by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Bill Downey, of Gold Trends.net, LLC, is an Independent Investment Analyst with over twenty years of study. YOU SHOULD NOT TAKE ANY MATERIAL posted on this WEBSITE AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. Do your own due diligence. No one knows tomorrow's price or circumstance. The author intends to portray his thoughts and ideas on the subject which may s be used as a tool for the reader. GoldTrends does not accept responsibility for being incorrect in its speculations on market trend or key turning points that it may discuss since they are at best a calculated analysis based on historical price observations.

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  • 10 Apr 2012 1:10 PM | Bill Downey (Administrator)

    SILVER
    Medium Term – (BEARISH/) (Moving Averages 33.60-34.41)
    The medium term 34 week moving average range is 33.60-34.41---and any weekly close above the averages would return the medium term ‘trend’ rating from down, to neutral. A monthly close above 35.83 would open up the potential for silver prices and would suggest the medium term correction is completed.  Until then the trend remains down on the medium term.

    Silver Weekly Price Chart

     

    GOLD
    Medium Term Trend (1682-1707) Neutral to lower---but at key support.
    The price low at the GREEN CHANNEL line is a key area and price is at one of the two price points where a YEARLY low should take place. Unfortunately the 2nd price level is the 1300-1400 area. Nevertheless, if you’re looking to buy physical or add to medium to long term positions, this is one area where you add a bit.  APRIL AND JULY are key times when you should be buying gold and silver.  November and February is a great time to be selling some.  That’s the best yearly plan to go with. 


    Gold Weekly Price Chart

    In summary, the DOTTED TREND LINE and the LOWER GREEN is a major point to watch. April is well known to establishing price lows so we’re on the lookout.  This week will be important. It looks like price is trying to establish a bounce.

  • 03 Apr 2012 8:29 PM | Bill Downey (Administrator)

    Quarterly Price Review
    Silver yearly price open 27.98---High--37.48--Low--27.91--Close 32.48 + 4.50. 
    The long term price chart for silver shows the many price channels that exist. This chart represents the price movement since the gold standard ended in 1971.
    The yellow zone on the chart is the 2012 price range. This range is based on the action from 1980 as well as the current price channel (Green Arrows) that is setting price ranges for this year.

    The most important aspect of this price zone is that in 1980 the 38 dollar area was the POST monthly high for silver and the 26 dollar area was the post crash bounce point before the collapse to the 5 dollar area.  During that ERA---both of these points were finality points of resistance. In other words, they defined the price range that silver could not establish and hold.

     In this current ERA the exact same price points have so far established themselves as key support and first resistance points of price.  This is the first real long term evidence that silver may have established a NEW plateau from which to launch higher prices from.

    Silver Monthly Price Chart with long term channel lines

    Gold
    CYCLES

    It's not that we weren't aware of the FOMC meeting notes, but that we just did not expect it to render gold this hard again.  We prepped by reducing our exposure down to two contracts ---- selling one at 1680 basis June last night.  In retrospect, we should have gone for two.  But we did not (and neither did the market) expect to have dialogue that was 'spun' to say that the Fed is not going to be accommodating to QE3.  

    We mentioned last night that we would be liable for a potentially hard pullback and that Tuesday's have not worked well recently.  Part of the problem is whether we're going to have to just keep exiting each time an FOMC meeting comes around.  One thing for sure, the next it will be at least two contracts I rid myself of instead of one. 

    Finally, we discussed last night the next peak in the cycle was April 6th (plus or minus 72 hours) and today's drop was right at the beginning of the cycle window.  Today's high at 1682 could very well turn out to be the high for this cycle and now the potential to move lower is in play once again. 

    In summary – We knew things were not fully right, but we did not expect gold to trade below 1655 and now once again the 1655-1665 area is going to become first resistance.  The potential for gold to move lower is in play.  The chart shows the blue short term cycle is now asserting its influence on the metals.  We remain cautious as the next two weeks could be difficult for gold.  At the moment, we favor lower on any break of the 1635 spot price area.  The next target would be the 1600-1622 area.

    Gold Price Chart with Short Term Cycles


  • 01 Apr 2012 9:25 PM | Customer Service (Administrator)

    How long can the gold stocks continue to under perform?
    What is most interesting is that gold stocks led the way down in 2008 during the last liquidity panic and this year’s activity in Europe has set a potential global liquidity event.  Are the gold stocks giving us warning again that there is trouble right around the bend?  It is a situation that needs to be monitored and it is the ONE THING IN THIS GOLD BULL MARKET that should have us concerned.

    We have mentioned many times over the past few years that the one thing that can bring gold and silver prices down---is a global liquidity event.  The situation came to a head with Greece, but the real concern is Spain and the other nations standing in line behind them.

    How does this affect gold stocks?
    When liquidity dries up, there is no money available for gold stocks to borrow for exploration and development unless you’re a cream of the crop company. Even then, it is difficult. This is what caused the crash of 2008 to be so severe.  With price acting the way they are, we need to remain cautious and open to such potentials developing on the global front.

    Seasonal trends show that April usually is a strong month for gold stocks.

