Week Ending 03/27/09
The following is an excerpt from the full market wrap report available at the Honest Money Gold & Silver Report website. For a free trial copy access the link at the end of this report.
Gold is the best example of how the pricing of risk is being perceived differently from one day to the next. All the markets are extremely volatile and will most likely remain that way for some time. The system is very jittery as well it should be. The strains being placed on it are huge.
The 60 minute chart shows the huge intraday move gold made last week - a +7% intraday move of $70 per ounce. Notice this rise came after gold had broken below its falling trend line that extends down from the recent highs of just over 1000 to the recent lows near $900 in response to the Fed's announcement of debt monetization. At first it looked like gold was correcting after its strong move. Then it began to hold and consolidate.
On Thursday, however, gold made strong intraday highs and looked like it was ready to head back up, but it gave the gains away by the close; and it's been downhill ever since.
Thursday evening I warned that this looked like what was going to play out, as was posted on the website's bulletin board.
It will be important to see if gold holds its 61.8% fib level.
On an intermediate term basis gold's lower rising trend line offers strong support at $900.00.
A key pivot point resides above near $945.00.
Silver has been acting a bit better than gold as of late. GLD corrected below its 50% level but SLV hasn't yet to come even close to its 50% level.
Part of the reason for this however, is that silver fell much further than gold did from the long term highs, and thus had a lot more room to move back up into.
Silver's daily chart shows it bumping into overhead resistance and backing off. Its 50 ma offers good support, and below that its rising trend line does as well.
To the upside, $13.55 and 13.75 offer immediate overhead resistance levels that would be bullish if taken out, followed by $14.00.
From the March 2008 high of 1569 the GDM index fell to a low of 447 in Oct. of 2008. In 7 months the index lost 1569-447=1122 points or 71.5% of its value.
After hitting the Oct. low of 447 the index rallied up to its recent high of 1068 for a gain of 1068-447=621 points or 51.8%. Even after this huge gain, however, the index is still 1569-1068=501 points or 32% off from its all-time high.
As the daily chart shows, price ran into overhead resistance between the 50% and 61.8% fib retracement levels. After the 621 point rally off its lows, the index understandably stalled out at such a significant price level that has overhead supply going back a couple of years to the far left of the chart.
It will take a bit of time to work off this overhead supply. It is fairly common for significant resistance not to be overcome until two or more attempts are made. Each attempt works off more of the overhead supply, until resistance is finally overcome.
The next chart focuses in a bit closer to the recent price action. RSI is showing a negative divergence, which suggests a pullback.
There is an open gap at 35 that may need to be filled: more evidence of a likely correction. The CCI indicator was deep into overbought territory and is now moving lower.
The next two charts both provide evidence that GDM's long term outlook is bullish. The first chart is a cup and handle formation that is a powerful long term bullish chart formation. It also shows the STO indicator moving up out of oversold territory and headed higher.
The second chart shows a golden cross of the 50 ma above the 200 ma. Golden crosses are considered to be bullish chart indicators and do not occur that often and usually signal forthcoming advances.
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The above excerpt is from the full market wrap report available at the Honest Money Gold & Silver Report website. This week's twenty-five page report contains thirty charts & graphs, including positions held in the model portfolio and on our stock watch list.
We are so bullish on gold that we are offering a money back guarantee to all new subscribers. If gold does not make a new high during 2009 your subscription will be refunded in full. Stop by and check it out.
Good luck. Good trading. Good health. And that's a wrap.
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