Are Precious Metals Melting or Firming Up

The past two months have been tough on the precious metals sector. We saw precious metals lead the market higher all of last year until December 2009 when prices plummeted as the US Dollar started to bounce. The continued rise in stocks indicated an extreme overbought condition and alerted us that a sharp pullback was going to take place.

Many traders including myself were surprised that the broad market did not sell down with the metals. In December the market looked and felt ready for a sharp pullback but new money continued to flow into stocks, pushing the market higher. This slow and steady grind higher was very frustrating to watch because the market was making new highs day after day while obviously needing to take a breather at any time.

It’s this grind higher that sucks in the last retail buyers before prices collapse, unfortunately leaving many holding overpriced securities and commodities for sale another day.

Since gold lead the market up last year it should be the first to correct and also pullback quicker and deeper than its followers (stock market). This is what we are seeing now which I explain below using charts.

HUI – Gold Stock Index – Monthly Gold Trading Chart
I use this exact month chart for helping to time long term trends for gold and gold stocks. It looks as though we have temporarily formed a double top with this current breakdown. It will most likely take several months to repair the damage done to this chart and possibly more than a year.

There are two options for this chart:
1 - It will form a bullish flag or pennant then continue its move higher.

2 - Or will continue to slide, indicating sellers are in control and that we are looking at a multi year trading range as the market digests the 10 year rally in gold.



The HUI:GOLD Ratio – Weekly Gold Trading Chart
This chart goes up if gold stocks are out performing the price of gold and down if they are underperforming. From 2001 – 2006 the chart looked very bullish but as time went on the ratio really started to look weaker and weaker.

The 2008 meltdown crushed precious metal stocks and the recent rally back up to resistance looks very bearish. It looks like a large bear market rally (test of breakdown level). This also goes for the monthly chart above. I cannot say either chart is looking bullish anymore. Things really depend on how strong the next bounce/rally is so we can gauge the strength behind the move (dead cat bounce, or legitimate rally).



Gold GLD ETF – Daily GLD Trading Chart
The next three charts really pull things together in my opinion in terms of how much selling is left in the market on the daily chart time frame.

Here I have drawn on a daily chart showing what I figure will unfold over time. This is the same pattern that I have been talking about since early December. I love trading ABC retrace patterns because of their accuracy and follow through on trend reversals.

In short, if we see gold break this support level then traders are going to panic out of the market sending the GLD fund towards the $101-$103 level. This panic selling is exactly what is needed if we want to see gold continue a sustainable and strong bull market rally higher.



Silver SLV ETF – Silver Trading Chart
Silver has been a little more difficult to trade as the chart clearly shows the choppy price action. I feel that if silver breaks this level of support we should expect to see $14-$14.50 quickly.



US Dollar Trading – Daily Dollar Trading Chart
This chart pulls the above GLD and SLV charts together. Both gold and silver have more room to fall before reaching a major support level. Knowing that and looking at this chart of the Dollar you can see the Dollar has approximately the same amount of room to rally.

So in a perfect trading scenario, the dollar will continue to climb for a few more days to reach resistance and in return that will push gold and silver down for a few more days.



Precious Metals Trading Conclusion:
I think this week will be a pivotal one. I can see the dollar moving higher sending precious metals and stocks down enough to shake traders out of their long positions in gold, silver and stocks. Once the sentiment turns bearish we will begin looking for an oversold speculative trade and possibly a low risk trend trade setup.

As for the energy sector, both crude oil and natural gas look weak and I continue to patiently await a low risk setup for each.

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Gold Weekly Technical Outlook

Gold' fall from 1163 continued last week and is reached as low as 1075, breaking 1075.2 support briefly. INitial bias remains on the downside this week as long as 1105.1 minor resistance holds As noted before, whole decline from 1127.5 should be resuming and a break of 1075.0 will target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1105.1 will turn intraday bias neutral and bring recovery. But upside should be limited below 1163 resistance and bring fall resumption.

In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253 after interim consolidation from 1033.9 has completed in form of an expanding triangle. Next long term target is 100% projection of 253 to 1033.9 from 681 at 1460 level. We'll hold on to the bullish view as long as 931.3 structural support holds.....Comex Gold Continuous Contract 4 Hours Chart.

