vietnamese central bank has also granted quotas to import 10 tons of gold for use by its banking system and gold traders.

Low Interest Rate with Worthless Paper

Some analysts attribute the most recent rally to the reversal of a decades-long selling of gold by developed economy central banks to net buying by emerging market authorities.

Gold accounts for 9% of reserves held by central banks (valued at market prices). Therefore, it is logical for central banks stocking up on gold as it does bring the much needed diversity due to gold’s low correlation with key currencies and its strong inverse correlation with the US Dollar.

However, diversifying reserves primarily via gold rather than other currencies partly suggests the expectation of interest rates around the world to stay low for a long time. Moreover, it reflects central bankers’ growing distrust of all paper currencies, not just the Dollar.

Surging Derivative Trading

Some of the world’s most successful traders, including John Paulson, David Einhorn, and Paul Tudor Jones, have positions in gold or gold related investments. Pension funds allocate about 5% as protection against the weakening Dollar. Hedge funds and traders are piling into gold futures markets around the world, lured by the record-high prices in the precious metal.

Based on the Commitment of Trader (COT) report as of November 24 by the U.S. Commodity Futures Trading Commission (CFTC), the number of long positions in gold was around 370,000, up about 5,000 from just a week ago, mostly from non-commercial short-term speculative investors.

It is also interesting to note CFTC Nov. 2009 monthly report shows that while commercial participants held net short positions; non-commercial and other participants, who accounted for 51.4% of open interest, held net long positions,. Some traders already indicated there has been some good upside buying in March and April in the $1,300s and even $1,400s.

Overall, NYMEX Gold futures open interest increased 4.8% in November with longs outnumbering the shorts by 71% to 12%. This would have been the highest number of long speculators in the history of the New York gold market since 1975, except for last year when the gold hit $1,030. (Fig. 2)

High number of speculative positions is the driving force of the commodities rally in general, but that also makes gold vulnerable to further corrections as well as high volatility.

Diminishing Physical Demand

Regardless of the gold fever this year, according to the third quarter 2009 Gold Demand Trends Report from the World Gold Council, demand reached 800.3 tons, representing a drop of 34% year-over-year. The report also found that average gold prices for the quarter were 10% higher than in the same quarter last year.

Diminishing physical demand coupled with higher price suggests it has been mostly speculators that are driving up the price. In addition to central banks using gold to rid Dollar dependency, fund managers and speculators also have been driving up the price of gold, partly seeking protection from potential inflation in a low interest rate environment.

Fear Factor

Gold is a commodity that perception plays a more significant role than other market factors. Almost all other commodities such as crude oil, natural gas, copper, prices often fluctuate on indications of inventory, supply, and demand; whereas gold moves primarily with investor’s fear or perception of inflation, U.S. Dollar and the economy.

But just as fast as the market perception can drive prices straight up, it could tank an asset class in a matter of minutes. As discussed here, investment/speculator demand is clearly a major factor in the current gold price rally, a decline could potentially take the gold price down quite significantly on indications such as rising interest rate, or the U. S. Dollar starts to strengthen.

If history is any indication, after gold rose sharply in 1979-1980 to $850, it was followed by a drop to near $500 in less than 2 months. It is conceivable that gold could take a similar loss in a short time.

Short-term Outlook

The general expectation is that the Federal Reserve will not act in favor of the Dollar until later next year. Gold and Dollar correlation is still highly negative, but one should expect a fair amount of volatility given the uncertainty of global economic direction intensified by the Dubai crisis. In that sense, gold could certainly challenge the $1,225 levels again, with $1080, $1050 and $1025 each represents significant support level.

Technically Overbought

Friday’s pullback has moved gold’s MACD to the downside and the 14-day Relative Strength Index (RSI) back in the neutral territory (Fig. 1), which could spur more selling if Dollar retains its strength.

Though gold’s longest rally (nine days) since 1982 ended last Wednesday, the precious metal is racking up a near 35% gain on the year, and moved up almost 17% this month alone, heading for the sharpest annual increase in two decades.

So, at this level, gold has also run into profit-taking, as well as year-end fund manager’s portfolio repositioning. Closes below the 20-day moving average crossing would likely confirm that a short-term top has been posted.

Long Term Bullish Intact

Sporadic green shoots of economic data could obscure the harsh reality, and lead to gold weakness in the short term. Nevertheless, there’s enough momentum around for gold to make new highs as long as the Dollar stays weak spurring further safe haven demand on concerns about a double dip recession.

Therefore, the potential exists for a large rise in the longer term. However, if this rally extends into uncharted water on momentum without a healthy enough correction, upside targets will be hard to project with the eventual correction equally difficult to predict, just as they say, “The higher you climb, the harder you fall.”

