Thomas
DeChastelain
Memorial Archives

Gold Sector Charts
posted Oct 21, 2005 at 07:00PM

Bullion Daily



Just a little aside. The resistance trend-line is simply a parralell line taken from the support trend-line. This placement give a more "bullish" interpretation as there is still room to rise. Bullish when compared to last week's which shows gold in a potential ending diagonal near resistance.

I believe last week's trendline, becasue it covers a longer period of time carries more technical weight..but it just goes to show how placement of trend-lines can skew the look of a chart. I think it important to realize that there can be more than one possbility in terms of defining chart structure.


As far as the chart above, all I would say is that the 450 price level is more important than the 50 dma. From an EWA perspective, there is a chance for one more leg up to the upper resistance channel.

HUI Daily



Nice bounce off support. The bulls need to push this over the 50 dma.

HUI/Gold Ratio



Some real technical damage has been done here. Everyone has their "rules". I tend NOT to enter new positions in the gold sector unless this ratio crosses back over the 50dma. The only exception is if the sector is really oversold on a weekly basis - but there I am buying in anticipation of a bottom. In this environment I would buy only on strength..pattern break outs, breaking through resistance averages...all accompanied by stops.


USD Daily



Still wrestling with key resistance. Technically there is nothing standing in the way. Price action says all in the end. Again I think a strong move would go along with the deflationary aroma which permeates the market. This would provide a strong head wind for gold.

(Note: the chart annotation should read "trend for next couple of months"

Discussion

The HUI/Gold ratio break-down is the key technical event.

One has to consider that what once looked like a break-out might be a case of throw-over, which in EWA terms, is defined as a bullish exhaustion of sentiment. The fact that equities have not yet confirmed the new bullion highs is another reason to be cautious. In short it means that considerable downside risk has entered the sector.

As mentioned above I would not buy in anticipation of a bottom. Things are simply not that oversold yet. For myself I will remain on the sidelines and see how the charts develop and wait to see if certain resistance metrics are overcome. I need to see the HUI/Gold ratio get back over trend-line resistance and/or the 50dma. I cannot imagine a bull market without this condition existing.

I will be away so there will be no charts or commentary next weekend.

Good trading

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