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Weekly Fundamental Outlook for Gold

Although gold price seemed to have found temporary support around 1075, the benchmark contract slid -0.5% last week following a -3.6% decline in the prior week. Strength in USD and shift of demand to PGMs weighed on the yellow metal. In the near term, gold should remain under pressure as the dollar will probably be boosted higher by sovereign risk problems in Greece. In fact, investors are very much concern about the Greek fiscal problem will be spread to other European nations.

Greek bonds and CDS showed that investors are increasing worried that the EU will not assist the nation to come out of debts. The euro plummeted to as low as 1.3861, the lowest level since July 2009.While we believe the EU and IMF will eventually offer some kinds of financial supports to save Greece from going bankrupt, the problem will remain a drag for the euro, and hence gold.....Read the entire article.



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Gold Market Commentary For Friday Evening

Gold closed lower on Friday as it extends this month's decline. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, the 38% retracement level of the 2008-2009 rally crossing at 1032.60 is the next downside target. Closes above the 20 day moving average crossing at 1116.00 are needed to confirm that a short term low has been posted.

Friday evenings pivot point is 1082.70

First resistance is the 10 day moving average crossing at 1101.70
Second resistance is the 20 day moving average crossing at 1116.00

First support is Thursday's low crossing at 1073.20
Second support is the 38% retracement level of the 2008-2009 rally crossing at 1032.60

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Gold Heads for Second Monthly Drop as Dollar Rally Cuts Investment Demand

Gold, little changed in London today and set for a second monthly drop, may decline as a stronger dollar curbs the metal’s appeal as an alternative investment. The U.S. Dollar Index, a six currency gauge of the strength of the greenback, traded near a five month high. The dollar has strengthened on concern Greece’s fiscal problems will spread, damping demand for European assets, and as the U.S. economy expanded more last quarter than economists expected. Gold, down 1.2 percent this month, typically moves inversely to the dollar.

“Speculators are still liquidating gold, with no physical buying in sight,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report. “Bullion is still trading on the back of swinging currency markets.” Gold for immediate delivery lost $3.42, or 0.3 percent, to $1,083.68 an ounce at 1:58 p.m. local time. The metal is down 0.9 percent this week, heading for a third decline. Bullion for April delivery was little changed at $1,084.60 on the New York Mercantile Exchange’s Comex unit.

The metal declined to $1,082.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,088 at yesterday’s afternoon fixing. Spot prices are 12 percent below a record $1,226.56 set on Dec. 3. “Further gains in the dollar would keep gold on the defensive,” said Toby Hassall, an analyst with CWA Global Markets Pty in Sydney. “Prices are finding support at the level of December’s lows”....Read the entire article.

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George Soros: 'The Ultimate Asset Bubble Is Gold'

George Soros didn't mince his words when giving his opinion on the yellow metal in Davos to Maria Bartiromo.....

Mr Soros, arguably the most famous hedge fund manager in history, warned that with interest rates low around the world, policymakers were risking generating new bubbles which could cause crashes in the future. In comments delivered on the fringe of the World Economic Forum, Mr Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."

If ultra low rates are inflating gold, then what will happen as we enter a tightening cycle and interest rates rise?

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Gold Higher Overnight, Bears Still have The Advantage

February gold was slightly higher overnight as it continues to extend a small consolidation pattern off last week's low. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, the 38% retracement level of the 2008-2009 rally crossing at 1032.60 is the next downside target. Closes above the 20 day moving average crossing at 1116.20 would temper the near term bearish outlook.

Fridays pivot point for gold is 1084.17

First resistance is the 10 day moving average crossing at 1102.20
Second resistance is the 20 day moving average crossing at 1116.20

First support is Thursday's low crossing at 1073.20
Second support is the 38% retracement level of the 2008-2009 rally crossing at 1032.60

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Gold Market Commentary For Thursday Evening

February gold closed higher due to short covering on Thursday as it extends this week's trading range. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, the 38% retracement level of the 2008-2009 rally crossing at 1032.60 is the next downside target. Closes above the 20 day moving average crossing at 1116.80 are needed to confirm that a short term low has been posted.

Thursday evening pivot point for gold is 1084.17

First resistance is the 10 day moving average crossing at 1108.50
Second resistance is the 20 day moving average crossing at 1116.80

First support is today's low crossing at 1073.20
Second support is the 38% retracement level of the 2008-2009 rally crossing at 1032.60

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Gold's Rally is Short Lived

Jon Nadler, senior analyst at Kitco.com, argues that despite low interest rates and President Obama's State of the Union, gold prices will stay volatile as the carry trade and investor risk appetite battle over the precious metal.