*Dian Chu, Market analyst, trader and financial writer for Seeking Alpha, Zero Hedge, Daily Marksts, iStockAnalyst & StraightStocks. My articles also appear in Reuters, USA Today and BusinessWeek, etc. Professional credentials include M.B.A., C.P.M. and Chartered Economist with extensive professional experience in market segment forecasting and strategies. Previous employers include Enron, Time Warner & Clear Channel. I’m currently working in the U.S. for the energy sector.

Source: Dian Chu, Economic Forecasts and Opinions, December 6, 2009.

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Paksu : Be cool with this situation, the overbought gold will return in bull pipe with 2-4 days.

Emas catat harga rekod tertinggi - Kosmo 3 Dis. 2009

2009-12-05T08:28:00.000-08:00

GAMBAR fail menunjukkan jongkong emas di sebuah bank di Switzerland baru-baru ini.

LONDON - Harga emas mencapai paras rekod melepasi AS$1,217 untuk setiap auns (31.1035 gram) atau RM132 segram semalam berikutan kebimbangan pelabur yang mencari tempat selamat setelah nilai dolar semakin lemah.

Harga emas di Pasaran Bulion London melepasi paras halangan AS$1,200 (AS$1=RM3.38) buat kali pertama kelmarin.

Selepas mencapai harga rekod baru, emas jatuh sedikit untuk didagangkan pada harga AS$1,207.82 menjelang tengah hari. - AFP

The Dow, Dollar & Gold – What Goes Down Must Come Up

2009-11-30T20:29:00.000-08:00

Sunday, November 29th, 2009

This year has been a very exiting time for traders and investors. We have seen a steady climb in prices with controlled pullbacks in the broad market and gold.

Using technical analysis we are able to quickly and accurately make informed decisions just from looking at the charts. In the charts below you will see how simple chart patterns along with support & resistance levels can provide excellent low risk entry points. Also you will see how candle stick charts can be an early indicator for prices to reverse direction.

DIA ETF – Daily
The DIA (Dow Jones Index Fund) is trending higher. By applying some basic technical analysis you are able to time your entry points having the odds in your favor.

In this chart I use two simple forms of analysis. The broadening formation (red trend lines), and horizontal support zones shown in blue.

Broadening Formations: This is when the price becomes more volatile making higher highs and lower lows. I think of it as one of those Megaphones for talking to large groups of people. So when a chart has this pattern it’s virtually yelling at me and I start taking profits or tightening my stops.

Horizontal Support Zones: I like to focus on support or resistance zones which are a little different than most traders. I do not use the top and bottoms of previous waves for these levels. Instead I take the average price then expect the support level to be penetrated somewhat as the level is tested. This is how the market keeps you out of the good trades. I cover this in great detail in my Stock Market Trading Education Course available in January.

Analysis: The DIA ETF looks ready for a pullback to the $99- 100 level.

DIA ETF

GLD Exchange Traded Fund – Weekly
Gold has been on fire and riding this wave up has been very profitable thus far. Last week a doji candle was formed on the chart and this can signal a change in short term price action.

This chart shows some of the past doji candles and what happened to the price of gold soon after. What this candle is telling us is that the buying and selling pressure is equal. So we know momentum is slowing and we should expect a consolidation or correction.

Because gold has rocketed higher, indeed going almost straight up in the recent weeks, I expect a pullback to be very quick. A drop to the $110 or even the $100 level in the coming weeks is not out of the question, but we all know commodities can go parabolic for several months (straight up). This is why we continue to tighten our stops and keep holding out long positions.

Gold Exchange Traded Fund

US Dollar – Weekly
The US dollar has been up and down like a yo-yo in the past 15 months. The chart below clearly shows what has been happening with this currency and what I think we could see very soon.

The blue support zone (73-74) is a key pivot point for the dollar. That being said lets take a look at the chart.

During the time when the price is trending higher July 2008 – Feb 2009 we see lower wicks appear more often. This tells me that sellers pushed the price down early in the week but were then overcome by buyers nearer the end of the week. This is bullish price action. Also the broadening patterns during this timeframe’s tops indicate increased volatility and we know that is a sign of weakness.

From March 2009 – Sept 2009 the trend was down and there are longer upper wicks telling us buyers became over powered by sellers each time the price rallied.

In the recent 3 months we observe lower wicks meaning buyers are moving into the US dollar again. Knowing that there is major support below the current price I have to think the dollar could start to bottom around this level.

US Dollar Trading

Trading Conclusion:
The broad market is becoming unstable and looks like it could have more of a pullback this week. I would not be adding to any long positions until we see the market trading near support. Three out of four stocks move with the market so it is crucial to understand the overall market direction when buying and selling stocks and commodities.

Gold is trading at a level which is fuzzy. The weekly chart is neutral and the daily chart is still on fire as it moves up. All we can do is ride our positions and keep raising our stop prices.

