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Technically Precious with Merv

By Merv Burak CMT      Printer Friendly Version
Feb 9 2009 1:11PM

www.preciousmetalscentral.com

For week ending 06 February 2009

The price of gold is hitting its head up against the ceiling set by the top activity from the Sept/Oct highs. Is it time for some downside action?

GOLD

LONG TERM

Due to some time constraints this week’s commentary will be short and to the point. Just the facts.

Gold price remains above its long term moving average line and the line slope continues to point upwards. The long term momentum indicator also remains in its positive zone above its positive sloping trigger line. The volume indicator is still showing some strength and remains above its positive long term trigger line. All in all, the long term rating remains BULLISH.

INTERMEDIATE TERM

On the intermediate term there are a couple of things that jump out at you.  First, gold continues to move nicely inside its up trending channel.  Although it is closer to the upper resistance trend line there is still room for upside action although the down side may be getting to be the more possible. On the down side there is lots of room without getting out of the channel.  The normal indicators continue to be quite positive although the action is now at the level of the Sept/Oct high and that may be causing a temporary resistance to further upside action. The price of gold does remain above its positive sloping moving average line and the momentum indicator continues in its positive zone. Some weakness in the momentum is being noted as the indicator is just very slightly above its trigger line and any further deterioration in the indicator would put it in a negative direction below its trigger. The volume indicator is continuing above its positive trigger line but its action is getting to be more lateral than upside.  All in all, the intermediate term rating remains BULLISH.

SHORT TERM

On the short term the market action looks like it’s starting to get weaker.  A top may be at hand if it wasn’t for the ever present global political and financial surprises that seem to keep happening. As for the market action the most discouraging action is that of the daily trading volume. This past week we had seen very low daily volume action even on those days when the price of gold moved higher. The other suggestion of weakness is the more aggressive Stochastic Oscillator.  It failed to post new highs with the price the previous Friday and then fell off fast during the week. It almost entered its negative zone before bouncing off the neutral line. There may still be more weakness ahead.  However, for now any such weakness, should it come, is not envisioned to be of major concern and should result in a continued upside action.  As for the actual short term indicators, well the price is still above its positive short term moving average line and the momentum indicator remains in its positive zone although its direction is now towards the down side below its negative trigger line. As mentioned, the daily volume action is very low and not a good thing.  All in all I must still give the short term a BULLISH rating.

The immediate direction of least resistance seems to be for a continuation of the lateral direction although with a negative bias.

SILVER

Although silver looks to be acting better than gold (it has, at least lately) over the longer period it is still lagging gold’s performance. This we can see in that silver is still somewhat below its September high while gold is right there. Having said that, the intermediate term momentum and volume action seems to be more steady and to the up side. Everything is all positive from the intermediate term point of view. On the other hand the short term looks like it might be entering a problem period. It is right up against the upper resistance trend line of its up trending channel and may be due for a reaction back towards the lower line. The short term momentum indicator has entered its overbought zone so that is a warning, at least, that the up move may be getting over extended. For now, however, everything is still moving in an upward direction.

PRECIOUS METAL STOCKS

Over the past 9 or 10 weeks the precious metal stocks have had themselves quite a run.  It may be time for a rest to consolidate all those gains before trying for the next move. The average intermediate term (50 day) gain of the top 25 stocks in the universe of 160 is now over 200%. The best one during this period is now into the 400% gain area. A rest is really in order before things get really over heated. Although the indicators are still all gung-ho on the up side there are some signs of weakening, especially from the momentum indicator.  It is starting to flatten out and possibly start a downward move although that has not yet happened. Because of the huge moves so many stocks have made recently this would not be the time to be getting into the market. Although the rest or reaction may not start tomorrow, a short term top is closer than one might want to imagine. A standard saying in “the business? is that one should not chase after stocks. Therefore the best policy at this point, it would seem, would be to wait for the reaction to take hold and get in on the next move, after the stocks have had a chance to gain more strength. Of course, this plan may in fact be the wrong plan and the stocks just might continue to zoom into the stratosphere, but I wouldn’t count on it. The odds are not in that favor.

Merv’s Precious Metals Indices Table

Let’s call it another week.

Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv’s Precious Metals Central
08 February 2009

 

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For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com.

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician (CMT) and tries to decipher what’s going on in the securities markets. As an underground surveyor in the gold mines of Canada’s Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv’s driving focus is to KEEP IT SIMPLE.

To find out more about Merv’s various Gold Indices and component stocks, please visit http://preciousmetalscentral.com. There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

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