Gold,Silver and Oil rises on weak Dollar

Crude Oil continued to make new highs for the year as focus has switched to the signs of pickup in demand from Asia combined with fears about inflation.

The continued weak economic outlook in Europe and the U.S. and subsequent drop in demand has been the main focus for the bears over the last few months. However crude has now rallied nearly 100% from the January lows and many are beginning to adjust their outlook.

OPEC at their meeting in Vienna refrained from further production cuts, something that is currently difficult to do as some members has been cheating and producing more. Instead they switched to verbal intervention as Saudi Arabia said that the global economy can handle a $75-80 Oil price as they saw demand picking up most notably in Asia. Front month Crude Oil broke above 200 day moving average at $62.18 and this strong technical picture helped drive prices above $65 this week

Up until recently the main factor driving Oil prices higher were the support from rallying stock markets combined with the weaker dollar.  This last move however has happened without the support from the U.S. stock market as no new highs has been seen for over two weeks now.

What has been seen is a rally in government bond yields as traders continue to sell bonds on the basis that yields could continue to rise as governments are struggling to finance ever increasing budget deficits. This week US 10 year yields rose to 3.71%, a level last seen in November 2008 long before Central Banks began Quantitative Easing.

Rising bond yields has unnerved investors and the subsequent risk of a dollar collapse or reemerging inflation are driving investors into commodities.

Technically the rally in Crude Oil is now well established and short sellers have got to be patient. With the break above $62.18 traders now look for a move back to the November high of $71.77 followed by the 38.2% retracement at $76.30.

On the downside $62.25 needs to give way before talk of a correction can begin followed by major support at $59.50. One major word of caution is the RSI level which indicates the market is overbought and the risk of a downside correction could be happening soon. 

I will be keeping an eye on the S&P 500 index which is currently stuck between 200 day moving average resistance at 930.50 and strong support at $885. Continued rise in bond yields and subsequent dollar weakness will be supportive for commodities.

Meanwhile precious metals continue to be driven higher by some of the already mentioned factors. Silver is heading for its biggest monthly gain in 22 years and Gold is back to a three month high with $1,010 again coming into play.

Flows into ETF Gold funds has not increased during the week which leaves us a little concerned about the sustainability of this rally. In the near term however the dominant factor behind moves in Gold will be moves in the US dollar which to certain extend is driven by movements in bond yields.

A further weakening of the dollar combined with geopolitical risks out of North Korea may revive investment demand for Gold and take it back towards the February high at $1010.

CNBC Report by Bill McLaren – 22 May 09

LET’S LOOK AT THE S&P 500 INDEX DAILY CHART
 

Last interview I indicated the rally may have exhausted into the 60 day cycle.  If that were the case the Key to this strong advance was the number of days and the number of points to the decline.  I indicated if the index exceeded 3 days down it could indicate the uptrend was complete and a downtrend of some sort would take place.  The critical support is 875 and that has still held but the index traded down 5 days.  Although that 5^th day down was just marginally lower.  It has rallied three days and remember the normal counter trend within a trend is 1 to 4 days and this rally failed at 3 days so there could be a lower high in place and the start of a downtrend.  The support below 875 is 863 and very important 831 down to 826.  The 863 support is ¼ of the range up and keeps the uptrend intact so for the bears that is a very important level to be broken.

The next important time window is 90 calendar days from low around the 5^th of June. If the index doesn’t get any legs down it is very likely the index would move sideways into that time window and bring in an important high after a 30 day period of distribution.  If the index doesn’t trend down from here but moves on the side into the first week in June that could be the end of the move up and with 30 days of distribution would represent a very bearish picture.      

NOW LET’S LOOK AT THE US DOLLAR INDEX MONTHLY CHART

The index rallied up from the “false break” low and moved to our forecasted price level of between 1/3 and 3/8 of the last range down.  This level keeps the downtrend intact.  I noted a year ago that countries would attempt to debase their currencies in an attempt to gain a competitive advantage to revive their economies.  The key support on the monthly chart is the 2004 low.  The large amount of volatility the previous 6 months is an indication of a top so there could be a test of the 2008 low or a marginal new low.

NOW LET’S LOOK AT THE DAILY CHART

The index is now in a capitulation style of trend or panic style of downtrend.  This is clear due to the “space” that occurred between the 3 day rally high and the previous low.   The key support is not only the price of the December 2008 low but is also the price of the December 2004 low.  There is a very strong time cycle present that indicates the follow dates can produce a strong vibration in “time.”  The next is June 2^nd and June 8^th – the 8^th is very significant at 96 days from high.  Then June 20, July 8 and the expiration of the cycle on July 26. 

