Gold Market - tag category postings

In the days and weeks ahead I may start to do more close coverage of both the gold price and the mining stock sector.  I may do this because of the chance that the gold price may soon unleash itself into a raging (bullish) monster and it could start to become more relevant and timely than any other sector in the market right now.

I have been doing a lot of coverage of the sp500 and the SPY ETF.   But I have to tell you honestly, where is the trend in that market ?  It seems like a wasteland of swing trading ranges and lack of real gusto in terms of direction.   The direction will eventually reveal itself but I want to cover the areas that I believe deserve the most attention and ahead of everyone else before they become ‘mainstream’ ideas.

Of course I will still need more confirmation about the possible moves in the gold and mining stock sector in the weeks and months ahead but I am sensing that something big may be close to happening in this sector and I want to be on top of it before the dog and pony show starts on the major business TV networks.

It could very well be that the gold market will become the ‘only game in town’ soon.  People have said that before but to be honest I have still up to this point not really noticed a mass public adoption of the gold story.

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The weekly chart of the spot gold price shows that gold setting up for a very important test next week.  The test is to see whether or not the gold price can hold longer term uptrendline support on the weekly chart.

The uptrend shown in the first chart below is a 2 year uptrend line and has a good degree of significance.  If we break down through this trendline on the weekly chart next week then one has to question the current integrity of the gold bull market in my opinion.

I did a couple other recent posts pointing out the weekly bearish divergence on the gold price chart and the similarity to the mid 1970s gold price topping formation.

If gold breaks down through the uptrendline next week then it would probably challenge the 1160 level which is an important level of support as it was the neckline level of the previous inverse head and shoulder bottom formation (see it drawn in on the first chart below).

If 1160 breaks then it could imply an eventual test of 990 level which once again is a very important level of support and again the neckline level of the previous massive inverse head and shoulder bottom formation.

Perhaps I am looking much too far ahead, but if we do get to 990 and then 990 also breaks it could imply a move down to 680 as a possible final bottom.  That would be roughly a 46% drop from the spot gold all time highs.

I think it is important to keep in mind that the gold price has been going up since 2001 or almost 10 years.  I am probably repeating this line of thought from a previous post, but even very strong bull market uptrends sometimes need a mid point correction as a pivot point for the eventual blow off down the road.

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I have been reviewing the gold price charts recently up to the monthly scale charts and I am seeing enough evidence to suggest that gold is about to head downtown for quite a while.

There is a class C (as defined by Alexander Elder) bearish divergence (between price and MACD) on the WEEKLY scale that looks confirmed to me as of today.  Of course the week is not finished yet, but I am sticking my neck out and will say this is a confirmed bearish divergence right now.   The only way the gold price can avoid this class C bearish weekly divergence is by blasting high by the end of this week well above the 1200 range.

Class C bearish divergences are known to be some of the strongest signals in technical analysis according to Alexander Elder.  And this is not a daily bearish divergence, it is a weekly one.  So that means it should have price trend implications for several months.  The divergence formed over an almost 1 year time frame which gives it a good amount of significance.

If you just look at the price one can also clearly see that it has printed a 2B sell signal on the weekly chart which is another bearish sign and can lead to a swift cascade down in price.

The chart below shows the two red dotted lines that define the divergence and also note the blue uptrend line on this log scale chart that shows price close to breaking down through an almost 2 year uptrend.

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The SPDR Gold Trust GLD ETF looks like it is just about ready for another big move.  Some time ago I did a post on why I thought it was prudent to be cautious on gold because there was at least the potential of a bearish weekly divergence developing.

That bearish divergence has failed to play out.  And now the gold market finds itself in a position where the daily MACD is just about to turn bullish and the gold price is compressed into an ascending triangle.  In addition the weekly chart and the monthly chart still look bullish. 

So I have to tip my hat to the bulls here.  The monthly RSI is right into the powerzone and has plenty of room for upside expansion.

As long as the GLD maintains the current supporting ascending triangle structure I think you have to be open to huge upside moves.

If we see any closing prices below 120 in the week ahead then it would change the near term very bullish outlook and could completely reverse my opinion.  But for now I have to say the GLD has everything going for it to the upside and actually an entry right near these levels with a protective stop at 119 seems like an outstanding risk/reward.

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The gold price is in a very touchy situation right now based on the weekly chart and I have a bad feeling right now that gold will get clobbered tomorrow badly on the employment report.  The daily chart of the SPDR Gold Trust (ETF) shows a recent up move retracement on very light volume.

The monthly price swings are also showing me that we have a sell signal based on volume on the GLD.

There is also a very ominous looking weekly price divergence that is developing which could turn into a confirmed sell signal in the weeks ahead.  I think people forget that gold can be extremely volatile to the down side.  It has had an superb run since the 2001 lows, but like any market nothing goes up in a straight line.  Markets need to build sideways cause after huge spikes upward as a foundation point for the next leg up.

If in the weeks ahead the SPDR Gold Trust (ETF) breaks below the 98 level then it is going to put a serious 1st nail in the coffin of gold for perhaps 2 to 3 years and we could see a 50% decline in the gold price from the all time highs.

This is exactly what happened in the mid 1970’s.  Gold went from 200 down to 100   but then after 100 it shot up to 850 for the final blow off run.   So if we break down to 650 then it could very well be the stopping point before another huge run to 5,500 gold price.  So the question is how many in the gold crowd want to sit through a 50% 2 year decline in the gold price ?  A 2 year 50% decline can be a very painful and emotional burden and cause one to doubt the entire premise of the bull market in gold. 

But a 50% decline would setup up massive cause and pivot for a blow off run to 5000 5 years from now.