The US dollar could start to bottom over the next few weeks. Depending what happens with Dubai this week we could be in for a big bounce in the dollar as investors flock to safety as the US dollar is still the currency of choice if/when other countries start to have a financial melt down again.

Paksu : For the time being, gold will run inverse the USD. Last Saturday, USD make some correction up and Gold was down little bit... any other comments

Gold, Silver and Oil Out Perform their Equities?

2009-11-30T20:20:00.000-08:00

Sunday, November 22nd, 2009

Since the market crash in late 2008 we have seen investors favor quality stocks that pay dividends and have steady earnings. Fast growth companies and equities with physical resources like commodities have also done well.

Let’s examine the monthly charts of gold, silver, oil and natural gas – and observe how they have traded in comparison to their mining equities

Gold – Monthly Chart
Looking at the monthly chart as far back as 2004, we see that gold has formed the same patterns repeatedly. This has created a stair step pattern and allows us to calculate measured moves and a time frame for this to take place.

As we can see gold has broken its 2008 high and is starting another rally which we have seen several times before. I figure we could see gold rally for another 3-5 months and possibly reach the $1500 -$1600 level before forming a multi month or year consolidation.

Investors around the world are buying gold because it is a physical product which has been proven to hold its value.

Gold Monthly Trend

Silver & Precious Metal Stocks – Monthly Chart
Silver and PM stocks have been trading in tandem since 2004 and we can see this by looking at a price performance chart of both silver and the HUI index. The interesting part is that the physical commodity silver has held its value better than the stocks during corrections.
Apparently investors prefer tangible investments over stock certificates of mining companies in periods of increased volitility. Lower risk is in the commodity.

Silver Monthly Trend

Commodity Trading Conclusion:
Investors around the world continue to put money into gold which is a universal hedge against inflation. The broad market appears to be trading at a major resistance level. Tops in the market generally take a much longer than to reverse directions than market bottoms. We will not knot for sure if we are entering a top for a couple months as the charts unfold. Now that commodities are trading back at reasonable levels I think they will hold up better than equities if the market starts to correct.

We continue to enter low risk setups and trade with this strong up trend but are aware that we must be protected and focus on the lower risk plays.

Oil, Gas, Silver Gold – Getting Ready for Next Rally

2009-10-10T08:49:00.000-07:00

Commodities have and continue to be a fantastic trading vehicle for those who can stomach volatility. After last year’s market crash most commodities pulled back to normal if not lower than normal trading ranges. This allowed us to enter the market at 10+ year lows for natural gas.

If we look at the weekly chart for gold, silver, oil, natural gas and the CRB commodity index we can see that commodities in general look ready to skyrocket higher approximately 34% on average in the next 4-12 months.

Take a looks at this chart of gold. While this chart shows the basic technical analysis of the price of gold you can see the completion of the Cup & Handle pattern which is VERY BULLISH. Also you can see gold broke to a new high. While I don’t like to trade new highs it’s hard not to want to buy into this breakout. Most traders should be long gold already, but if you are not, you have a couple of options. Buy into this breakout with a tight stop or wait for a pullback and buy on a test of the breakout. Personally I am waiting for a pullback (test of breakout) before I add more to my position.

Trade Spot Gold

Silver has been strong but has not held up its value as well as its big sister (gold). As you can see silver must break through two more major resistance levels before making a new multi year high. Overall silver still looks strong and I will be waiting for a low risk setup for us to add more to our positions.

Trade Spot Silver

Commodity Trading Conclusion:
Overall commodities look like a great buy. We are seeing precious metals moving up strongly and gold making a new high which is very exciting as our golden rock stock plays push higher and our commodity ETF play continue higher as well.

Chris Vermeulen

The Reason Why Gold Hasn't Skyrocketed

2009-09-27T01:32:00.000-07:00

With the printing presses in full printing mode, many people are questioning why gold prices haven't gone higher - much higher.

In my new video, I explain some of the subtle market cycles that are at play right now in this market. These short-term cycles have been the dominant force in gold all year and appear to be still in control of price action.

I believe the longer-term upward trend in gold is very much intact; short-term we could see more of a trading range that has a downward bias. I think when you watch this video you will get a much better understanding about the rhythm of this market.

If I am correct, you will see some amazing opportunities that I believe will be presented to traders in Q4. In fact, if everything goes according to plan are we could all be looking at some very nice Christmas/holiday profits.

The video is easy to follow and I think you'll learn a whole lot about cyclic price action in the gold market.

We do not require you to register to view this video.

Discover and benefit today from what I learned over 30 years ago in the trading pits of Chicago.

Enjoy the video and please give us your feedback on this blog.

Every success,

Adam Hewison
President, INO.com
Co-creator, MarketClub

Gold & Silver Technical Trading Charts

2009-09-07T20:38:00.000-07:00

I hope everyone enjoyed the weekend!

