Bullion Charts and Commentary
posted Nov 4, 2005 at 11:24PM
Again I believe that the 450 support level is more important than the 50 dma. This level has to hold to maintain the validity of the pattern break-out.
Gold - Pulling the Camera Back a Bit
One can see however that there are platoons of support lines under the 450 level which should help keep the overall bull market structure intact.
We should get a bounce soon, but overall this is not a chart I would be buying at this time.
The most bullish chart of the sector, in that it has maintained its support trend-line in the face of bullion weakness.
HUI - Pulling the Camera Back a Bit
Again my own perspectivve was that of a swing trader who sold into the resistance trend-line. From there I was watching to see if prices would rise inexorably in a clear break-out...which has not happen as of yet.
There are various scenarios that I am watching for. The first is the index bounce off the 50 dma and puts through a clear break-out. I would not feel comfortable buying this as I don't feel current conditions are sufficiently bearish to mark the start-point of a "Wave III" type advance. A lot of the froth has been taken out of the COT which does not include the end of week pumelling...so it must be considered a possibility.
An inflection point comes at the 200 dma support line or the 200 price level, all corresponding to a reverse H&S pattern.
The third possibility is an "e" wave down to the major support trend-line. This would require a USD move to the 95 fib resistance level I feel.
Unhedged vs Hedged
Unhedged stocks did not confirm bullions new highs, which to me is another reason for caution.
US Dollar Daily
Very constructive price action.
US Dollar Weekly
The 40 week moving average has moved over the 65 week moving average. This is a major technical development for dollar bulls.
Well here we have it. Gold equities have bounced off a major resistance trend-line even as the dollar has broken through important resistance price zones. The price action of unhedged gold stocks has been lack-lustre. A lot of the froth has been removed from the recent COT data, but is still not at "optimum" buy levels.
The gold sector charts themselves are not that oversold yet, to warrant buying in anticipation of a bottom.
As such I remain on the sidelines and waiting to see the gold sector enter a more bullish configuration. In the near term I would want to see a clear break-out of the HUI with respect to its main restance trend-line. As a contrarian this is a difficult "buy" emotion wise, as one is buying momentum, and praying that there is yet a big herd to come behind you.
It is a break-out however that you would have to respect. We are talking about "Wave III" type potential...the kind of rally that is too expensive not to participate in.
If the dollar does embark on a period of strength, then the HUI moving back down to the support trend-line is not out of the question. Markets are rarely that convenient however, so we will have to take things as they come.