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Mid-Week Charts: Gold, Silver, Oil, Nat Gas and SP500

The stock indexes have been trading very choppy making it difficult for swing/trend traders. It’s during times like this when seasoned traders rise above the herd of average traders.

If you only trade one strategy like swing trading or trend trading then you are likely finding it difficult to make money right now. On the other hand, day traders are having a blast right now as they take advantage of the powerful intraday rallies and sell offs.

I personally like swing trading but during times like this, when I know it will not work, I have to switch my strategy to day trading and focus on the 60 minute and 5 minute charts.

SP500 Index Fund – Intraday Setup
I posted this chart earlier this week and I want to be sure everyone takes something away from this chart as I believe it shows a perfect low risk setup for shorting the market, or you could buy a reverse fund which goes up as the market moves down.

At first glance this chart is noisy, but if you simply focus on the all the different color analysis separately you will notice how simple trading can be and what you should be looking for.

Red Analysis:
1. Overall market trend is down so we are looking for a short trade, signs of weakness.
2. First we see a light volume test of the previous high set earlier in the day. The low volume indicates there are not many participants in the move up and that is a weak sign.
3. Between 14:30- 15:30 we notice the price start to drift higher on very light volume. Also, the price moved up into a resistance level. This to me is a perfect setup.
4. You would sell short or buy a reverse index fund at this point hoping for the market to start selling. You could also wait until it started to drop before taking a position but when a chart looks this good I try to get in at the highest price possible.

Blue Analysis:
1. The price starts to drop forming several small bear flags going into 14:30 before bouncing. Also note the volume began to rise as more selling was happening. This tells us that trading activity is predominately selling and that we should also focus on shorting when the time is right.
2. Again, the price starts to drop forming several small bear flags going from 15:00 – 15:45 before bouncing. Also note the volume began to rise as more sellers took part in this short term trend.

Black Analysis:
1. This shows more or less the resistance level, area to short the index and the nice trend down.



Gold GLD ETF Trading
Gold has been under selling pressure since early December. That powerful drop and the chart pattern it has formed will generally resolves itself after an ABC retrace pattern. I have drawn this on the chart which is what I think will happen in the near term. This daily chart of GLD ETF has a small 4 day bear flag and bearish reversal candle which is pointing to lower prices in the near term.



Silver SLV ETF Trading
Silver has a funky looking chart. It has formed a large megaphone pattern and possible head & shoulders pattern. Both are bearish and if we use the Head & Shoulders to calculate where silver could end up trading if it continues to break down, then $14.00 would be a level to look for a bounce.



Natural Gas UNG Fund
The natural gas fund UNG has been in a down trend for over a year and the recent drop looks to be the start of another sell off. This could possibly form a reverse head & shoulders pattern with this drop moving UNG down to the $8.75 – $9.00 area. We will have to wait and watch things unfold for now.



Crude Oil USO Fund
USO looks to be trading at support. I am inclined to patiently wait another session before possibly taking a position.



Mid-Week Trading Conclusion:
In short, I feel the overall market could bounce including stocks and possibly commodities, but the selling is not over yet in my opinion. The drop we have seen in the past week is the half way mark. So this bounce would be the starting of an ABC retrace for stock indexes. During choppy times I like to be sitting in cash and or day trading for short term profits.

Precious metals do look oversold and ready for a small bounce or sideways move; I do think they will head lower. Too many traders are still holding on to their gold positions and until a large number of them get scared out of their positions, we will not see gold rocket higher.

Natural gas looks like it’s about to head much lower this week while oil looks ready for a solid bounce off support.

We continue to wait for new low risk setups as different investment scenarios unfold.

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Smart Scan Chart Analysis of GLD

Where is gold headed? Where is the gold ETF GLD headed?

Smart Scan Chart Analysis indicates a counter trend rally is underway. It also indicates that the current down trend could be changing and moving into a trading range Sidelines Mode.

Based on a pre-defined weighted trend formula for chart analysis, GLD scored -55 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10........Last Hour Close Below 5 hour Moving Average
+15........New 3 Day High on Wednesday
-20........Last Price Below 20 Day Moving Average
-25........New 3 Week Low, Week Ending January 23rd
+30........New 3 Month High in December
-55........Total Score



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Gold Daily Technical Outlook For Thursday Morning

Intraday bias in Gold remains neutral as it's still staying in tight range above 1081.9. Some more sideway trading could be seen but after all, another fall is still expected as long as 1117.8 resistance holds. Current fall from 1163 is expected to continue to resume whole correction form 1227.5 and should target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will bring stronger rebound and put 1163 resistance back into focus.

