Week Ending 6/18/10
Gold closed at a new all-time high: $1256.60 (continuous contract). GLD made a new high of 122.83 for a weekly gain of 2.35%. The daily chart below shows GLD breaking above resistance from its May - June highs and forging ahead for another all-time high. Gold's performance has been nothing short of spectacular.
Notice on the chart that both RSI and MACD are showing negative divergences. These indicators warrant attention, as they will be resolved one way or the other: either price will continue up, forcing them up; or price will drop and align with the divergences.
As mentioned in the email alert earlier this week - price trumps all else. Indicators are derived from price, so they are secondary at best. Indicators often give false signals or are reversed, etc.
There is no perfect system or one that is even close. It is a game of percentages: you lay your money down and you take your chances. You try to control risk versus reward.
Hence, divergences are something to be monitored. They say: pay attention, something MAY be up. But in the end, all that matters is price; and if you are on the right side of the trade. Everything else is secondary.
With that being said, weighing risk versus reward: buying or taking new positions at these prices, with the current divergences, is risky business, and better set-ups will prevail.
The gold bull has a long way to go. Buying on weakness and selling into strength is a hard act to beat.
Gold's (GLD) weekly chart shows pretty much the same thing as its daily chart: a break out above resistance to new highs has occurred, but negative divergences can be seen in RSI and MACD.
Also, notice that volume declined significantly on this break out, compared to the previous moves to new highs. These divergences suggest that there is less conviction and underlying strength to this move; however, a new high is a new high. The divergences warrant attention to the additional risks indicated.
The gold stocks were stellar performers this past week, with the GDX gaining 6.44%. Some of the individual miners featured on the stock watch list for the past several months performed even better: Newmont (NEM) was up 8.89% and Randgold (GOLD) was up over 7%, while Silver Wheaton (SLW) gained 8.25%.
The daily GDX chart shows two gaps up on Thursday and Friday. Overhead resistance is directly above from the May high. Gold stocks have been performing well, but they haven't been able to match physical gold's all-time high as of yet. Open gaps usually get filled.
The above excerpt is from this week's 30 page report, available on the Honest Money Gold & Silver Report website. All major markets are covered: stocks, bonds, currencies, and commodities, with the emphasis on the precious metals.
Dozens of charts are available and our stock watch list provides numerous investment ideas each week, while our model portfolio offers a game plan to implement them. A FREE one-month trial subscription is available. Stop by and check it out.
Good Luck. Good Trading. Good Health. And that's a Wrap.