    Perhaps a lot of the damage is already complete Gold Stocks and the spring rally is about to begin. 

    f the seasonal plays out, the end of March should produce a price low near this area.  IF WE GET A CLOSE BACK ABOVE 500, it will neutralize this downtrend.   We thought the 475 area would come into play here at March’s end --- and with price at 472 as we enter April, the potential for a price low must be considered. 

    Intermediate Term – (Bearish)

    Our last update featured this bearish chart at HUI 523.  With the 50 point 10% drop since then, the bear pattern and the seasonal price tendencies ended up playing out in 2012.

    In that last update we wrote this about this chart:

    THERE IS ABSOLUTELY NOTHING BULLISH ABOUT THIS CHART PATTERN AT THE MOMENT.  In fact, the opposite.  We have what looks to be a head and shoulder top or at the very least, a complex correction pattern that does not look complete. IF we close above neckline #1 on a Friday basis, we’ll review---otherwise, this pattern look is suggesting---seasonal correction dead ahead. 

    HUI Price Chart

    Price has dropped a full 10% since then and continues to be in a hard downtrend. However, the seasonal price pattern is due to change in April.
     
    Outlook

    Short term cycles are due higher into the week of April 7th for Bullion, but for gold stocks, things remain in a tough state of affairs. We would think a lot of stops have already been taken out and if the seasonal can kick in, a price low should be established. 

    As far as the low, look for all the bulls and cheerleaders to start second guessing themselves and begin to argue amongst them as a group and then some of them turn bearish. A low should develop shortly (no pun intended) right after that psychology appears.

    We’re in the time window for a seasonal low to TAKE PLACE.  A close above the moving averages will be the signal that the low is in place.  Be sure to check the DAILY GOLD PAGE where we track the HUI intermediate term price for changes.  In summary, the trend remains down but seasonal factors favor a low and price bounce in April.  Be sure to check the daily gold page update--where we feature an updated HUI chart and trend at least 3 days a week.

  • 30 Mar 2012 9:35 AM | Bill Downey (Administrator)

    Gold Trend ~

    Long Term=Up (major resistance held the uptrend – Need monthly closes above 1767-1804)
    Medium Term=NEUTRAL (Major Resistance 1767 Monthly Close)
    Intermediate Term=Down---The North American Winter seasonal correction looks complete – spring rally is next.  The ‘trend’ has not turned up yet on an intermediate term basis.
    Short Term= Neutral– Short term cycles look to have bottomed --- support is now 1644-1650

    Support and Resistance for Friday March 30 2012
    Initial Resistance for 1666-1675 and 2nd tier 1681-1688
    Initial Support 1645-1655 and 1626-1634

    Our last update listed initial resistance at 1666-1676 and the high was 1665. Initial support was listed at 1643-1651 and the low was 1645.

    RECAP
    News
    Yesterday the Comex gold open interest dropped down to 407.3k contracts. Because today is the final day of the "roll" period for the April gold contract, it will likely drop below 400,000. That LAST time Comex gold open interest dropped below 400,000 contracts was 9/1/09, when it fell to 384,703. The NEXT day it jumped up to 410,754 and gold began the move to its 2011 cyclical peak just below $1900. During that run, open interest expanded to over 660,000 contracts.

    Markets
    The yield on the 10 yr T note ended at 2.17%.The dollar was practically the same range and close as Wednesday 79.18 –just 3 cents difference---same with the euro down .0012 to 1.3306---The pound was up.0063 to 1.5955 The yen was down .54 at 82.28---Crude oil was last down $2.25 per barrel $103.17 as the inventory report showed a huge rise (7 Mil BBLS if I recall correctly)---the DOW erased another 85 point loss to close higher by 19 at 13,145.

    The stock market tried to sell off again, but that just isn’t going to happen until the “books” are closed for the quarter after tomorrow’s trade.  It’s going to look good for the USA---huge stock market up move --- and all the ‘spin’ reports.  It’s an election year.  And while the STOCK MARKET is doing great --- gold stocks are really CLOSE TO TANKING LOWER.

    And that is the one thing that doesn’t make sense here --- AND WE NEED TO BE CAUTIOUS because either THEY turn now --- or there is something WRONG.  And that means we must be on guard with our long positions in bullion and silver.

    Gold Stocks
    Medium Term Trend

    So while we are bullish on gold, this DANGER has to keep us on guard that the gold stocks are acting this way. This chart is READY TO BREAK DOWN IF WE DON'T TURN HERE.  I don't know about you---but it makes me very uneasy to see this chart. Thus, we'll keep a watch and let's keep it in mind. Something does not seem right that gold stocks are doing this.

    This much I’ll say.  Unless there is a turn here in the next 72 hours of trade, the radar alert will be on. Gold has moved without stocks but this is a long term break line that is being violated. They have EITHER FINISHED cleaning out the weak stops and this thing is about to turn up or the gold stocks are about to take a 10% haircut.

     

    HUI Weekly Price Chart 

    GOLD
    Gold traded all the way down to our lower support area of 1644-1654 coming in at 1645 but for the signals trade page it was perfect --- we added the 3rd contract on our position at 1651 and it was right when the lows of the day were made and within a half hour the lows were in place and a nice rally ensued moving 18 dollars off the lows and giving us a nice chart formation and the PULLBACK has a good chance of being complete.