In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.....Comex Gold Continuous Contract 4 Hours Chart.

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Gold Market Commentary For Wednesday Evening

February gold closed lower on Wednesday and is poised to extend this month's decline. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 20 day moving average crossing at 1117.50 are needed to confirm that a short term low has been posted.

Gold pivot point for Wednesday evening is 1089.87

First resistance is the 20 day moving average crossing at 1117.50
Second resistance is the reaction high crossing at 1141.70

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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New Video: Central Bank Buying Saves Gold

Natalie Dempster, Head of Investment for the World Gold Council, says central banks have shifted from being net sellers of gold to being net buyers. This transition is a bullish indicator for higher gold prices.



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Gold Declines in New York on Stronger Dollar, Falling Equities

Gold fell in New York as a stronger dollar curbed the metal’s appeal as an alternative asset and some investors sold bullion to cover losses in equity markets.
The dollar rose as much as 0.3 percent against a basket of six major currencies while European and Asian stocks declined on mounting concern that China and the U.S. will accelerate plans to unwind stimulus measures as their economies rebound. Before today, gold rose 21 percent in the past year as the dollar tumbled 7.4 percent.

“Gold is on the defensive because of the dollar,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. Gold futures for April delivery dropped $6.40, or 0.6 percent, to $1,093.10 an ounce at 10:25 a.m. on the New York Mercantile Exchange’s Comex unit.

The Dow Jones Stoxx 600 Index of European shares lost as much as 1.4 percent, falling to the lowest level in more than a month. It has slid 2.7 percent this year as the U.S. called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth. U.S. equities fluctuated.

“If stocks continue to fall, people may have to liquidate their gold positions,” said Bernard Sin, the head of currency and metals trading at bullion refiner MKS Finance SA in Geneva.....Read the entire article.


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Gold Market Pivot, Support and Resistance Numbers For Wednesday Morning

Gold was lower overnight but continues to extend a small consolidation pattern off last week's low. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 20 day moving average crossing at 1118.00 would temper the near term bearish outlook.

Wednesday mornings pivot point for gold is 1095.57

First resistance is the 10 day moving average crossing at 1114.70
Second resistance is the 20 day moving average crossing at 1118.00

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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Gold Daily Technical Outlook For Wednesday Morning

Gold is still bounded in tight range above 1081.9 as consolidations continues and intraday bias remains neutral. However, another fall is still expected as long as 1117.8 resistance holds. Current fall from 1163 is expected to continue to resume whole correction form 1227.5 and should target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will bring stronger rebound and put 1163 resistance back into focus.

In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.....Comex Gold Continuous Contract 4 Hours Chart.

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Gold Market Commentary For Tuesday Evening

February gold closed higher due to short covering on Tuesday as it consolidated some of last week's decline. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are becoming oversold but remain bearish signaling that sideways to lower prices are possible near term.

If February renews last week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 20 day moving average crossing at 1118.50 are needed to confirm that a short term low has been posted.

Tuesday evening pivot point for gold is 1095.43

First resistance is the 20 day moving average crossing at 1118.50
Second resistance is the reaction high crossing at 1141.70

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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Gold Bears Appear to Have The Near Term Advantage

Gold was lower overnight and is poised to extend last week's decline. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends last week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 20 day moving average crossing at 1118.10 would temper the near term bearish outlook.

Tuesday's pivot point for gold is 1097.38

First resistance is the 10 day moving average crossing at 1117.00
Second resistance is the 20 day moving average crossing at 1118.10

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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Gold Daily Technical Outlook For Tuesday

Intraday bias in gold remains neutral for the moment and some more sideway trading could be seen. Nevertheless, another fall is still expected as long as 1117.8 resistance holds. Current fall from 1163 is expected to continue to resume whole correction form 1227.5 and should target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will bring stronger rebound and put 1163 resistance back into focus.

In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.....Comex Gold Continuous Contract 4 Hours Chart.

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J.C. Doody, Golden Buying Opportunities

J.C. Doody, editor of goldstockanalyst.com, thinks gold will continue to see short term pressure in this long term bull market. He reveals the mining stocks he's looking to buy at a discount.



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Gold Bulls Shrug Off Bearish Signals to Close Higher

Gold closed higher due to short covering on Monday as it consolidated some of last week's decline. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends last week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 10 day moving average crossing at 1123.30 are needed to confirm that a short term low has been posted.

