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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 12/05/2009 : 20:07:10
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Gold Blow Off Rally in for Rough Sailing Ahead
Commodities / Gold & Silver 2009
Dec 05, 2009 - 02:29 PM
By: Merv_Burak
That “blow-off” line shown last week has been breached this Friday and I’m afraid we’re in for some rough sailing ahead, at least for a little while. It will take some time for the indicators to suggest what’s happening but let’s go right to them and see what they are saying at this time.
GOLD : LONG TERM
It takes some time for the long term indicators to turn around and confirm any kind of trend reversal. Reversals are first noted in the short term indicators and progressively move over to the longer periods as time goes by. At the present time Friday’s action, along with the previous Friday’s action, does not in and of itself suggest a long term trend reversal but it does say something in the shorter periods (see below).
Although the long term P&F chart is now moving in a downward direction it is still far away from any reversal signal. Even if it goes straight down from here it would have to drop to the $1020 level for a reversal. Of course, should the action in the days and weeks ahead cause the P&F chart to reverse direction again then we may get a higher level at which the P&F would give a reversal signal.
Gold price, despite Friday’s plunge, is still some $160 above its long term positive sloping moving average line and therefore nothing yet to worry about from the long term standpoint. The long term momentum indicator remains well inside its positive zone but Friday’s action HAS caused the indicator to move below its trigger line. The trigger line is in the process of turning down but as of Friday’s close it is still very slightly pointing upwards. At the present time this momentum indicator is just giving us the very early initial indications of reducing strength, from the long term perspective. The volume indicator remains very much positive and well above its positive trigger line. On the long term the rating remains BULLISH.
INTERMEDIATE TERM
The FAN Principle trend lines shown last week took almost 5 months to fully develop. As such I consider the lines as intermediate term indicators. With the breaking of that third FAN trend line (i.e. a close below the line) we now have one indicator that gives us a bearish intermediate term signal. As this was a “blow-off” line the break is very often accurate. What does it foretell? Well, basically that we are into a declining market ahead. As this is an intermediate term signal I would not consider it a death sign for the long term but just a rough ride for the next few weeks, at the least. To go beyond that we would have to wait for further on going indicators.
The (Merv’s) FAN Principle provides a reversal signal very, very close to the reversal top. It is one of very few indicators that does so. It is not perfect but one would be very foolish to go counter to its message, at least until the signal is nullified by a move to new highs in a short period of time.
As for the normal intermediate term indicators, they are still mostly positive. The FAN Principle signal is normally so far ahead of the usual indicator one might wonder about the value of the usual indicators. Well, we do not get a FAN Principle pattern very often so we have to go with the next best. One should be watching that the usual indicators are starting to move towards the same signal already given by the FAN.
The gold price remains well above its positive intermediate term moving average line but they are starting to get closer to each other. The momentum indicator had moved into its overbought zone during the week, started to level off on Thursday and dropped below its overbought line on Friday. It also dropped below its trigger line and the trigger has turned downward. So, from a strength standpoint the indications are that the strength is decreasing, although still positive. The volume indicator remains positive and above its positive trigger line. The intermediate term rating remains BULLISH at this time.
SHORT TERM
Friday’s action, although scary, has not changed the picture much as far as the normal indicators are concerned. We see how far above the intermediate term moving average line that the short term line is. Still far from confirming an intermediate term reversal. The same is true as far as the distance between the very short term and short term lines are, for short term reversal confirmation.
On the short term we have the price of gold dropping below the short term moving average line and the line turning towards the negative but not quite there yet. The momentum indicator has dropped below its trigger and the trigger line has turned downward but the momentum itself is still in its positive zone, for another day or so. The short term rating has started to move towards the bearish but not quite yet. It has gone to the – NEUTRAL level today.
Two interesting points about this week’s short term chart. First is the short term momentum indicator. As we see, as the price rose to new highs during the week the strength of such move was diminishing. We ended with a short term negative divergence resulting in the plunge of Friday. The second feature is the daily volume action. Over the past month the volume has been steadily improving as the price rose. On most of the days the daily volume was in excess of the short term (15 day) average volume (red line). This past week the daily volume was very low as the price continued to move higher. Again, another sign of weakness in the price move to new highs. One can never tell ahead of time when such indications prove accurate but given such warning signs one might restrict ones actions until such signs either are negated or proven to be accurate.
SILVER
First of all that silver P&F chart shown here two weeks ago is still nowhere in trouble of reversing. It has now gone through its first two projections and was on its way to the next, at $24.00.
