Sunday pre-game, 5/6/2012

Quick update. I pointed out last week that I'd be surprised if the weekly euro-gold chart, which was right at a critical trend line, broke down. It didn't.

That's allowing me to interpret the weeks ambiguous action in dollar-gold more charitably. Here's an old daily one. Note the 144-day moving average is now resistance, and price is sandwiched between it and the final trend line of the steep post-2009 move:

The gold monthly chart (going back all the way to early 2001) shows how atypical the past several months have been. For the entirety of this trend upwards, there hadn't been more than 2 red months in a row. Even during the cataclysmic seeming action of mid-2008. Now we've begun the fourth red month. Still, the monthly drop has been very controlled. Also note that there have been two instances of 5 out of 8 months red. Both marked very important bottoms. Well, 5 of the last 8 months have been red.
The 21- and 36- month moving averages appear significant. The former (green) is tracing the lower part of the channel, and the latter (red) was where the only monthly close out of the channel landed, in 2008. If gold keeps consolidating above the 21-month MA, that's not necessarily a bad thing ... it would herald a move to $3000 within a year.
The silver charts all smell like farts. Here's the weekly chart I've posting regularly:

No, silver won't drop to $15 (barring some cataclysmically deflationary event) but I want nothing to do with trading it until I get some clues which way it's headed. Of course, gold will almost certainly follow. Patience here is warranted.

The CCI fell through it's 61.8% fibonacci line, but is right at the last blade of its fan. If there's a big rosk-off sell-off ahead, the $506 level, at the 50% retracement, looks like a good time for a QE3 announcement.


derek said...

Thank you for this. One point I noticed in reviewing the monthly "never more than 2 down in this bull" meme is that the odd "HFT-mistake/slam downs/market moves" occurred at month open/closes. Do algos read charts? Do BB/CB types? If you are a CB looking to buy would it not be prudent to indicate an end to the bull via a chart? Look at February daily: it inclines up, March: inclines down, April: flat-up. Other than the odd timing of days (with a leap day for good measure) there is actually one down month: March and a consolidation month: April. Cheers!

GM Jenkins said...

Good point, derek. The end of December 2011 and Feb 29, 2012 were especially salient examples of apparent chart painting.

Victor The Cleaner said...

At $1600 we are now below the trend line. Who of you has the balls to go short paper gold?


GM Jenkins said...

LOL, Victor - I'm tempted. I'm seeing this correction ending at $1560 gold, $27.50 silver.

I came pretty close to shorting silver on Friday, as per my charts above, but I won't feel truly comfortable shorting until the honorable CFTC finishes its 4-years-and-running silver manipulation inquiry and reassures me that there's some integrity in this market. (Either that or a silver asteroid comes crashing through my window).

Victor The Cleaner said...

GM Jenkins,

why $1560? If that is the bottom, there is not enough downside for me - I cannot hang around in front of the screen all day.

The downside in Brent is much better.


Dr Durden said...

If this is our wash out week, I got $1566 for a bottom bollinger touch on the weekly as of today.