Market Wrap
Week Ending 12/07/07
Gold
Last week's report stated that gold was at an important juncture, sitting on top of its bottom trend line, and that a break below it on a closing basis, especially on a weekly closing basis, would turn support into resistance. So far support has held (+1.24%).
Gold was up $11.10 to close the week out at $800.20 for a gain of +1.24%. During intraday trading on Monday, price broke below the bottom trend line, but recovered by the end of the day to close back above it.
This was good action, as buyers overcame sellers; however, a follow through with conviction needs to be sustained to provide further confirmation.
Up first is the weekly gold chart. Although price was up for the week, many of the indicators have rolled over and are pointing down.
RSI was well into overbought territory, and has since turned down and broken below the 70 level, closing at 62.24. This suggests that a test of the 50 level may be forthcoming.
Histograms are steadily declining back towards zero. MACD appears to be rolling over for a possible negative cross over.
The stochastic indicator was well into overbought territory, and has since turned down below 80.
The Bollinger bands are widening or spreading further apart, which usually indicates that prices will not be violent in either direction for the near term. Significant support resides at the middle Bollinger band at $743.49.
Next up is the daily chart for GLD, the gold exchange traded fund. The chart is more bullish than the weekly gold chart above.
RSI is showing a positive divergence as it made a lower low, while price put in a higher low. This is constructive, but needs to be built on.
So far the bottom trend line has been tested a number of times and held. Just below it is the 50 day moving average, which has held as well.
Histograms are receding back towards zero, which is positive. MACD is still under a negative cross over, but it appears to be flattening out.
Volume on the decline decreased, which is another good sign. It could still go either way, but the weight of the evidence is positive.
Below is the monthly gold chart. It shows the longer term trend. The price action moves from the bottom left hand corner to the upper right hand corner - a bullish stairway to heaven.
Overall the signals are mixed. RSI is well into overbought territory. The stochastic indicator has made a negative cross over to the downside.
The histograms are positive but may be flattening out. MACD has put in a positive cross over, which is constructive. Price remains well above its 20 ema.
The last gold chart is a point & figure chart. Last week's report showed the same chart, which at that time had given a high pole warning.
The warning has not, as of yet materialized, as price held support and moved up just under 1% for the week.
A bullish price projection remains in place for $960.00, but things can turn on a dime. A trend, however, is in effect until it isn't, and as of now it is.
Prices move from the bottom left hand corner to the upper right hand corner, another stairway to heaven.
Short term caution is still warranted until further confirmation occurs.
Silver
Silver had a better week than gold, moving up +0.34 cents to $14.51, for a weekly gain of +2.40%.
Most of the indicators, however, are weighted to the downside.
RSI was repelled just short of the 70 level and closed at 56.34, hinting that a test of the 50 level may be close at hand.
Histograms are retreating down towards zero, while the stochastic indicator has crossed over and down.
Price still remains below its broken horizontal trend line, which has turned from support into resistance.
SLV, the exchanged traded silver fund, had an even better week, gaining +2.71% to close at 142.76. However, it too has several negative indicators.
RSI bounced off the 70 level and appears headed down to test 50, presently sitting at 55.82.
Histograms are receding down towards zero and MACD is flattening out. Volume deceased on the downside, which is a positive.
The Stochastic indicator has rolled over from well above the 80 level to 70.29 and is pointing down.
Next up is a silver point and figure chart. As mentioned last week, on Nov. 30th it put in a high pole warning.
So far price has not fallen. A bullish price projection remains intact at $25.50.
Last up for silver is the monthly chart. There are mixed signals, but the trend from the bottom left hand corner to the upper right hand corner remains in effect until it isn't, and right now it is.
RSI has turned up, but is starting to run sideways, further price action is needed for confirmation. The negative histograms are receding back towards zero, which is positive.
MACD still shows a negative cross over, however, it has turned sideways from heading down, and may be setting up for a positive cross over. Notice the lines "pinching" closer together.
The chart shows silver pretty much staying above its middle Bollinger band since the start of the bull market, thus providing solid support. Also, notice the Bollinger bands are coming closer and closer together, which usually signals a significant move is coming - one way or the other (note: this is a monthly chart and the signals are longer term).
Hui Index
The Hui Index held support this past week, closing up 5.85 points to 412.06 (+1.44%). Support is just below the current price.
RSI is still above 50; however, it has been headed down after bumping into resistance near 70, with a slight upturn most recently.
Histograms have gone from strongly bullish to receding back towards zero. MACD has rolled over and appears to be about to make a negative cross over.
The Bollinger bands are spreading wider apart, suggesting that no immanent pressure is building for a big move in either direction.
The red horizontal trend line is the first zone of support, the middle Bollinger band is next.
GDX Index
The GDX Index is presently the most bullish of the three main gold stock indices. This will be more apparent in the point & figure charts in the next section that follows.
On the daily GDX chart below, the index is about 7% above its horizontal support line. During the recent correction a higher low has been made, and has held thus far, while volume has decreased.
Histograms are headed back towards zero, and MACD and STO have flattened out from their declines, as has RSI. Now they must turn up.
Xau Index
Below is the monthly chart of the Xau. It remains well above its long term horizontal support line at 160. This level was resistance going back for twenty years, until broken above this year. It then turned from resistance into support.
The higher low of 163.48 made during the recent correction, may prove to be an important pivot point. Time will tell. The Xau/Gold ratio has broken above resistance.
Point & Figure Charts
Next up are a series of point & figure charts for the Hui, Xau, and Gdx.
Both the Hui and Xau charts are bearish, while the Gdx chart is bullish.
First up is the Hui Index, with a bearish price projection to 380.00
Next up is the Xau Index, which has a bearish price target of 148, which is a considerable ways beneath its present price.
The last p&f chart is the Market Vectors Gold Miners (GDX). It is the only chart of the three indexes that has a bullish price projection, one that is much higher than the existing price.
The indices each contain a different composition of various precious metals stocks and a different weighting of the individual stocks held.
This is a major contributing factor to their different performance and future price projections on the point and figure charts.
It is best to remember that it's not so much a stock market, as it is a market of stocks. This holds true in sectors as well, including the precious metal sector.
There are some pm stocks that look quite promising. In other words, the key may be to choose the correct stocks, not an overall index.
Stocks to Watch
Disclosure: The gold stock portfolio has positions in KGC and SLW. Good luck, good trading, good health, and that's a wrap.
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