    Silver Daily Update for Friday March 30 2012

    Trend
    Long term= Up /
    Medium Term= Bearish/ Need a close above 34.50-35.00
    Intermediate Term=Bearish/BUT CYCLES in bottoming process
    Short Term= Neutral--- Cycles look to have bottomed but the trend is still down

    Support & Resistance for Friday
    Initial resistance 32.50-32.70 and 2nd tier 33.05-33.41 (all prices Spot Forex)
    Initial Support 31.55-31.89 and 2nd tier 30.46-31.06  (all prices Spot Forex)

    The last update listed resistance at 32.95-33.30 and the high was 32.35---Support was listed at 31.40-32.14 and the low was 31.56


    RECAP
    News
    Yesterday the Comex gold open interest dropped down to 407.3k contracts. Because today is the final day of the "roll" period for the April gold contract, it will likely drop below 400,000. That LAST time Comex gold open interest dropped below 400,000 contracts was 9/1/09, when it fell to 384,703. The NEXT day it jumped up to 410,754 and gold began the move to its 2011 cyclical peak just below $1900. During that run, open interest expanded to over 660,000 contracts.  Silver has no roll over this month.  We think it will tag with gold and the economic reports coming out.

    Price held 31.46 as we got as low as 31.56 before a turn happened after 11am and the market rallied STRONGLY into the 32.20 area.  If we close above 33 on Friday it would favor higher next week. Today’s reversal looked good on the daily chart. Now we need to follow thru.

    Markets
    The yield on the 10 yr T note ended at 2.17%.The dollar was practically the same range and close as Wednesday 79.18 –just 3 cents difference---same with the euro down .0012 to 1.3306---The pound was up.0063 to 1.5955 The yen was down .54 at 82.28-----Crude oil was last down $2.25 per barrel $103.17 as the inventory report showed a huge rise (7 Mil BBLS if I recall correctly)--the DOW erased another 85 point loss to close higher by 19 at 13,145.

    The stock market tried to sell off again, but that just isn’t going to happen until the “books” are closed for the quarter after tomorrow’s trade.  It’s going to look good for the USA---huge stock market up move --- and all the ‘spin’ reports.  It’s an election year.  And while the STOCK MARKET is doing great --- gold stocks are really CLOSE TO TANKING LOWER.

    And that is the one thing that doesn’t make sense here --- AND WE NEED TO BE CAUTIOUS because either THEY turn now --- or there is something WRONG.

    AGQ Silver Bull ETF Price Chart and Moving Average Trend


    Outlook for Friday
    Short term cycles still has potential to turn the trend up into the week of April 7th.   The low of THURSDAY is the key now. As long as we remain above 31.46, the upside will have the favor. But be careful because Friday is the last trade day of the quarter, and we have to remain open to anything on the last trade day. The ‘control boyz’ will be trying to keep it below 32.50 – 33 and if the hedge funds window dress, it should give silver support near 31.90-32.00.

  • 22 Mar 2012 2:43 AM | Bill Downey (Administrator)


    Gold Update Thursday March 22 2012


    Trend ~

    Long Term=Up (major resistance held the uptrend – Need monthly closes above 1767-1804)
    Medium Term
    =NEUTRAL (Major Resistance 1767 Monthly Close)
    Intermediate Term=Down---The North American Winter seasonal correction is about complete
    Short Term
    =Down – short term cycles call for a bottom this week.

    Support and Resistance for Thursday
    Initial Resistance for 1657-1665 and 2nd tier 1677-1682
    Initial Support 1638-1648 and 1605-1612


    In our last update resistance was listed 1665-1675 and the high since then has been 1665.  Support was listed at 1625-1644 and the low since then is 1641.  Because of the trading range, the support and resistance areas have not changed in 4 days.

    RECAP
    Gold has been trading in a range of 1640-1665 where it is trying to establish a low point from which to attempt a rally.  There has been no earth shattering news either way. Price steadied on Wednesday and has been in corrective mode since price touched 1717 two Monday’s ago. US treasuries have declined sharply over the last week dampening demand for commodities in general.  The China slowdown has also affected commodities so far this week.
    Our call for a trading range is still in play but we think that this is about to end on Thursday.
    Futures settled below the 50-week moving average. This only adds to the list of significant moving averages gold has traded below in the past month: the 20-day (now 1703), the 50-day (now 1707), the 100-day (now 1700), the 200-day (now 1684) and most recently the 50-week (1656). Open interest is falling, volumes are weak, and stochastic on the weekly chart suggest Gold may be slipping away from overbought territory.
    Gold price suppression is so aggressive and blatant now, that the world financial system's problems must be far worse than generally understood, Sprott Asset Management's John Embry told King World News on Tuesday.
     
    Outlook for Thursday

    Look for gold’s first resistance area to be 1657-1667 on Thursday. Since the short term cycle window is open, a trend change is due this week. The ideal date is tomorrow, the 22nd (plus or minus 72 hours). On the downside the 1635-1644 area is support. So far that area has held the price lows this week.  We’re not sure yet if gold has one more dip on this current correction or whether we are basing and ready to move higher into the first week of April.  A close above 1675 would be the first indication that the short term cycles have turned up. With Mid Week Wednesday past us, its possible for gold to turn down into Thursday.  The advantage is to the downside.  Watch that 1635-1644 area that is key support.


