Thomas
DeChastelain
Memorial Archives

Bullion Charts And Comentary
posted Sep 26, 2004 at 03:24AM

Bullion Price Action



Gold's failure to hold the 410 level was a keen disappointment from a short-term technical stand-point.

Bullion Daily



The short term trend remains up. We have good support from both moving averages, as well as trend-line support below that. Breaking trend-line resistance has very bullish implications for the longer term picture..especially if it is followed by a shallow correction to retest that trend-line to confirm it as support.


HUI Daily



Bullish price action for the flagship sector continued with the breach of its 200 dma being the key technical event here.

The stochastics and CCI show that the low hanging fruit has been picked...and will need a rising bullion price or sustained weakness in the USD to avoid a pull-back.

HUI Fib Study



As well, a key technical development was the non-confirmed breach of the intermediate term resistance trend-line (Confirmation requires it stay above the trend line for 2-3 days and preferably move 2% above it)

HUI Short-Term EWA Count



Again how much "juice" this leg gets will depend on the dollar breaking key supports. If the USD does break support then there should be opportunity to milk some more profit in this leg before a retrace of the entire leg ensues.

If the dollar does break support...then the retrace should be realtively shallow...no more than 38% and perhapps only 22%.

If the dollar holds relatively firm then price action going forward will become more stunted and will leave open the possibility of a counter-trend rally coming to an end.

RATIO CHARTS

HUI/Gold Ratio



A closer view



Unhedged vs Hedged




The ratio charts are on nicely bullish uptrends, with unhedged stocks leading the market and overcoming key resistance trend-lines. Keep an eye on moving average support.

USD Daily



The dollar is not dead yet. Trend-line support is nebulous but still holding. The more important horizontal support line is still holding. Stochastics are close to completeling a down cycle with these supports still in place, so at least a short-term bounce looks to be in the works.

Bonds vs Dollar




Now the conventional wisdom is that falling bonds are good for gold. And yet the pattern between bonds and the dollar during its bear market puts that assumption a little on its head.

When you look at the above charts you will see that sharp rises in bonds have been accompanied by sharp drops in the dollar. Sideways motion by bonds by relatively sideways action in the greenback.

The most meaningful countertrend rallies in the USD have been accompanied by sharp drops in bond prices.

What is interesting here in recent action, is that despite a sharp rally in bonds, the dollar has held up relatively well in comparison to past action...a bullish divergence for the dollar


Now it is just a pattern...whether that is just random coincidence or one causes the other is something I don't have a good feel for, although lots of "theories" suggest themselves.

It is just something to keep an eye on, as long bonds are certainly due for at least a pull-back. Bond Charts

Miscellaneous Wildcards

Oil tends to lag gold by 9 months to a year. If gold fails to make new highs by year end..expect oil to duplicate gold's early in the year price action

The central banks are meeting soon to codify gold sales. The commentary I have read lean to all of this resolving bullishly in gold's favour. Watch and shoot.

Discussion/Summary

For myself, I continue to see this market through the mentality of a short-term trader. On Tuesday morning I was a heavy buyer, including a recklessly massive bet on a single stock. Now it worked out, with a wet-dream bonzo news release that casued sharp gains. But before that the stock was pushing against a marshmallow, with a distressing amount of supply coming out of the woodwork.

Now the buying was based on gold moving up strongly and the dollar failing to mount any kind of offensive on key resistance. The closing of gold positons on Friday was on the basis of gold failing to hold 410 and USD maintaining support.

Now short-term trading is not something one can "reccomend"...it requires a paradoxical blend of agressive risk taking...and at the same time, anal retentive money management. If you know what that means..fine...if you don't - then that means you have to go throught that rite of passage called a "learning curve"...and this is NOT the environment to do it.

Again waiting for the impulse to work itself out and waiting for the retracement may provide a more forgiving opportunity to put together a more diverse basket of stocks to ride out any major upleg.

On what happens next week I remain neutral..the locking in of profits was more prudence than taking on a bearish bias. Gold getting back above 410 really puts the whip hand back to the bulls. Ditto for the USD decisively breaking support metrics.

On the HUI the key number is 210 which is critical support from an EWA viewpoint. From a more traditional perspective the 200dma at 208 becomes the key support metric to watch.

The dollar as always a key to watch...but with stocks outperforming both bullion and the dollar, there is a bit of a safety buffer within the market.

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