Thomas
DeChastelain
Memorial Archives

Bullion Charts and Commentary
posted Jul 16, 2005 at 02:30PM

Introduction

The end of the week saw me taking my profits on my four trading positions. Only time will tell whether this is a case of getting shaken out. In the end the calculus of technical events, the desire to books some trading profits, risk/reward and the uncertainty of how things are going to go, had me move assets to the cash column.

I do still have some gold exposure and the afore mentioned assets remain available for redeployment. In this case the money would go into stocks a little lower on the gold food chain, where four "quality" names would go into 8-10 cheaper...but more speccier fare.

Next week promises to be an important one for the gold sector.


Gold Bullion Daily



A busy chart, with a number of potential trend-line and channel support lines thrown in. The only sure thing I would say is that until the major trend-line resistance is taken out bullion remains mired in a corrective pattern.

Breaking trend-line resistance was one of those "tests" I had mentioned that would confirm a new impulse was under way. Obviously that has not happened.

Momentum indicators remain on short-term sell. I will now wait to see if any of the trend-lines look like they will provide support for an inflection point.

Again I really don't know how things are going to shake out..one can easily argue that buying on Friday afternoon was the astute trade from a timing point of view.

Gold Bullion Weekly



Everything is still good here, as long as the 65 week moving average holds.

HUI Daily



The divergences finally caught up, and with bullion not doing anything, equities have rolled over on a short-term basis. The 18ema was a sector short-term "line in the sand" for me, and it got broken on Thursday and did not recover on Friday.

There are all kinds of moving average and pivot support lines that still lie underneath. A reversal that would take the index up through the 200 dma and through trend-line resistance (not drawn) would be a nice buy signal. Again, breaking the 200 dma was one of those tests that had to be passed to confirm the bullish case, and it did not happen.

HUI Weekly



The moving averages have turned lower, another reason for some caution. Again nothing that a move up above these resistance lines can't fix.

Discussion

The failure to break through triangle resistance lines was a disappointment, and has taken the air out of my bullish prognostications of a few weeks back. Then, golds stocks were bought in anticipation that these technical events would come to pass.

In short, from a technical perspective the sector is in a "show me" juncture. As such my mind-set is to stand aside and buy on strength, on a break-out, or wait for things to get oversold and various parameters to reach more optimum contrarian buy levels.

Good trading

Bullet Bullet Bullet