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You really need to study this long term gold mining stock index chart.  It was sent to me by a buddy of mine and the chart was made by one of the regular blog posters over at www.jsmineset.com . 

It is a super long term gold mining stock index chart that goes all the way back to the 1920’s.  What absolutely blows my mind about this chart is that it shows that the GOLD MINING STOCK sector has still not really even had a breakout from the trading range that began in 1980 !!!

This is an amazing chart!

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I suspect that a big move is coming in the gold price and the GLD ETF (SPDR Gold Trust).  Today gold behaved extremely well in the face of the first general stock market decline in over a month.

It could very well be that the gold price will begin to trade with relative strength to the stock market as the stock market is extremely overbought right now.  In fact I would not be surprised to see the stock market start to head south for the long awaited correction and then see the gold price zoom higher totally ignoring what the stock market does and even using a decline in paper assets as more fuel to the fire.

The daily and weekly charts on the gold price look outstanding and I continue to believe that right now…

Gold and Gold Shares are Much Better Risk Reward than the General Stock Market right now!

The reason for this is simple.  Gold has been in a corrective phase since early December 2009.  This is a long time by trading standards no matter what security or index we are talking about.  This consolidation time for gold has put it in a position to head higher regardless whether or not stocks keep going up or start a correction now.

The gold price has led the way in breaking out to new all time highs and the stock market has LAGGED the way trying to catch up to the gold price but so far not even coming close to achieving it.

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It is time to start paying serious attention again to the gold market and the gold price.  One of the things that fascinates me the most about markets is their ability to get people to essentially ‘fall asleep’ and basically forget about the previous excitement that was in full force.

The excitement I am referring to was the persistent run in the gold price towards the 1200 range.  That was a huge move and a very nice persistent move.  But since that early December 2009 high, the gold price has drifted sideways to down and held up remarkably well considering how strong the US dollar rally has been.

But once again I think the GLD and the DGP are worthy of close monitoring.  More specifically the GLD breaking above 114 would be for me a key event and signal that the gold price wants to get another big move towards 1400.  But the GLD ETF must be able to get above 114, otherwise it could drift sideways for another month or so to complete this consolidation.

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My current take on the gold market is quite simple because the gold market is structured in a way that makes the current analysis very clear.

The chart above is the monthly gold price chart.  It is very clear that the gold price has completed a valid ‘sign of strength’ breakout as shown by the tri-arrows.  That sign of strength breakout was very significant in that it was also a confirmed breakout north out of a very large inverse head and shoulders bottoming formation.

But now the gold price is retracing and it is doing one of the most common occurrences you will see in any market, index or stock.  And that is simply a retest of the breakout area, in this case the 1000 level.  Retests to the breakout areas on low volume have the potential to be very low risk entry points for going long.

But there are a few important things I would like to see on the monthly retest of the 1000 level on the gold price.

1. I prefer to see price touch the 1000 range but then bounce off of it as if it was stepping on a bed of hot coals.  So we want to see a monthly bar test of the 1000 level but then a very strong intra month reversal that closes at the top of the monthly bar’s range.
2. I do not want to see the gold price ‘hang around’ the 1000 level for too long a period.  In addition, I definitely do not want to see it break under the 1000 level again.  Perhaps it could break under 1000 for a very brief period, but it had better be quick.  The reason why is that we do not want to see the gold price succumb to the magnet of sub 1000 levels.

If we see sustained breaks below the 1000 level and weekly and monthly closes below that level then I will have to conclude that the gold bull market will go into hibernation for several years.  That is how critical this level is in the context of the entire chart structure in my opinion.

Breaking below 1000 would potentially set up a similar topping pattern to the one that occurred in the mid 1970’s gold bull market.  There was a similar slightly higher high and then a break down back under support.  It eventually led to a 50% price correction to 100 dollar gold price.  A correction of that magnitude from gold’s recent all time highs of 1200 would put it at 600.

So, to be clear, I still believe that the gold price is in a strong bull market.  But my condition for the maintenance of the bull market is that the gold price holds with strength the 1000 level.  If it fails in that regard, then I am going to have to flip to very bearish on gold for at least a 1 to 2 year period and be open to the idea of close to 600 level on gold.

It appears that the gold price is setting up to move into a parabolic type advance now.  There was a lot of sideways cause built up since the March 2008 beginning of pattern and now some of that cause is being used up but I suspect it is nowhere near being finished yet.  I would expect at least another three months of upside price movement.

There may be some complex corrections of maybe half a month in duration during the advance, but overall I expect the trend to be persistently up.  It would not make any sense at all for the gold market top top here at this point given the large amount of cause building that occurred since March of 2008.  This is why I believe any top calling at this point is premature.

During the later stages of this type of advance it would seem gold fever can once again come into play causing massive speculation and bidding up of the most speculative stocks.

The 1 dollar and change mining stock I mentioned before TLR Timberline Resources continues to hold it’s 50 day moving average and the chart looks like it wants to get an upside breakout going quite soon.

I am also following a couple pinksheet penny stocks in the gold mining sector that could see massive speculative gains on this gold mania run.  They are CVRG (converge global) and KATX (Kat Exploration).  Both of them trade on the pinksheets and are just a few pennies a share.  CVRG has quite a good chart structure and I would not be surprised to see it test the .445 swing high perhaps by March next year. 

During the entire gold bull market there are going to be lots of opportunities to take advantage of the mass speculation stages of the bull run.  They don’t happen all the time but when they do it is worth it in my opinion to ride along for a while with the speculative fever.

Seasonally, gold should be strong right into the end of this year and I would expect that strength to support the mining sector as well.