Monday evening's daily pivot point is 1098, the weekly pivot is 1104.43

First resistance is the 20 day moving average crossing at 1118.90
Second resistance is the 10 day moving average crossing at 1123.40

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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Global Investors Turn Platinum Over Gold

Even after a record 57 percent rally last year, platinum is cheap relative to gold, signaling more gains as demand grows from carmakers and exchange traded funds.

An ounce of platinum buys 1.41 ounces of gold, down 42 percent from the record 2.43 ounces in 2001 and 23 percent less than the 10 year average, data compiled by Bloomberg show. Automakers, the biggest buyers, will expand output 20 percent this year, said Evan Smith, who helps manage $2 billion at U.S. Global Investors. Hedge funds raised their bets 163 percent in 2009, about twice gold’s increase. ETF Securities Ltd. funds lifted holdings to a record 598,104 ounces.

“We are long platinum and short gold,” said Jonathan Barratt, the Sydney-based managing director with Commodity Broking Services Pty, who predicted platinum’s rally in September. “Gold remains under pressure. As inflation moves lower and the dollar goes higher, gold isn’t as solid.”

Bank of America-Merrill Lynch strategist Michael Widmer raised his forecast for this year by 35 percent to an average of $1,750 and predicted $2,000 for 2011. Standard Chartered Plc forecast platinum will be one of the year’s best commodities. Prices may jump 55 percent to a record $2,400 by mid-year, said Joerg Ceh, head of commodity trading at Landesbank Baden-Wuerttemberg in Stuttgart, Germany’s biggest state owned lender.

Platinum, which declined 0.3 percent to $1,544.75 an ounce at 1:12 p.m. in London, is still down 33 percent from its March 2008 record, while gold sold for $1,097.60, within 11 percent of its peak last month. Buying platinum today and selling gold would return 30 percent, should the ratio return to the 10-year average of 1.84 times.....Read the entire article.

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Gold Pivot, Support and Resistance Numbers For Monday

February gold was higher due to short covering overnight as it consolidated some of last week's decline. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends last week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 10 day moving average crossing at 1123.60 would temper the near term bearish outlook.

First resistance is the 20 day moving average crossing at 1119.00
Second resistance is the 10 day moving average crossing at 1123.60

First support is last Friday's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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Are Commodities and the Dow Index Dead?

It was a heart pounding week on Wall Street as traders and investors locked in profits during 2010’s first round of earnings season. While it is normal to see selling of shares after good news hits the market, last weeks melt down was over exaggerated and for good reasons.

In short, we expected good earnings and that is why the markets have been crawling higher the past couple months (buy on rumor, sell on news). But what made last weeks sell off so strong was the fact the market was way overbought on the short term time frame and looking ready for a correction already. So we saw twice the selling pressure crammed into one week.

Looking back at a 12 year chart of the Dow Jones Industrial Average we can see the market is now trading at a major resistance level. There are two scenarios the market will likely follow in the coming 12 months. And it could take a year for each of these scenarios to unfold.

Scenario #1 – The market could top then start heading lower to test the 2009 March low. I don’t want this but it could still happen. Topping is a process. Unlike most bottoms which happen very quickly, tops tend to drag out much longer. In this case I figure we are looking at 4-12 month time frame for the market to truly roll over and confirm that we are in a major bear market again.

Scenario #2 – If the market holds up relatively well and forms a bull flag then we can expect to see higher prices in the future. If this happens it will take 4-12 months to unfold also.

Both scenarios have characteristics associated with them, so as the market progresses I will update on the market internals which will help tell us if the underlying market is holding up well or deteriorating. Only time will tell and we will play it one candle at a time.



Gold Stocks – Rockets or Rocks?

The gold stock index closed below its support trend line which held up for over a year. This is not a good sign for gold or gold stocks but there is light at the end of the tunnel.

Simple technical analysis is telling us to be cautious at these price levels. If we zoom way out on the charts the current price level and chart patterns on these charts scare me. The gold stock/Gold ratio chart is trading under resistance and the HUI (gold stock index) is trading near the 2008 high. What I do not like is the technical breakdown on the HUI monthly chart. You can see the trend line break on the chart with my small zoomed in picture.

The good news is that everything looks to be extremely over sold on the 60 minute charts so I am expecting a bounce across the entire market for a 1-5 day dead cat bounce. Friday we did see gold stocks move up strong off their lows out performing the price of gold. This is positive for gold and stocks. Depending on how that unfolds we could take a short term momentum play to profit from a possible leg lower.