    Short Term - down
    Cycles – Due to bottom in the next 72 hours

    the short term cycle turn window is in play and a low is due this week. The ideal day is the 22nd, but it can extend up to 72 hours beyond the 22nd.  This price line at 1635 has held the lows so far but we can’t rule out a test of 1600. Price is trying to form support at 1644-1655 – (the 50 week moving average is 1655). A CLOSE below 1635-1640 would favor a move to 1600. So even though there is a low due this week, it doesn’t mean we are done going lower just yet.

    The next support is the 1605-1612 area and we’d expect any close below 1640 will favor the lower yellow. We’re looking for a cycle low, but we need to see some sort of reversal before we can claim the low is in. Odds favor it will either be this blue dotted trend line near 1640 or the lower yellow at 1605-1612. The ideal day for a turn is Wednesday (plus or minus 72 hours). Another area of importance is the November low at 1561. If there is a dip to the 1560-1600 area over the next 48 hours, we should see a low form in that area and if presented with a set-up, we’ll look to establish a position. In summary, a short term low is due anytime in the next 72 hours and while not the absolute, that 1600 area might be the area that will provide support if we get one more dip this week.

     GOld price chart with short term Channels

    It would take a close above 1705-1712 (Spot) to really neutralize the downtrend.
    Looking towards the upside, first WEEKLY resistance is now the 1683-1693 area and daily resistance remains at 1666-1675.

    Gold Stocks Short Term (NUGT)
    TREND– Bearish since 22.45 on 3/2/2012-(PRICE NOW DOWN 28% SINCE Bear signal)
    RESISTANCE (20.00-22.00)   close 16.65 – 15


    Short Term Speculators

    the unbiased moving average trend remains down. We discussed the 16 dollar area as a major point and that is where we are trying to support at. This stock is now moving into DANGEROUS TERRITORY WHERE A DROP AS DEEP AS a drop below 15 does not have any major support until the 12 dollar area. Tuesday’s low at 15 is the line in the sand. Anything much lower will favor 12.

    As long as price is below the moving averages and Red 13 is above Blue 34, the downside is in play. A short term cycle and intermediate term seasonal low is due in gold and gold stocks this week.

    NUGT Bull Stock ETF Price Chart
     

     
    Gold Stocks (HUI INDEX)
    The HUI index is close to giving way lower towards 400-450.  The trend remains down and it will take a weekly close above 500-520 to reverse the trend. Until then advantage is to the downside.  The dip under 470 on Tuesday tripped up some important stops.

    We need to get back above the 500 on a closing basis to favor the short term trends has turned and we need a close above 530-535 to favor the seasonal downtrend is complete. April is usually a bullish seasonal month for the metals.

    For the moment, the trend remains down. With short term cycles due to bottom and the seasonal weakness due to end, the potential that we’re near an important low is in play but we need to see price turn up and at least close back above the moving averages before more important consideration.

    HUI Price Chart with support and resistance area
     
     

    Intermediate Trend
    Moving Average Trend – Bearish at 165.59 since 3/5/12
    RESISTANCE (164-166) close---160.23


    Trend

    the unbiased moving average trend remains down. It takes a close above 166.25 to neutralize the downtrend condition. Look for key resistance now to be the white mini dotted channel line that I’ve listed resistance just above.

    Swing Traders
    THE lower green trend line at 155-156 is where key support resides. (1590-1600 spot gold)
    Price bounces aside the TREND REMAINS DOWN.  That white mini channel line at the 165-167.50 area is now first resistance. It looks like a downtrend wedge is being formed and if we should trade to the bottom of the wedge in line with the green channel line, we look to establish a position as soon as we move out of the wedge.

     Silver Using ETF SLV moving average Trend price chart

    Year to Date Moving Average Signals
    1/11/2012 Bullish at 159.66 ----- 3/1/2012 Neutral 164.29 +4.63


    What Next?

    Price has been inside our trading range (1644-1665) for three full days and we suspect that the FIRST CLOSE above or below this range will set the pace for the remainder of the week. With commodities in general rolling over on the short term, and with Mid Week Wednesday now complete, the advantage on Thursday is still to the downside.
     
    The chart below shows the two black arrows of support and resistance. The red mini line above price is the first spot to watch for resistance as it held resistance today. The lower down trending red dotted line is support. For Thursday that works out to be the 1625 area. The lower green highlighted area in the 1644 area is where price is trying to forge some support. Any close below that area will keep the pressure on. It's going to take a move above 1670-1675 to neutralize the downtrend.  This trading range we've discussed should be complete and if there's another dip down, Thursday is the day most likely to encounter price pressure.

     Gold Daily Price Chart with support and resistance Channels
     

    Bottom Line
    The trend is still down but short term cycles are due to bottom this week. If we see a set up, we’ll look to take a short term trade. The downside still has the advantage. A close above 1676 will neutralize the downtrend and favor that the short term cycles are having effect. Thus look at 1644-1648 as first support at the lower green highlighted area. That will be followed by the down trending dotted red line at 1625 and finally, should we get a hard break lower, the 1579-1605 will be major support. A cycle low is due this week and favors the 22nd as the ideal day where price is due to bottom, but there's a 72 hours standard deviation so the potential to move lower into Friday would still be within the 'window.'  A close above 1675 will be the first clue that the cycles are kicking in. In summary, the trend is down. We may get one more dip, so it’s best to be patient. Now that Mid Week Wednesday is complete, we have to be cautious that this range trading was not the highs being put in for the week.