Although silver is showing weakness and has a decidedly negative divergence in its intermediate term momentum indicator it has not yet broken its up trend line from the late Oct low, as has gold. In addition, we do not have a FAN Principle set of trend lines but the primary up trend line from the July low, which started the FAN trends in gold, is more of a basic up trend line with three lows at its support, the July low, the August low and the late October low. Although we do have a short term up trend line from the Oct low the one to watch would be this primary one.
Without going into details the indicators and ratings for silver are very much similar to those of gold so one can go to the gold commentary to see what is happening to silver.
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Think positive. |
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redneck
1000+ Penny Miser Member
1273 Posts |
Posted - 12/05/2009 : 23:44:03
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Nothing has changed.
The underlining problems with the economy still exist.
Gold and silver will continue to rise as our currency steadily depreciates everyday.
People around the world are tired of carrying our debt and are buying
physical gold and silver instead of the dollar or the other fiat currency's, creating a shortage of physical pm's.
Fridays large correction and losses were triggered by investors stop losses kicking in.
The only thing traded was paper, gold and silver ETF's not physical pm's.
The employment report was probably fudged to stop the hemorrhaging of the dollar.
Not to mention,Comex manipulates the market cause they can...
Analysts and marketing firms make up $hit to read so they can justify selling and charging people for their opinion. Most are guessing like the rest of us and don't know squat...
Until we and or the government take steps to correct the faults in the way we run our economy and political system,things will only get worse.
Pm's and other commodities will steadily increase.
Gold Blow Off - "Rally in for Rough Sailing Ahead"
I don't think so...
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brian0918
Penny Collector Member
USA
315 Posts |
Posted - 12/06/2009 : 08:05:54
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I am convinced a magic turnaround that results in a long-term rising dollar and dwindling gold is impossible. It would imply a contradiction - that printing money doesn't result in inflation, that one can continually borrow without requirement to pay back, that our bubble can be continually blown up and re-blown up and it will never burst.
A deep recession or depression, or hyperinflation will be the only signs for me that a true recovery has occurred. As it stands, our "recession" did not lead to any more savings and less spending - so it was not a recession. And our "recovery" has not lead to job creation, so it is not a recovery.
The more times we try to inflate this bubble, and the longer we delay the inevitable, the worse it is going to be when the bubble actually does burst - which it will. |
"The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master." -- Ayn Rand
Searched: $2230 Nickels; Liberty: 1; Buffalo: 4; War: 20; 2009: 2; 2010D: 8 |
Edited by - brian0918 on 12/06/2009 08:07:33 |
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Country
1000+ Penny Miser Member
USA
3121 Posts |
Posted - 12/06/2009 : 08:38:07
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Markets do what markets do. I am convinced that PMs are in a BULL market. BULL markets are characterized by long periods of grinding ever higher, with periodic short sharp corrections thereby relieving overbought conditions. The corrections in a BULL market are always violent, but do not last long. Investors with strong hands (those with their own personal finances in good shape) and available CASH should BUY when the sharp corrections occur. I wouldn't mind seeing PMs go down a little more so that I can BUY more at a lower price. As some of the public offers PMs at a discount during BULL market corrections, take advantage of the opportunity by BUYing their PMs.  Look for PMs at a discount during a correction; do not hesitate to BUY when you find good deals. Stay the course because as you know, the fundamentals have not changed. Do not let prognosticators and chartists scare you so that you hesitate from BUYing PMs when you should. |
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Dalsuh
Penny Hoarding Member
USA
757 Posts |
Posted - 12/07/2009 : 15:44:41
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quote:
Originally posted by Country
Markets do what markets do. I am convinced that PMs are in a BULL market. BULL markets are characterized by long periods of grinding ever higher, with periodic short sharp corrections thereby relieving overbought conditions. The corrections in a BULL market are always violent, but do not last long. Investors with strong hands (those with their own personal finances in good shape) and available CASH should BUY when the sharp corrections occur. I wouldn't mind seeing PMs go down a little more so that I can BUY more at a lower price. As some of the public offers PMs at a discount during BULL market corrections, take advantage of the opportunity by BUYing their PMs. Look for PMs at a discount during a correction; do not hesitate to BUY when you find good deals. Stay the course because as you know, the fundamentals have not changed. Do not let prognosticators and chartists scare you so that you hesitate from BUYing PMs when you should.
I agree with you. I've been waiting for a pullback eversince silver was at $12 earlier this year. |
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Gold Blow Off Rally in for Rough Sailing Ahead
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