Precious Metals ETF Daily Charts – Gold & Silver
Gold and silver lost some shine last week as they plunged towards their next support level. A bounce is expected but then I feel we are heading lower and this will likely shake out the majority of traders before starting another rally higher.



Energy Fund Trading – USO & UNG



Commodity and Stock Market Index Trading Conclusion:
This month looks and feels like last Jan – March, but reversed. The market is now getting choppy as the bulls and bears fight for direction making is difficult to swing trade. Times like these are best for intraday traders, not swing traders. Trading tops is actually much more difficult than trading a bottoming market in my opinion so I will be picky with trade setups. My number one goal is to preserve capital and avoid choppy market conditions as part of managing risk.

Final trading thoughts, I look for the broad market to get a possible bounce this week, but I feel lower prices are still to come. The USO oil fund looks prime for the picking and that could be our next trade.

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Gold Weekly Technical Outlook

Gold's fall from 1163 extended further to as low as 1083 last week and the development suggests that whole decline from 1127.5 is resuming. Initial bias remains on the downside this week for 1075.2 support first. Break will confirm the bearish view and target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will turn intraday bias neutral and bring recovery. But upside should be limited below 1163 resistance and bring fall resumption.

In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253 after interim consolidation from 1033.9 has completed in form of an expanding triangle. Next long term target is 100% projection of 253 to 1033.9 from 681 at 1460 level. We'll hold on to the bullish view as long as 931.3 structural support holds.....Comex Gold Continuous Contract 4 Hours Chart.

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New Video: Where Should YOU be in the S&P 500?

Does this week's negative action in the markets spell a fantastic buying opportunity? Is it time to short this market or just wait quietly on the sidelines? What exactly does our Fibonacci levels tell us?

In today’s short video we take a fresh look the S&P 500 and what we think it is going to do in 2010. We will also be looking at an important “Trade Triangle” that has just flashed an important signal for this index.

So Just Click Here to watch the new video and as always our educational videos are free to watch, and there’s no need to register. Enjoy the video and please feel free to leave a comment.

Good trading,
Ray C. Parrish
President/CEO
The Gold ETF Trader

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Gold Falls on Concern Obama Bank Plan May Erode Commodity Trade

Gold futures dropped to a one-month low on speculation that President Barack Obama’s plan to restrict U.S. bank trading will reduce investment demand for commodities, including precious metals. The proposal to limit risk taking by banks, preventing investments in hedge funds and private equity pools, may cost Goldman Sachs Group Inc. $4.67 billion in revenue next year, JPMorgan Chase & Co. said in a report. Investors poured $60 billion into raw materials in 2009, according to a Barclays Capital survey, fueling the biggest commodity rally since 1979.

“President Obama’s restrictions on bank trading could undermine the gold market, if it prevents investment from moving into risk markets,” said Tom Pawlicki, an MF Global Inc. analyst in Chicago. “Gold has correlated well with risk markets in the past year, and yesterday’s events sent investment into Treasuries rather than gold and stocks.” Gold futures for February delivery dropped $13.50, or 1.2 percent, to $1,089.70 an ounce on the New York Mercantile Exchange’s Comex unit, dropping 3.6 percent this week.

Earlier, the most active contract touched $1,081.90, the lowest price since Dec. 23. Gold fell for the third straight day, the longest slump in six weeks. Last year, investment in the SPDR Gold Trust, the biggest exchange traded fund backed by the metal, surged 45 percent to as much as 1,134 metric tons. The total value of the fund grew 85 percent to $40 billion. Gold futures jumped 24 percent in 2009, the ninth straight annual gain, touching a record of $1,227.50 last month in New York.....Read the entire article.

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Gold Continues in C Wave Down

From guest blogger David Banister....

1. I predicted on December 4th for my partners that Gold could pullback to the 1040 to 1070 US ranges, with a mimimum of 1070 likely. So far the Gold pivot lows have been to 1074, bounced up, re-traced to 1090, ran to 1145, re-traced to 1090 again. I got the partners in my service us out of several gold positions issuing take profit alerts on the B wave bounce to 1135 recently, and we have held a few. We sold our ICI.TO, JIN.TO, and AAU at much higher levels and remain out of those positions.

2. Gold now appears to be in the C wave down in this corrective pattern from the Dec 3 highs. It appears to me the $1040 US target is more likely now, and possibly lower. I have a GLD ETF chart below.