    The trading range of 1644-1666 is still in play but the first close above or below will indicate which side the market favors next. IF we get a push to 1600 on Thursday or Friday, it should provide the short term cycle low.  Watch that trading range and let's see which way it wants to move. The downside still has the advantage.

  • 16 Mar 2012 12:57 AM | Bill Downey (Administrator)


    Silver and the Medium Term Picture

    Medium Term – (Moving Averages 34.40-34.92)
    with price below the moving averages, and with Red 13 above the blue line, the medium term trend in silver remains down. The major attempt to close above the long term blue line was reversed at the upper momentum channel.

    It comes down to whether the moving averages and the long term blue line will now become resistance once again or whether silver can overcome. This Friday’s close will be important.

    They are right there as price is in between both averages. In summary, any way we slice it, we need to get back above the long term blue line to discuss the upside. Needless to say---we need to hold this dotted trend line on a weekly close.  A close below 31.46 would keep the downside potential open.

    Silver weekly Price Chart with Support and resistance channel lines


    We got our bounce to the red dotted downtrend line at that turned out to be resistance for the day. Friday’s high should either be at this line or the middle green zone on the chart. We favor the red dotted line as resistance, but it will depend on how strong the market is. The red dotted downtrend line was support on Thursday on the downside. Thus we have the two lines as the area of support and resistance. Short term cycles are getting closer to a price low and the technical statistics are very oversold. If we don’t get a price low here at the 1637 area, then the next potential is going to be 1605-1615.

    It’s possible to keep the bounce we favored on Thursday in play on Friday. But the red dotted trend line at 1665-1673 AREA is RESISTANCE FOR FRIDAY.  Support is favored at either 1650-1655 or at 1639-1644. We’ll look for a bounce into Friday – but 1665-1573 is the favored high points.

    Gold Daily Price Chart with Gann Lines and Support angles

    Gold Stocks Short Term (GDX)
    TREND– Down
    Short Term Speculators

    the unbiased moving average trend remains down. Prices traded in an inside day today. No new high, no new low. The market is trying to rebound from here. This Bull/Bear Zone is a 2 year support area.  The new 52 week low in GDX has discouraged a lot of bulls. 
    As long as price is below the moving averages and Red 13 is above Blue 34, the downside is in play. Odds favor the low for the week is in place. Regardless, price needs to hold this area in gold stocks or the pressure will continue to the downside.

    GDX Gold Stock mining Index Daily Price Chart with key price support area





  • 10 Mar 2012 3:50 PM | Bill Downey (Administrator)

    Gold and the Seasonal March Correction

    To everything, there is a season…….

    Every aspect of our human life is guided by time and the seasonal aspects of the year.  Gold is not exempt from these cycles of time.  The chart below was constructed by www.skoptionstrading.com and uses the daily gold closing price for the 21st century bull market.  Not only is it in line with 34 year studies,  it provides us with the current bull market trend, making it a bit more precise.  Since it is an average, it smoothes out the spikes and gives us a guide as to what we should favor.  Long term gold watchers have called this period the “ides of March” but perhaps it should be called the “Slides of March” due to the corrective nature that this time of year brings to gold prices.

    Some years do not have a March pullback, but they are rare. The 130 drop since the 29th of February already qualifies as the seasonal effect being in play. The only question that remains is how long it will last before prices turn back up. Let’s take a look at a few charts to see if we can find some clues to watch for.

    Gold Seasonal Price chart for bull market years 2001 to 2011
     

    Seasonal studies show that March is one of the worse months of the year for gold and silver prices.  So while the long term trends are up, its best to be cautious during the month of March. Since February 29th, price has dropped 130 dollars from top to bottom (1792-1663) and 80 dollars using the Friday 1711 price close. This suggests to us that the seasonal is taking place and once complete, a new up leg will begin in gold.

    Can gold go lower?

    We have always had the conviction that the only thing that can bring gold prices down is a Liquidity squeeze or trap, where a cash shortage takes place and a rush to turn assets into cash also drags gold down with all other assets. We have stayed firm in that realm whenever we are asked what could bring gold down. That conviction has played out since gold has once again gone into a corrective mode during the current liquidity panic and sovereign debt crisis in Europe.

    Going to the chart below, the last major peak in gold during the 2008 Liquidity Trap took place the week of March 21, 2008 at the 1030 level and dropped in a five wave motion for approximately 34 weeks to the 690 lowest weekly close level (34%) and then made a major low from which we have moved higher since. From the low of 681 to the high in August of 2011, a span of 34 months took place.

    The current liquidity trap is now in its 30th week and has completed 4 waves of price motion. While not exact, it has a lot of characteristics of the first liquidity trap.  The only thing it really needs to complete the symmetry would be for gold to drop one more time to complete the time sequence (34 weeks) and the wave sequence (5 waves).  When we combine that with the current seasonal tendency for gold to be weak during the month of March, it makes a strong case for one more drop in gold before the end of this liquidity trap takes place.


