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“Technical analysis absorbs and reflects all technical and fundamental market moving action to the daily close. Fundamentally, precious metals are long term bullish. Never take your attention away from the bigger picture.”-Traderrog
“Gold is revisiting similar trading action from 1979-1981. Price never gives us a smooth line, straight shot to the moon. Corrections are normal and we expect a mild one from October 8, 2007 through October 19th. Technical projections tell us a return to $700 seems the worst case but we forecast something higher. Yesterday’s gold close was $729.20 after the dollar found some support. Look for a small wave higher this week followed by more corrective selling. This interim period ought to demonstrate sideways, choppy action before the next rally. With a general stock selling haircut coming later this month, precious metals shares could weaken with the others-temporarily. After a price adjustment, gold and silver ought to rally strongly into the fall.”- Traderrog
Thirty years of monthly gold action tells us a price stall at $700 was predictable resistance.There are other price points trying to suppress gold but these are only a blip on the longer term trading screen. Do not be fazed or knocked out of the bigger picture. We like to trade the technicals but fully expect to be trading PM’s long for a minimum of four years and more likely several years longer. Traders will pause at major price points in the $700’s and $800’s but some of our sharper analyst friends are now forecasting $900 or more this fall.
Old Highs on Gold & Silver Index Attract Current Price Like Magnets
This is an excellent longer term chart explaining several things and forecasting others. The big, red triangle in the price box is of the continuation and breakout variety showing us the clear, breakout XAU rally in late 2005. The dotted red line at the top is longer term major price resistance. We broke that line in 2006 and again this year showing larger buying pressures as they build for a rally. Notice too, the lows in 2006 and 2007 are moving higher, which is also bullish. The PMO or, price momentum box signaled selling with a crossover moving average right at year-end in 2006.
Note that now, it is curling up to cross-over again into the bull posture and rally. One of the best gold and gold-silver shares indicators is the shares XAU price relative to gold in the lower box. Look at the beautiful signal it provided in early 2005 just as price rocketed on this chart. For now, in 2007, we see the same signal saying here comes another of those big shares’ rallies. Currently, the dark line crossed over and broke above the exponential moving average of 20 days. This tells us on the longer term historical chart that buying is just ahead.
December, 2007 Monthly Silver with Slow Stochastics
Monthly silver has doubled since a bottom in 2004. Silver prices can be confusing to some traders as they reflect heavy commercial applications as well as being a precious metal and a currency. This tug-of-war among the three applications coupled with lower volumes compared to other futures contracts produces extreme volatility. Note the last three price bars: (1) a long bar opening near $13.00 and falling to $11.00 support. But, then it jumped right back up with a close above $12.00; (2) the second bar opened above $12.00 and then zoomed to $13.00; (3) the last and most recent bar opened near $14.00, sold lower and bounced back to close undecided in the middle. All of these signals are bullish, showing higher price pressures.
In the lower box, the slow stochastics indicates a definitive bottom, and a cross-over to the buying posture. Since silver often follows gold and copper prices like a little puppy, and all of these signals and indicators are saying stay with precious metals.
Do not let the forthcoming market disruptions and confusion take your eyes off the precious metals football. Those staying in the game for the longer pull with some occasional profit-taking trading can become major winners.-Traderrog
Roger Wiegand
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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com
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