I see a Gap at 102.50 on the GLD chart, and there is a chance that will fill. This would represent a 50% Fibonacci pullback of the entire advance from April 2009 into December 2009. A 61% retracement would push Gold even lower towards the 97-98 areas on the ETF. I would not be going long Gold right now until we see the patterns complete. I would also avoid going long Gold stocks just yet. They will bottom before Gold bottoms, but the timing is still off.

The dollar is likely to bounce a bit further and a break over 79 on the Dollar to the upside certainly leads to another leg down in Gold.

With that said, we will monitor some Gold stocks for some washout pivot lows to possibly trade into at the right time. I have avoided getting back into GSS for example because the chart is not yet right.



Make sure to visit David at Active Trading Partners.

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Gold Closes Lower, Three days and Counting

Gold closed lower for the third day in a row on Friday as it extended this week's decline. The mid range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends this week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 10 day moving average crossing at 1127.60 would signal that a short term low has been posted.

First resistance is the 20 day moving average crossing at 1118.80
Second resistance is the 10 day moving average crossing at 1127.60

First support is today's low crossing at 1081.90
Second support is December's low crossing at 1075.20

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David Einhorn Killed It In 2009, And Is Still Bullish On Gold

Marketfolly got a hold of the letter David Einhorn sent to investors on Tuesday.

Greenlight's various hedge funds were up 36.9%, 33.7%, and 30.6% in 2009, much thanks to the big earner for Greenlight in the fourth quarter, CIT. Their investment gained 30% as CIT executed a reorganization plan in 40 days, says the letter.

The letter also says the fund will maintain their long position in gold and also stay short in Moody's, despite its having been a loser for Greenlight in the fourth quarter. He thinks in the long run things will turn around. But the hedge fund manager has less hope for some other investments.....
Read the entire article.

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Gold Daily Technical Outlook For Friday

Gold's fall from 1162 extended to as low as 1088 so far. As noted before, recovery from 1075.2 has completed at 1163 already. Correction from 1227.5 is likely resuming. Intraday bias remains on the downside for 1075.2 support first and break will confirm this bearish view. On the upside, above 1117.8 minor resistance will turn intraday bias neutral and bring recovery. But upside should be limited below 1163 resistance and bring fall resumption.

In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Correction from 1227.5 is still in progress and is in favor to extend further towards 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However downside will likely be contained there and bring strong rebound. On the upside, a break of 1163 resistance is needed to indicate that fall fro 1227.5 has completed. Otherwise, more downside should be in favor.....Comex Gold Continuous Contract 4 Hours Chart.

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Gold Continues it's Slide, Here's Your Numbers

Gold was lower overnight as it extends this week's decline below the 20 day moving average crossing at 1119.00. Stochastics and the RSI are bearish signaling that a short term top might be in or is near.

If February extends this week's decline, December's low crossing at 1075.20 is the next downside target. Closes above the 10 day moving average crossing at 1127.90 would temper the near term bearish outlook.

Friday's pivot point for gold is 1101.87

First resistance is the 20 day moving average crossing at 1119.00
Second resistance is the 10 day moving average crossing at 1127.90

First support is Thursday's low crossing at 1088.00
Second support is December's low crossing at 1075.20

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New Video: Gold's Next Leg Down

Jon Nadler, senior analyst at Kitco.com, argues that investment demand for gold is waning as traders shift to platinum and palladium for more speculative upside.



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Gold Extends Break Below 20 Day Moving Average

February gold closed sharply lower for the second day in a row on Thursday as it extended yesterday's breakout below the 20 day moving average. The low range close sets the stage for a steady to lower opening on Friday.

Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the reaction low crossing at 1086.60 is the next downside target. Closes above the reaction high crossing at 1163.00 are needed to renew the rally off December's low.

First resistance is last Monday's high crossing at 1163.00
Second resistance is the reaction high crossing at 1170.20

First support is today's low crossing at 1088.00
Second support is the reaction low crossing at 1086.60

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Gold Moves Lower, Below Critical 20 Day Moving Average

Gold was lower overnight as it extends Wednesday's decline below the 20 day moving average crossing at 1118.70 confirming that the short covering rally off December's low has ended. Stochastics and the RSI are bearish signaling that a short term top might be in or is near.

If February extends this week's decline, the reaction low crossing at 1086.60 is the next downside target. Closes above the 10 day moving average crossing at 1132.10 would temper the near term bearish outlook.