    Gold Weekly Price Chart with 2008 liquidity trap vs 2012 liquidity trap similarities
     
    Our two moving averages provide us a guide as to whether the trend is up or down on a medium term basis.  A weekly close below the 1675 area would be suggestive that gold has one more leg down to complete the correction process. A lower price this time of year would coincide with the North American Seasonal pullback that usually takes place during the Month of March.

    Overall, the gold and Silver Markets remain in a correction that began in 2011.  Last week’s action tested the two Moving Averages we watch (1673-1705).  The blue 34 week moving average is at 1705 and last Friday’s close above that level keeps gold in a medium term uptrend, but just barely. The low of the week tested The Red Average 13 at 1673 and the lowest daily close we saw last week was 1674. This area also coincides with the 200 day moving average (1675).

    The current gold correction is now entering the 30th week. The fundamental  once again is a Liquidity Trap. The price drop from 1920 to 1520 has carried 21% so far.  Notice also that there were 5 major wave’s in the 2008 pullback. So far, this current pullback has completed 4 waves. A fifth wave down from here would complete a similar look to the 2008 drop and would complete a 34 week time comparison as well. If gold were to drop the same magnitude as in 2008, it would portend a drop to the red and white channel lines on the chart near 1300-1450. The other potential would be for the drop to hold the lower green channel line near 1600. Those are the two best places to look for a low if the seasonal pullback is not complete.

    Therefore, should the price of gold close below the 1666-1670 area this coming week, odds will favor that gold is going to move lower into the week of March 21st and would complete a 4 year pattern from where the 2008 correction began and to where the 2012 correction ended. They both would have about 34 weeks of pullback time. 
    Does it have to be that way?

    While it doesn’t have to be that way, it still behooves us to at least pay attention to the last liquidity incident as a guide. Since the greatest Stock Market Analyst (W.D. Gann) suggested that if we want to know where prices are going we need to look at what price has done in the past, the last liquidity event is probably a good place to pay attention to.

    For those of you not familiar with cycles, have a look at our next chart below.

    The circles represent the most likely time that short term trends change on a monthly basis.  Not all cycle turns play out. They work about 75% of the time and provide a guide to overall short term trends. The other 25% of the time a cycle inversion occurs. This is when the markets are so strong (or weak) that they blow right through the cycle and do not make the turn that is usually expected. When that occurs, the biggest moves in price occurs.

    A great example of an inversion is the week of January 23rd when the strength of the market overwhelmed the RED short term cycle. Prices held in check and tried to turn down but gold was too strong and burst upwards in a long range price day. When that occurs, an inversion takes place and price moves up to the next cycle before a turn takes place.

    Gold Daily Price Chart with Short Term Cycle turn points

    The current cycle is an important one in that a price low is happening at the BLUE cycle. Note how all other price points since the August high has price lows at the RED cycle.  Before the August high, all lows were at the BLUE cycle (bull trend).  Since the market has been correcting, all lows are at the RED cycle (corrective trend).

    Now the 64K question is this----did the “100 dollar” drop day that occurred during the Bernanke speech set us up for the BLUE cycle to have reverted back to the bull mode, where prices now make their lows at the BLUE cycle or did the blue cycle just begin early from that high due to the manipulative effects of interest rate policy?  If that is the case, then the market still has two more weeks to drop until the next cycle that is due the week of March 21st.  If so, then the market would bottom exactly three years to the week that the 2008 price peak occurred and would be in line with the 2008 drop not only in time duration (Approximately 34 weeks) but it would also provide a 5th wave in the pattern as was observed in 2008.  Here’s how we’ll decide:

    If we make a new closing low under the 1665 area (last week’s low) then we will favor lower prices into the week of March 21st.  Our first price target will be the 1600-1620 area, but we will refine that number as we approach that area.

    On the upside, if we close above the 1727-1736 area, we’ll favor that price is moving higher into that time frame and our first target will be the 1755-1767 price area with the potential for more.  Our Daily page covers all the action each night of the week and adapts to the ever changing situation in the gold and silver markets.  Check out the trading history page for a view of how our short term trades have worked out for us. A free 30 day trial at no cost is available on a one time basis for those who would like to see our full content with no strings attached. 


     the potential for more.
  • 02 Mar 2012 6:06 PM | Bill Downey (Administrator)

    The gold and silver markets experienced a major sell off last Wednesday during Fed Chief Bernanke's testimony on capitol hill. A 100 dollar drop in gold and a 10% during Wednesday's high to low drop in silver from 37.40 to 33.74 rattled investor's. Regardless of the reason for the drop, lets take a look at what the Gold and Silver longer term charts look like. 

    The chart below shows the silver price pattern since 2005. The most important trend or channel line for silver's entire bull market run is the Long Term Blue line. For the first 10 years of the bull market, this line was the absolute resistance point that stopped every price spike during that time. That is until 2010.  Note how price touched that line in 2010, pulled back to the 26 area and then exploded higher in a massive spike in price that led to the run up to the 50 dollar area. Then came the crash of 2011. 