Gold is once again the hot commodity, as the price rises to the $1000 per ounce level. This $1000 – $1033 is a technical pivot point for gold. One of two things is going to take place in the coming weeks.

If the price of gold can move above $1033 then I expect to see a lot of traders and investors buying gold, as they panic into the position because they do not want to miss another gold rally. Also traders who are short gold will be forced to cover their positions and this will send the price of gold rocketing higher towards the $1200- $1500 area. On the other hand, if gold fails to break higher, we will see a swift sell off, as everyone sells their position.

HUI – Gold Stocks Index – MonthlyI like to use this chart for timing longer-term gold investments. Gold stocks tend to lead the price of gold on a percentage gain/loss basis and so far this month, gold stocks are on fire. This bodes well for gold.

When I see breakouts on this monthly chart, I tend to take larger positions in gold and gold stocks because rallies tend to last 2-6 months. I like to take profits, as the price rises, so that I am locking in gains while still taking part in the continuing move.

The gold stocks (Golden Rockets) we purchased 2 months ago are now up 45% and 100% from our entry point and they still look very strong. Taking some money off the table is a great idea. Gold could go either way fast and it’s better to sell some of the position to lock in profits and let the balance of the trade run. Too many traders swing for a home run and never take profits on winning positions. Winners eventually turn into losers if you hold on to them long enough. Money management is the key to successful trades.

Price of Gold – Gold Bullion – Weekly ChartThis chart clearly shows the breakout last week from the pennant pattern. The price of gold is nearing resistance. This week will be exciting as gold tries to breakout.

Price of Silver – Silver Bullion – Weekly ChartSilver is not as close to the 2008 high like gold is, but is still performing well. Silver is trading at a short-term resistance level and I expect to see higher prices this week.

Silver and Gold Newsletter Conclusion:Gold and silver are starting to run higher and with all the media coverage I expect to see money moving into precious metals for a couple months. This is an exciting time for precious metal investors and a lot of money is going to be changing hands once these metals pick a direction and start moving.

Chris Vermeulen thegoldandoilguy.com

Gold Investment being driven by economic fears, says analyst - 05/09/2009

2009-09-07T20:20:00.000-07:00

The editor of a well-respected precious metals newsletter claimed yesterday (September 3rd) that investors are rushing to Buy Gold for its safe-haven status.

James di Georgia, who produces Gold and Energy Advisor, is an experienced gold analyst whose views are often quoted in leading publications such as the New York Times and USA Today.

He explained in an interview with cnbc.com that concerns over the massive US spending during the recession are persisting and will eventually see Gold Prices increase to about $1,200 per ounce.

"When you have such a large part of US population convinced we're running to hell in a handbasket with federal spending, you're going to have a large part of the population buying and taking possession of gold out of fear of what's going on," he told the news provider.

Investors also turn to gold when supplies of the yellow metal are diminishing as this naturally tends to increase demand and therefore push prices higher.

Last week, Harmony Gold, which is the world's fifth-largest gold producer, suspended operations at its Doornkop mine in South Africa after a worker died in an accident involving a conveyor belt.
When incidents of this nature force the closure of mines, production is inevitably impacted.

| Goldbug | goldnews.bullionvault.com | 05-09-2009 |

The Precious Metals August 23, 2009

2009-08-25T22:05:00.000-07:00

Precious metals like gold and silver appear to be forming a bullish pennant formation, which generally leads to higher prices. Currently the US dollar is hovering around a support level, which is the 76- 79 range. Only time will tell if the US$ breaks down sending gold to new highs in the coming months.

Below is a 4 month spot Gold chart
You can clearly see the pennant formation with gold nearing is apex. Soon enough spot gold prices are going to Blast off or Drop off. I continue to follow the charts closely as we near the apex for a low risk buy signal.

Below is a 4 month spot Silver chart
Spot silver price is forming a similar price pattern. Because spot silver is much more volatile the pennant is a little taller. Again we wait for a low risk setup.

Precious Metals Trading Conclusion:
Precious metals are slowly working their way to the apex of their large multi month pennant formation. In the coming weeks or months I expect to see prices spike much higher with everyone dumping their money into the safe haven GOLD & SILVER.

When spot silver and gold prices start to break down from these multi month pennants we investors will start withdrawing our funds from precious metals at a very fast rate sending prices down.

As always, I keep focused using my low risk-trading model, which helps to alleviate the emotional part of trading during a time like this. Knowing that my down side risk is generally under 3%, this allows me to stay calm and focused. When a trade goes against me, it is not damaging to my account and I review what I have done to be sure I followed my trading system as planned. Losing trades happens all the time in trading, as it’s just part of the game. Knowing this, accepting it and keeping losses minimal is what separates profitable traders from the not so profitable traders.

| Chris Vermeulen| thegoldandoilguy.com|