Source: McLaren Report

Broader Market Technical Analysis Update

by Roy Martens

The big picture hasn’t changed much this past month. The most surprising news, at least for the ones in the dark, was that China is hoarding Gold. Their reserves have risen a lot and they intend to expand their stockpile even further. Although this is very good news for Gold in the long run it didn’t really have a big impact on the Gold price last month, which is kind of surprising.

Such news is huge because the monetary reserves of China are enormous and although they say they will not shift their reserves into Gold at this time, I wonder if they will still hold that position if the dollar should tank.

Most likely this positive news was put aside by the announcement that the IMF intends to sell a lot of its Gold in order to raise cash and support the various countries that are in trouble, which should have a negative impact. We, however, have to look past this negative force for Gold because once the Gold reserves of the IMF (and other Central Banks) are gone there is nothing left to cap the price of Gold!

Due to the selling of the IMF ,Gold could suffer in the short term but it is my opinion that this fall (should it happen) will be a very good entry level for people that don’t already own the yellow metal.

As the Gold chart will show from a technical point of view, Gold is currently at an important stage and this upcoming month could be the set up for a rise to the highs or a fall to retest the $700 level (Impact of IMF selling Gold).

Whatever the outcome, Gold bulls are certain that Gold will reclaim its power further down the road. Will China be the only one to see the light? I don’t think so, there will be many other countries that will follow in China’s footsteps and I wouldn’t be surprised if a few of them, for example the other BRIC (Brazil, Russia, India) countries are already doing the same as China.

All charts are courtesy of Stockcharts.com

GOLD

The picture for Gold hasn’t changed much this last month. The flag pattern is still intact.

However, this pattern can’t continue for much longer because it will get too big to remain a valid flag, rather, it will then change into a channel. For now the blue lines are the most important ones to watch. They have to support Gold together with the 34 w. MA at $859.

If this level fails we can brace ourselves for a big fall, because the $700 will then be the next target again. As long as the $850 holds we expect Gold to break out of the flag pattern and start a new run at the highs.

SILVER

The Silver chart remains fairly positive. The flag pattern is still intact and completion doesn’t seem that far off.

The current correction wave could be a wave 2 but it is still too early to tell so this EW count isn’t valid yet. The chart is improving further with the 24 w. MA starting to curl up in support of an upcoming move. This move could be the wave 3 higher triggered by a breakout from the pattern.

The RSI and MACD are in perfect position to move higher and a new buy signal in the DMI (cross of buying power over selling power) will follow quickly if Silver moves higher from here on.

OIL

Oil is taking a breather after the first breakout attempt failed. It successfully re-tested the

17 w. MA for support and is moving higher again towards the resistance zone and the 34 w. MA.

The 17 w. MA is rising and should support Oil in the upcoming attempt to break the heavy resistance zone. If Oil succeeds it will trigger a huge buy signal because it will automatically mean a break above the 34 w. MA, a new LT buy signal. The first target after a breakout will be the $80 level ($78 is a 38.2% monthly fibo level shown in last month’s chart).

The technical conditions are improving slowly but are still in negative territory (RSI, MACD) while the selling power remains in charge, meaning that the current move higher is still ‘just’ a correction in the ruling downtrend.

USD

The Bulls are doing a good job supporting the USD. They have manage dto keep it above the 34 w. MA and the uptrend is still very much intact.

The downward pressure is still there and keeps building so the bulls aren’t out of the woods yet. As long as the 34 w. MA holds firm the bulls remain in the driver seat, but once it is taken out we will see a big sell signal and a trigger for a huge fall towards the 72 level.

The technical conditions are still positive but this can change very quickly. The RSI is a whisker away from triggering a sell signal and the MACD is on its way towards the 0 line. This upcoming month will be very interesting to watch.

COPPER

The chart for Copper is coming along as expected and the presented EW count fits nicely into the monthly chart that was shown last month.

The technical conditions have improved further and are in perfect position to get this wave 5 underway. The RSI is back above the 50 level and should start rising from here, the buying power in the DMI is trying to take over and the MACD is steadily rising towards the 0 line and the magenta resistance line.

If copper breaks above the resistance zone the indicators all turn positive at once and could trigger a very big move higher. The $300 level could then come within reach very fast.

Bespoke’s Commodity Snapshot

Below we provide the year to date change of ten major commodities.  As shown, copper is up the most in 2009 at 54.3%, followed by orange juice (21.81%), oil (18.61%), and platinum (17.71%).  While platinum is up 17.71%, gold is up just 0.84%.  Last year, platinum traded down to a 1 to 1 ratio with gold, even though the metal is much rarer than gold.  So far this year, however, platinum is diverging from gold on the upside once again.  Natural gas continues to be the big loser with a decline of 37.23% year to date.

