Week Ending 9/25/09
Gold was down -16.70 (-1.66%) to close at $990.90 on the continuous contract. The short term chart below shows gold's recent breakout and pullback, as it sits perched on top of horizontal support.
As of now this appears to be a short term pull-back, but there is some evidence that something more could be underway. Gold needs to hold support here.
MACD made a negative crossover, which suggests more corrective action may be coming. Note that volume expanded on the pullback and the histograms have turned negative as well.
The first line of support GLD is sitting on top of is its upper horizontal trend line that connects back to the June high around 97.
At the bottom of this support area is the lower horizontal line that connects back to the August high near 95. The 50 dma is converging on this area. This support band should stop any short term correction.
The weekly (intermediate) chart looks stronger than the daily chart. The inverse head & shoulder pattern remains intact, although it has not yet broken out with conviction or confirmation.
Notice the series of higher lows stepping up from the right shoulder (89-91). I suspect that these two levels will hold any correction; and as long as the right shoulder (85) is not broken below, the intermediate term trend remains up. RSI and the histograms remain positive.
Up next is the weekly GLD chart with the Fibonacci retracement levels overlaid. This has been a big move up out of last year's low near 69. A move back to either of the two first fib levels would scare a lot of weak hands out of the market – If (?) it were to occur.
As of now, I view any pull-back to be a buying opportunity if it holds support above the right shoulder, and I plan on entering the market when the right set-up(s) occur. I have raised a good deal of cash with this purpose in mind.
I believe that gold is in a secular bull market until proven otherwise. Hence, I prefer to buy on weakness that holds support. It is possible this opportunity will not present itself as such. I'll cross that road if and when it comes.
The gold stocks didn't fare to well this past week, losing -6.21% to close at $43.07. On the daily chart below the damage stands out. Horizontal support going back to the June high was sliced through. Price is now approaching the August high support level (42), which coincides with the 50 dma. This level needs to hold or the GDX could fall to its lower triangular support line.
MACD has put in a negative crossover and the histograms are moving lower as well. RSI has broken below the 50 level. Caution is warranted, as the gold stocks are subject to overall stock market risk, which remains significant.
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