When transitioning through pausing markets we must be very wary. Inflection points enable any market to go up, down, or sideways. We are watching miniscule moves and tendencies for multiple clues as to new directions. We can predict but can we forecast with enough clarity to put cash on the line to trade? Let’s review key charts for new trading signals to see our current positions.
Dow Monthly Shows Strong Price Support On Red Dotted Line Under 8,000.
Our next price resistance above 8,000 is the up-trending red line near 9,000. We know of support and resistance prices at 7850, 8,000, 8250, 8450, 8500, 8850 and 9250. The price of 8450 is major price resistance and support for the Dow. Should this one give way, we expect 8850. Note the 8989.14 resistance on the ten day moving average-it’s also touching the red channel line=double resistance.
The Obama Bounce was delayed but finally arrived as we did forecast. Our next larger question is how long will it last and will it give us enough room to enjoy a strong precious metals’ shares rally?
Gold Popped Above Continuation Triangle Once. Second Try Should Succeed.
Gold futures are trading this day of 4-9-09 at $885 for December and 882 for April. The December number is a major support and resistance price for gold. While it’s too early to tell, we suspect gold can rally next week and breakout to new and higher resistance at 1007 (the previous nearby top-see dotted red line). There are some strong “ifs” and “maybes” to consider but we think gold has a strong chance for $1007 this spring.
Next, gold will need even stronger power going beyond 1007 to 1140-1150 and maybe even 1250-1260. This next class of higher prices may not be achieved this spring. It all depends upon the length of a cycle extension from the tardy Obama Bounce and a strong potential smash through $1007. This is quite iffy at best but we suggest it as an outside possibility.
Precious Metals Shares Ready To Rally.
Our best signal on this chart is the gold metal price versus the shares shown in the lower box. This clue is usually 90% accurate. Further, one of our best analyst colleagues agrees and he is often correct as well. That lower box ratio was terribly over-sold as the index marker hit the bottom on this chart over a very long cycle from 1984 to present. This is the super low for this ratio on the entire chart. Often these stronger moves create even stronger snap-back moves in the other direction-up.
US Dollar Stopped At 89.50. Now We Go Back To 80.00 Support.
The dollar is forming a congested continuation triangle pattern being stuck near 85.50. On the cycles, we are entering spring-summer when the dollar and bonds normally go weaker and sideways. When 84.50 is decisively broken, the dollar would then seek support at 82.50 followed by 80.00. This will take time but as credit, bonds, interest rates and other factors go sour, the selling could accelerate.
Silver Appears Supported At $12.00-$12.50.
We would not like to see silver fall below major support at $11.85 and do not expect it. However, silver is volatile and has tendencies to overshoot on both the long and short sides. If the Obama Bounce (Delayed) continues along with PM shares, we suspect silver can follow. Our spring objective is the price congestion point between $16 and $17. We remain convinced silver can see $21.50 resistance again this year. Can it then breakout into new and higher territory at $25-$26 and our higher technical ceiling of $30.73 for the December, 2009 futures? Soon we’ll know.
For now, traders should be wary of pivot reversals in any direction. These transition and inflection points can be great entries; if you get them right. Have patience before installing new trades and above all control your risk. Buying and holding gold and silver coins keep you in the trade. Buying futures spread positions do the same with a time decay factor involved. Buying, holding and trading shares in gold and silver can be good moves for as long, or longer than spreads with less leverage. Plan your trades and investments very carefully before initiating them. Always have an exit strategy and that includes staying out of the way of elections and selling juniors into strength if you choose an exit. -Traderrog
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com
Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information
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