Gold Pops Over Upper Donchian Levels

On Thursday the gold market popped over the upper levels of its Donchian Channel. We suspect that the top of the Donchian Channel acts as resistance for gold. Only the monthly Trade Triangle is still red. With a Chart Analysis Score of +60, this market is in an trading range. With our monthly Trade Triangle in a negative position we are no longer quite as bullish on this metal. Long term term traders should be in short positions in silver with appropriate money management Intermediate term traders should be on the sidelines.

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Adam Hewison: Is This Rally For Real?

What is behind this market’s rally? The market has been going higher on light volume and admittedly to an area that has presented problems for the S&P 500 in the past, the 1220 area. It is an important policy to respect market action, as we believe that trumps everything in the long run. The market is at some very crucial levels.

Looking back at the past two months, you can see we have just been in a very broad trading range. I believe that professional traders will be shorting the S&P 500 against the highs that were seen just recently. The risk is maybe 10 or 15 points and the downside is maybe 200 points. So the risk reward ratio is really quite attractive from a trading standpoint.

There are “two flies in the ointment” we see right now. First, the S&P 500 is heavily overbought on the Williams% R indicator and at resistance. Secondly, our monthly Trade Triangle continues to be negative for this market. I believe that this combination will begin to put this market on the defensive, perhaps even later today and next week.

It has been an interesting week and it would appear that all of the markets we track are closing against the major trends. This is not to say the markets have reversed course, rather we are seeing a counter trend rally against the bigger trends.

Now let's look at the gold market......

The spot gold market is up over $30 for the week. Unlike Silver, the gold market has a positive long term Trade Triangle indicating that the longer term trend is still positive. With a Chart Analysis Score of +65, we expect this market to continue to remain in a trading range. Gold has reached the midpoint of the Donchian trading channel, which will probably halt its upward momentum for the time being.

 We would not be surprised to see this sideways action continue for another week or so. I think most traders would be better off just watching from the sidelines until the volatility subsides. Only long term traders should maintain long positions with the appropriate money management stops in place.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 65



Here's our week ending video covering the 6 major markets we track every day.

Adam Hewison: The Markets Voted and it's No Confidence In Obama

It would appear that President Obama’s speech last night was not well received looking at the financial markets this morning.

Readers of this report know that we rely on our Trade Triangle technology for trends, and not what a government official has to say and this includes the president of the United States. I learned over the years that the markets generally tell you what they’re going to do. Price action alone is the greatest truth you can see in the marketplace. Price action is what determines trends, price action is what determines traders actions.

Many newbie traders think there must be some mystical power that drives the markets. The truth is, the market is driven by people who believe prices are you going to go higher or go lower. It is that simple, however, most investors tend to over think the market.

Now I understand that there are folks out there that would disagree with that statement and say that the fundamentals, i.e. supply and demand, earnings etc. etc. is what drives the markets. Yes, there is a certain truth to that, but the other part of the equation is the psychology of the market. Market sentiment or psyche can really play havoc on the fundamentals and that is why price action alone is the best market analyst in the world.

As we go into this weekend with the 10th anniversary of 9/11 looming over everyone’s head It’s important to look at how the markets are closing for the week.

We consider how a market closes for the week to be very important. Did the market make or lose ground for the week? Which way is the monthly Trade Triangles? Did the market close in the direction of the major trend? All of these thoughts are reflected for the most part in the weekly closing price of any market. That’s why we concentrate and bring to you our weekend updates, which allows you to see the big picture and not the minutia of every tick.

Let's look at gold price action........

We are still somewhat concerned about the negative engulfing line that took place on Tuesday and was confirmed on Wednesday. These type of Japanese candlesticks are pretty reliable, however they’re not 100% reliable. The 3 concerns we have our a possible double top, a negative engulfing line that is being confirmed and also the fact that we were looking for a cyclic high at the end of Q3 or early Q4. For the week the Gold market is trading about $25 lower. Last Friday spot Gold closed at $1882.33 presently we are trading as of this report at $1855.13.

It would appear as though Gold is going to lose ground for the week and this is contrary to the longer term trends. The $1900 level is resistance for gold at the moment. Support comes in around the $1800 area and extends all the way down to $1750. Looking at the market visually it would appear as though we have possibly put in a double top. This will only be confirmed with a close below the $1750 level. Intermediate and long term traders should maintain long positions with the appropriate money management stops in place.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 85

Check out todays video that covers all 6 markets that Adam follows.....

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