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Gold Odds Favor Accelerating to the Downside

Commodities / Gold and Silver 2011 Sep 18, 2011 - 04:00 PM GMT

By: Merv_Burak

Commodities

Best Financial Markets Analysis ArticleThe week has seen some ups and downs for gold but in the end gold has been slipping slowly lower.  Will it reverse or accelerate?  Odds seem to be on the side of accelerating on the down side with some ups to confuse the issue.


GOLD

LONG TERM

Getting right to it nothing much has changed from the long term perspective for gold.  Daily or even weekly price fluctuations take time to affect the long term.

Trend:   Gold remains well above its long term positive sloping moving average line.  After having broken above a well defined up trending long term channel gold has not been able to make any further headway once the initial thrust was over.  It does look like the break may be a blow-off with a major top forming but that will have to wait for further confirmation.

Strength:   Although the long term momentum remains in its positive zone it has been steadily moving lower and remains below its negative sloping trigger line.

Volume:   The volume indicator has not been able to make any further headway on the up side for the past couple of weeks but remains above its positive sloping long term trigger line.

As of the Friday close the long term rating remains BULLISH.

INTERMEDIATE TERM

Things change a little faster in the intermediate term but still it takes time to reverse a trend.

Trend:   On Thursday gold broke that second FAN trend line and entered the zone between the first and second FANs.  This was expected as mentioned here previously.  Now that it has entered the zone below that second FAN trend line this line now reverses from a support to a resistance line.  Any rally is now expected to hit that FAN line and remain basically below.  Let’s give it a week or two and see how it goes.  In the mean time gold remains above its positive intermediate term moving average line but not comfortably so.

Strength:   As with the long term, the intermediate term momentum indicator is still in its positive zone but moving lower fast and is below its negative sloping trigger line.

Volume:   The volume indicator is turning more towards a lateral trend and has just broken below its intermediate term trigger line.  The trigger is still, however, in an upward slope.

Putting all that together the intermediate term rating remains BULLISH but with very clear warnings of possible changes ahead.  This bull is confirmed by the short term moving average line remaining above the intermediate term line.

SHORT TERM

 

On the chart are the three FAN trend lines previously shown.  You could say that FAN line 1 is a long term trend, FAN line 2 is an intermediate term trend and FAN line 3 is a short term trend.  Both the 3rd and 2nd FAN trend lines have now been broken.  The gold price action is expected to remain within that area between the 1st and 2nd FAN trend lines for some time.  That seems to imply that new highs may not be in the cards for a while.

As far as the short term status of gold at the Friday close, that’s not too promising.

Trend:   Gold is below its negative sloping short term moving average line.  It is also starting to establish a short term down trend line (not shown).  Although gold did rally on Friday it has not changes any of the short term trend indicators.

Strength:   As gold broke below that second FAN trend line on Thursday gold’s short term momentum indicator moved into its negative zone.  On the Friday bounce the momentum moved back above its neutral line but the indicator remains just below its negative sloping trigger line.  Of concern is the fact that even though gold bounced upwards on Friday the short term momentum remains below its level from the previous August low although gold is above its August low.

Volume:   The daily volume action remains low and below its average 15 day volume value.

The short term rating, at the Friday close, is now a full BEARISH rating.  This is confirmed by the very short term moving average line which is now below the short term line.

As for the immediate direction of least resistance, that should be to the up side as the latest price move seems to be in that direction and the Stochastic Oscillator is also turning upwards BUT I just think that the price will hit the resistance of the second FAN line and not go any further.  For that reason I will go with the lateral direction until the second FAN line is decisively breached or gold turns back to the down side.

SILVER

As with gold, silver couldn’t seem to make any headway this past week.  It continues to show weakness despite the Friday advance.

LONG TERM

Trend:   On the long term silver continues to trade above its positive sloping long term moving average line.

Strength:   The long term momentum continues to move in a basic sideways direction but above its neutral line in the positive zone.  It has, however, dropped below its long term trigger line and the trigger is sloping downward.

Volume:   The volume indicator was not able to make any headway this past week in keeping with the price trend.  It remains just above its positive sloping trigger line.

At the Friday close the long term rating remains BULLISH.

INTERMEDIATE TERM

Trend:   Silver dropped below its intermediate term moving average line on Thursday but moved back above the line on Friday.  The line itself is still in a gentle upward slope.

Strength:   The intermediate term momentum indicator remains in its positive zone but had dropped below its trigger line with the trigger now pointing downward.

Volume:   Although the volume indicator is basically moving sideways it did drop below its intermediate term trigger line with the line sloping downward.

On the intermediate term at the Friday close the rating remains BULLISH but is in a very precarious state.  This bull is still confirmed by the short term moving average line being above the intermediate term line.

SHORT TERM

As with gold, silver is not in all that good shape from the short term standpoint.

Trend:   Silver dropped below its short term moving average line early in the week and has remained there all week.  The line itself is now sloping downward.

Strength:   The short term momentum indicator was in its negative zone for most of the week but did cross into the positive zone by just a hair on Friday.  It remains below its trigger line and the line is pointing downward.

Volume:   The daily volume action is very low as could be expected when the price action is towards the down side. 

Putting it all together at the Friday close the short term rating was BEARISH.  This is confirmed by the very short term moving average line tracking below the short term line.

Merv’s Precious Metals Indices Table

Well, that’s it for this week.  Comments are always welcome and should be addressed to mervburak@gmail.com.

By Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv's Precious Metals Central

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com .

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician ( CMT ) and tries to decipher what's going on in the securities markets. As an underground surveyor in the gold mines of Canada 's Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE .

To find out more about Merv's various Gold Indices and component stocks, please visit http://preciousmetalscentral.com . There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

Before you invest, Always check your market timing with a Qualified Professional Market Technician

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