Thomas
DeChastelain
Memorial Archives

Bullion Charts and Commentary
posted Jun 17, 2006 at 02:12PM

Bullion Daily Chart



The bears launched an exploratory probe on the 200 dma but were repulsed strongly. Similar price action did occur with the HUI which subsequently showed the moving average to be tested again.

Bullion Weekly Chart



Overbought has been worked off, but is certainly not oversold on a weekly basis.

HUI Daily Chart



Not annotated but whenever price moves below a moving average or key support zone and then whips back over, it is usually a fairly reliable buy signal.

HUI Long-Term Chart



XAU/Gold Ratio



Gold vs the Euro



Discussion - Short-Term Picture.

I was actually up and watching bullion trade on Tuedsday night and watched as it slived through key fib support at 550 and then magically reversed itself and stormed back up.

Kind of neat if you are into that kind of stuff.

Now in the short term things look fairly reasonable. You have bullion going through a support and then coming back over. Ditto for the HUI.

I refer you to Steve Savilles Gold Sector Report

As well, the Housing Index reached a major support level of 200 and appears to be bouncing off of deeply oversold conditions. To me it is no coincidence that gold and housing fell in near unison, so it is a good sign for gold if housing takes this opportunity to put in some kind of rebound.

It looks like the rest of the equity complex may also have bottomed and is going to move north for a while.
I refer you to some charts in a piece titled Bears Have Hardly Budged by Carl Swenlin.

Particularly, notice how Swenlin, like Saville refers to Rydex Cash levels, which in both cases are of interest from contrarian stand-points.

The only fly in the ointment was the Bullion COT Data

As you know COT data is for close of markets on Tuesday. Well that Tuesday was one of the worst single day performances ever for bullion. As such I was expecting the commercials to have greatly reduced their short positions. As tha chart shows, the commercials actually increased their short positions, albeit marginally.

That's why I think bullion may still have a choppy week before getting some real traction. Perchance bullion will duplicate the HUI's price action by going back down to the 200 dma, dipping below to suck some last bears in, and then reversing strongly.

Discussion - Intermediate Term.

Actually I am going to leave the full discussion and rationale for a later date, hopefully during the week, but if not, then in next weekend's commentary.

The short version is that I think this upcoming rally will be the equivalent of a B wave, countertrend rally. There remains at least one more severe downleg in gold in the autumn time period before a real bottom is hit. But that bottom will be a big one and what comes after that will be the stuff of ages.

Bullet Bullet Bullet