    Note how the first crash leg was an exact test of the blue line and then a reaction rally right back to the top line of our Momentum channel.  From there, price collapsed right through the blue line and made an exact low on the BUY ZONE line. For the record, we issued a buy consideration at 26.70 on that drop. The final leg down and low on December 29th was yet another touch of the BUY ZONE line.  Here again we issued a buy zone consideration as an accumulation point at 27.55--and we're still holding that position. This latest rally in February finally took out the long term blue line at 34.70 and rallied all the way to the bottom of the upper momentum channel. It was here this week that the drop occurred on the last day of February. The closing price of that day was 34.70, exactly on the blue line. Go get an idea of how we traded silver in 2011, click on the trading history page under the premium menu. In 9 trades, we netted a total profit of 26 dollars per ounce. 


    Silver Weekly Price Chart with long term channel lines and price points of resistance and support

    The current outlook for silver is one where there is some caution to observe. The first is whether silver can remain above the long term blue line and whether silver can begin closing above the 34 week moving averages. The fact that silver did not close above this line on the February close and the moving averages does leave the potential for silver to pull back during the month of March along with a seasonal trend we want to share with you.

    The North American Winter Seasonal Price Trend

    If your new to the metals, the month of March has historically been a time where gold and silver have the tendency the under go a price correction.  Each has has different ranges and depth depending on the strength or weakness of the metals, but for the most part there is usually a correction that develops. 

    For the past two weeks, we've highlighted the chart below.  It is the seasonal average for gold during the bull market years.  Note the pattern of correction usually develops near the end of February and takes up a portion of March. Thus the current time frame, we should be very careful with our price outlook.  Not every year will produce a correction, but the trend is unmistakeable and the data is calculated using only the daily price closes during this bull market run. There is such a thing as a contra seasonal move where price goes in the opposite direction, but it isn't anything we should expect. The long term trends of silver remain up, but there is going to be ups and downs (as we've seen) that will be dramatic.  Since we've been tracking our trades on the website, we've had a successful outcome. We did not get caught in any portion of the crash and for 2011, while silver prices were actually down for the year, we managed to record a 26 dollar per ounce profit on our trades.  On our long term accumulation points, we're in at 18.90, (from 2010) and at 27.55 (2011).  Check out the trading history page on our website for details.  Now let's move on to Gold.

    5SeaAveFDBm

    Gold Seasonal price average during this bull market with March as a weak month


    The gold market obviously has the same issue when it comes to the seasonal trends.  Price has a tendency to correct and have one of the three worst times of the year for price appreciation. And just for the record, we were flashing that chart a full week before the correction took place.  As for the correction, we we're long when it began on Wednesday morning, but we had already reduced our position by 66% on the way up, booking profits as we went along. The only remaining position we had on the day of the crash was stopped out, but at a gain and not a loss. 

    The gold chart below shows the long term price pattern and how it relates to the channel lines we use to arrive at the key price support and resistance points.  All of the lines have been on the chart since 2009 and have not changed so they are not line FITTED after the fact. The midway green channel line has provided five major resistance points with the latest being February 29th.  We needed a MONTHLY close above 1767 and 1804 to favor a price breakout. On the last day of the month, just 14 dollars below 1804 and 23 dollars above 1767, gold dropped 100 dollars per ounce.

    Coincidence?  We don't think so. The professionals and the Feds know of these price points and are very aware of the markets potential to self full fill when everybody gets the buy signal. So they monitor and wait for the right moment to strike. Now a lot of this may seem conspiratorial but the manipulation of markets is a confirmed thing.  There are minutes from the Fed that suggest so and there's even an approved team that oversee the markets that was created after the crash of 1987.

    The coming month in gold promises to be volatile and quite possibly corrective. Our trading history page speaks for itself and so does our commentary that is available for you to review. If your in the gold and silver market, check out our reports and commentary. 

    Gold Monthly Price Chart with Long Term Channel lines of price support and resistance
    5XGldMONWm

    The Gold Stocks

    The gold stocks are flashing a warning sign and that is the moving averages are ready to roll over where the Blue line 34 week Moving average drops below the Red line 13. We call it the red line 13 as it is not a 13 week moving average of price.  As you can see in all the charts we've displayed, they do a good job of always keeping us on the main trend. This weeks high was right at the moving averages and turned back down from that point. With the seasonal coming into play, this time period is one of the two most dangerous points to be holding gold stocks. The Feb/March time frame and the June/July period are the two times per year that one wants to have a lower than normal inventory of stocks and/or some Put Options. 

    The chart speaks for itself. It has been caught in a long term massive consolidation for two years.  The 480-520 price area has held every single test. This time would be a perfect one for the professional's to run the price under 480 and have a lot of stops loss orders tripped up and for investor's to cave in and sell their position.  With the 34 week average rolling over, the seasonal price time of the year, and a chart pattern that is displaying bearish characteristics, (choppy and overlapping), the potential for the HUI to drop below 480 is high. If does, we think it will be a buying opportunity sometime in April.  

    The website is open to the public for one more week, feel free to read our other reports. You'll find them all under the Free Premium menu.  In summary, the "ides of March" has arrived and we need to be cautious of the seasonal trend and the important support in the HUI at 480-500.  As long as price is above that area, there's a chance that gold could hold that support line once again.  If it doesn't, we expect a HARD swift spike down that will have investor's selling at a time when price is making 3 year lows. And you know what usually ends up happening after that.


