Sunday pre-game, 9/18/2011

If there's any week where TA is useless, it would have to be this week. If something perceived as QE3 is announced in the next few days, the metals will probably move up emphatically (but perhaps not immediately, because we often see our central planners try to control the gold price after big announcements, G7 meetings, currency devaluations, speeches, etc.) On the other hand, if our central planners do not signal they will print like crazy, there very well might be a huge crash in stocks and commodities, since it appears QE3 has already been baked into current prices.

So after establishing that technical analysis is probably useless this week, on to some technical analysis.

Check out gold's weekly. A test of the center black line seems imminent. This chart suggests that, despite gold's stellar price action recently, no "paradigm shift" has yet occurred: we've just hit the top black trend line (for the third time in three years). We never finished a week above the top line, and now we're just making our way back down. In other words, if the gold price finishes one of the next few weeks all the way back down at $1600 or so, rather than signaling a "burst bubble," that would just be par for the course. So we have yet to see if the gold bull market will enter a new leg up, i.e. a new steeper trend channel, and that will be confirmed if we either bounce off the center black line, or break through the top one emphatically.

Silver's weekly looks to be heading back to the 34-wk moving average (pink dotted):

On the other hand, on the daily chart we've been looking at, silver finished the week right at the lower blue trend line, so if we have a good week this week, the long term trend will not have been broken.

And a few more somewhat bullish charts to start the week on a good note:

The CCI chart we've been looking at has now hit the 233-day moving average for the second time since we've been keeping track. That bodes well for commodity prices this week.

I want to also start keeping my eye on the gold:silver ratio. For all those weird silver-hating gold-bugs out there, the trend here is definitely in silver's favor unless the top blue dotted line is broken. My guess is we're headed towards the lower red line (i.e. silver will outperform gold for the rest of the year).

Finally, the 10 yr bond-to-silver ratio (i.e. the yield the government would have to pay lenders if it had to pay yields in ounces of silver) has hit a critical point: let's see if the lower purple line is adequate resistance. If not, I suspect the blue line above it will be.