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Honest Money Gold and Silver Report: Market Wrap

Market Wrap

Week Ending 4/9/09

The following is an excerpt from the full market wrap report available at the Honest Money Gold & Silver Report website. Stop by and check it out. For a free trial subscription submit a request via the email address on site.


Gold closed down -1.62% at $878.80 (continuous contract). During the week it hit an intraday low of 865.00. So far, the important $850.00 price level has held. From last week's report:

$850 is a key support level, as it is the high of the last bull market, and it marks a significant inflection point for the present bull market. It is important for price to remain above this level.

MACD has made a negative crossover, which suggests more downside action to come. It appears that $850 is going to be tested.

The weekly chart below shows a possible inverse head & shoulders formation in the making.


Silver was down -3.29% for the week, closing at $12.34. Silver has broken its bottom trend line and appears to be setting up to make a negative STO cross over. In last week's report I said:

I have been bullish on silver and remain so, especially long term, however, I'm not thrilled about the recent action. What started out as a short term correction may be morphing into an intermediate term move.

Not only did silver break its lower trend line, but as the next charts shows, it looks like the STO indicator is rolling over and setting up for a negative cross. If this occurs it would suggest that lower prices lie ahead.

Gold Stocks

The GDX gold stock index was down -1.46% for the week, closing at 33.04. In last week's report I stated:

The chart below is the same chart used last week, but it has been updated for this week. The RSI negative divergence played out to the downside filling the open gap. The CCI indicator was spot on flashing an early warning.

The charts of most precious metal indices are leaning to the downside, as are most of the precious metal stocks themselves. Most are overbought and need to consolidate. There are negative divergences.

As of now I'm looking for more downside action to consolidate the recent strong advances and resulting overbought conditions. This is normal and healthy market action.

Well, more downside action came this past week. Price is testing its lower trend line. Most of the indicators are bearish and suggest further downside action.

However, there are three potential indicators that may be signaling positive developments are not too far down the road.

A gold cross has been made where the 50 ma turns up and crosses above the 200 ma. This is a bullish long term signal that does not often occur. When it does, attention should be paid.

Money flows are still very strong. This is positive. If they hold near these levels it will be very constructive, as it would indicate money is not flowing out.

Notice the level where the STO indicator is at: near the 20 oversold region. As we saw earlier in this report, this price level often presages a reversal back up (rally).

On the second chart you can see where and what happened on similar previous occasions. There are several individual gold and silver stocks that are building the same formation/indicators. I am watching them for possible buying opportunities.

Right now almost everyone is bullish on the stock market and bearish on gold. That piques my contrarian interest.

Good luck. Good trading. Good health, and that's a wrap.

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