    5HUIWKLYFDBm

    HUI Gold Bugs Index Weekly Price Chart with Support and Resistance Channels






  • 29 Feb 2012 2:56 AM | Bill Downey (Administrator)

    Intermediate term
    Moving Average Trend – bullish - (Moving Averages 32.91-33.25)

    the unbiased moving average trend remains up. The price pattern remains impulsive. That IMPULSIVE LOOK instead of choppy and overlapping has been the clue to favor higher prices. When you look at your charts----the first thing you want to say to yourself is---“is the chart pattern that I’m watching impulsive (bullish or bearish with strength) like now on the chart, the pattern is impulsive (bullish). The rallies are strong and the pullbacks are weak and controlled. Or is it a corrective (choppy and overlapping counter trend move) like the rally of July through September. In Summary, always start with that question and most of the time, you’ll already know what the CURRENT NOW MOMENT trend of the market is. OK, back the chart.

    If there’s a pullback to the moving averages – 32.83-33.10 will be support on a closing basis (swing traders take note). This is equal to spot silver at the 33.83-34.10 area. As long as price is above the moving averages, and the blue moving average above the red, the trend remains up. The next important channel line we’ve been watching is in the 37 area (38 spot silver) and price is pulling into that area right at the end of the month.

    Silver using ETF (SLV) moving average Trend

    The emerging price pattern continues looking impulsive and we have two dotted lines of support.

    That up trending dotted line is first support on pullbacks. Swing Traders should consider targeting that next upper resistance line for profit taking on at least ½ your position. For position players, its best to stay in until the moving averages give a sell signal. It would have been better for price to arrive at this area next week, for projection purposes, but there’s no complaint from here. I’ve often commented that SLV is special to me because the pattern I see is only New York. I’m going to do some more work with this chart, but right now, there is NO RESISTANCE AFTER THE 38 area (39 in spot) UNTIL THE $43 dollar area (44 in spot silver). For now, look for RESISTANCE for this week at the WHITE CHANNEL line in the 37-37.50 area in SLV and 38.00-38.50 area in spot silver.

    Silver Stocks
    Today’s silver move has the stocks in a position where there are some stocks that are ready for Breakouts. CDE is one of them. It’s not been one of my favorites, but the chart really looks interesting and favors a move towards the 40 area. There’s a bullish bottom pattern there (head and Shoulder) and a price breakout is on the verge. Closes above that red line on a weekly basis favors a move to the channel line near 40. One note of caution – the seasonal is due and March is one of the worse months for metals. Buying here would mean favoring a contra seasonal move. If we get one this year (and its set up much more to do so than most years), then a strong move up would develop. If things work out however, short term cycles call for a pullback for a few weeks after March 4th-11th---- if get the pullback, it might be a nice play. If we close above 32 on a weekly basis---favor higher.

    CDE Weekly Price Charts and breakout potential channel lines of trend and price support


    Contra Seasonal Factor in Gold

    A CONTRA seasonal factor works like this. The MARKET HAS BEEN EXPECTING the seasonal to kick in and maybe that COT report with the huge increase has something to do with it. Pros know the seasonal and they play it. What happens is when a CONTRA seasonal event happens, the pros have to cover and it just screams the market higher. They always play the odds and seasonal. To make it easier, consider it this way. If this was corn, Kellogg’s corn flakes would be expecting lower corn prices and when the price goes contra seasonal, they have to run in and buy to hedge their production costs on cereal. It can make for big rallies when Contra’s happen.
    The chart below is a price projection of what a contra seasonal event would most likely exhibit at the moment. The red portion is the future and is a map for us IF the contra develops. The March 4th-11th should be the point of decision. We’ll be watching for it all into next week.

    Gold Contra Seasonal Price Projection Chart



  • 28 Feb 2012 6:14 PM | Bill Downey (Administrator)

    Gold moved up on Tuesday and as we get ready to close the month, price is sitting at the most important price point for the year.  The chart below shows the green channel lines that gold has been following ever since the 2008 crash. The lower green channel line has provided every single low and with the exception of the August price explosion, the middle green line (or midway channel line) has provided all the peaks. 

    A channel is about the least arbitrary technical tool we can look at because the MARKET price structure defines its boundaries.  Yes, a human still has to put the lines in, and that is why we don't call it totally unbiased.  The channel is nothing more than a standard deviation of price that the market itself forms.  It stands to reason then that the greatest place a market can have a price peak is at the channel line.  After all, it is the upper standard deviation of price.

    Since that is a factor that seems to be working well, one of the things the chart is telling us is that price is actually arriving at one of the two potential high price points for the year. The other of course being the upper green channel line at the 2100-2200 area.  So while the trends are all up and the market looks great, it is also at one of the two potential high points for the year.  If gold can close above this channel line, the upside and 2000 dollar gold will come into play. The other scenario, is that gold is going to form a major high point next week, and a seasonal correction is going to take place.  Which one will it be ?

    Gold Weekly Price Chart with Long Term Channel lines and support and resistance points

Technical Analysis :: Gold & Silver

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