Thursday's pivot point for Gold is 1120.37

First resistance is the 20 day moving average crossing at 1118.70
Second resistance is the 10 day moving average crossing at 1132.10

First support is the overnight low crossing at 1100.60
Second support is the reaction low crossing at 1086.60

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Choppy SP500, Gold Stock Meltdown and Dollar Strengthens

From guest blogger Chris Vermeulen....

For the past few weeks I have been expecting the market to correct. By looking at the price action on the weekly and daily charts we can see that there has not been any real pullback since November and that is important to note. Without regular market corrections stocks start to become over bought meaning everyone has/is buying them and no real sellers have jumped off the trend. So when the price in an over bought market starts to slide lower we generally see everyone rush to hit their sell buttons. This is what causes the high volume breakdowns similar to the GLD (Gold) breakdown last December.

Another way of getting a feel for the market to know if it is over bought is to look at market sentiment for bulls vs. bears (buyers vs. sellers). Currently almost everyone is bullish and with this high of a reading we must start protecting our positions by tightening stops and/or get ready to play the coming correction with a short term trading strategy.

We can add another level of analysis to assist our understanding of the market if we look at the 60 minute charts of the SPY & IBM.

The chart below of the SPY (SP500) clearly shows we are in choppy times. With the majority of investors buying up stocks left, right and center because they are bullish on both the economy and individual companies, we have continued to see the index crawl higher. This has been going on for almost 3 months now but the more recent price action in the SPY chart clearly shows there are some BIG sellers unloading positions into this buying pressure. When the big sellers slow their selling we see the price drift back up until selling kicks back in. This is a warning signal for lower prices in the coming days.

The IBM chart shows a perfect example of the ‘Buy on the Rumor – Sell on the News’ saying we all know. The share price of IBM ran up into their earning news as traders know IBM is great for beating estimates. Once the great news came out which actually beat the estimates, the price sold off. This is happening everywhere with stocks.

In short, the market looks top heavy and has also rallied into earning season. These two points really have me on edge for taking a long trade at the moment.



Gold Stocks and the Dollar

The HUI (Gold Stock Index) has been on fire the past 10 months. Both gold and gold stocks have been leading the market higher. But the past month we have seen gold stocks under perform the SP500 and as of today are testing a key support level. Only time will tell if it bounces or breaks, so keep a close eye on your positions.

I use the UUP etf of the US Dollar to show the price action of today’s price move. The US Dollar is now above a key resistance level and has started to move higher. If the Dollar continues higher commodities across the board will have downward pressure. This could trigger a large sell off in the gold and gold stocks which I think are still over bought using a short term time frame.



Gold & Oil Futures Trends

The trend of gold and oil has been down the past few days. Gold broke down in the past 24 hours in overnight trading which triggered a wave of selling when the US market opened.

Gold and oil are currently trading between key support and resistance levels. I am looking for gold to drift back up to the $1130 level where I will look for a short setup as the current price action is not bearish on the intraday charts.

Oil is still bullish so I am not really looking to short it at this time. I will wait for another low risk buy signal.



Commodity Trading Conclusion

I feel the broad market could be ready for a large correction ranging from 5-10%. I am calling it a correction as I want to stay positive thinking. But it could be the start of a major market top. Market tops tend to be a process and take several months to roll over. So let’s focus on protecting our money and wait for a pullback that will allow us to load up with some great positions in the coming weeks.

Patience is how money is made in the market. Waiting for the market to come to you is vital for success. Also having the patience to let winners run by scaling out (selling a portion) of a position when the price reaches a support or resistance level makes it easier to let them run. Each time you sell some of a position you are locking in a profit and lowering your risk for the balance of that trade.

Just Click Here to receive Chris Vermeulen Free Weekly Gold Reports and make sure to visit The Gold and Oil Guy.



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Gold Trades Sharply Lower, Confirms a Short Term Top

February gold closed sharply lower on Wednesday and below the 20 day moving average crossing at 1118.20 confirming that a short term top has been posted. The low range close sets the stage for a steady to lower opening on Thursday.

Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If February extends today's decline, the reaction low crossing at 1086.60 is the next downside target. Closes above the reaction high crossing at 1163.00 are needed to renew the rally off December's low.

First resistance is last Monday's high crossing at 1163.00
Second resistance is the reaction high crossing at 1170.20

First support is today's low crossing at 1106.80
Second support is the reaction low crossing at 1086.60

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