Below we provide our trading range charts of the commodities highlighted above.  The green shading represents between 2 standard deviations above and below the commodity’s 50-day moving average.  When the price moves outside of this green shading, the commodity is considered overbought or oversold.  Oil is pretty close to the top of its trading range, and the last time it moved above the green shading, it pulled back pretty quickly.  Natural gas is the closest to oversold territory and continues to trend downward.  Gold, silver, and platinum have broken their uptrends recently and are approaching the bottom of their trading ranges.  Copper, corn, wheat, orange juice, and coffee are closer to the top of their range than the bottom.

Source: Bespoken Reasearch

Loss Control from Stocks and CFDs, too Forex.

Suppose you have $5000 to trade with, and you lose 50% of this amount. How much money in percentage terms do you have to make to breakeven on your next trade? If you automatically said 50%, this is incorrect. You need to make 100% on your remaining $2500, to make up the lost $2500, and break-even! Things are never as intuitive as they first appear. This table emphasizes the importance of keeping your losses small so that you can recover and continue to trade.

If you lose 25% of your account, you must make 33.3% profit on the remaining equity, simply to break-even. Keep your total equity drawdown to less than 20% and you have a chance of surviving in the sharemarket. Trading is not about avoiding risk – it is about managing risk.

Types of Stops

An initial stop is designed to protect your capital. Even successful traders find that they only make winning trades around 50% of the time. As long as the dollars gained outweigh the dollars lost, then you will be profitable, even if your hit-rate is quite low.

A breakeven stop will help lock in a no-loss trade. This type of stop is implemented once a trade has begun to co-operate and there is now little threat of your initial stop being hit. At least when you have moved your stop to breakeven, there is a chance that you will end up with a profitable trade. Especially with the application of leverage, it is important to move your stop to breakeven as soon as reasonably possible. This will minimise the potential drawdown of your account.

Trailing stops are designed to protect your profit. Once the trade has trended strongly in the expected direction, you can follow the trend by moving your stop. You could also decide to extract money from the position if the option hits your profit target. I only use profit targets for option and warrant trades, not for share trades. Profit targets tend to cap available profits. Learn to protect your profits as well as protecting your initial capital and you will be well on the way to trading effectively.

Crude Oil and Gold

With Crude Oil and Gold being in the spotlight last week, especially against purchasing news out of china, we still need to keep our feet firmly planted on the ground as we take a look at the facts.

Looking at the raw data on Crude Oil provided by the EIA, it is very hard to be supportive of a bullish price action for the near term.  Crude Oil, Distillate’s, Gasoline and Propane stocks all reflect a much higher cyclical average than previously seen for this time of the year.  This is underpinned by above average production level and Crude Oil days of supply.

Taking this into consideration, these types of builds would not be a cause for concern, provided of course, that we are in a situation where demand is on the increase.  According to the IEA, “Global demand is now forecast at 83.4 million barrels per day, 2.4 million less than 2008. The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010″. 

And even judging by the short term movements in demand, there is really nothing to suggest an increase in the present environment.  After all, China’s Crude Oil imports did fall by 5.5% from last year and their Gasoline imports being virtually none.

The recent price action paints a slightly different picture as we approach the top of the range for this year’s prices in WTI. Having seen the sharp rejection of the downside this week, good discipline will be needed in approaching any shorts.  But it is really hard to see why we should be anything but short, targeting a correction in prices over the next couple of weeks towards $41.00.

The Gold price action is very similar to that of Crude Oil over the past week.  However, there too, the upside does seem to be fairly limited.  Much of the upside coming on the back of news saying that China had increased their reserves by 76% since 2003.  I am slightly skeptical about all this talk, as to some extent it sounds like a bid to talk up the market and I am still of the persuasion that no one country is able to buck the market.

We need to remember that we are trading far from the lows in stocks markets, and even when the carnage on equities was at its bleakest, we failed to break higher ground in Gold.  In saying that, it brings to questions whether Gold should carry a high weighting in a general market portfolio.  With little upside potential in Gold, I still believe that Gold at 780.00 remains a realistic target in the near term.

In general, I think in our current market environment, keeping it real and sticking to the facts remains the prudent strategy.

Stock Market Trading Plan

A trading plan will not guarantee your success in the markets, but a good plan will enable you to work methodically toward your trading goals while reviewing on a regular basis what is working and what is not. It will act as a roadmap for your trading journey. It will enable you to respond positively and constructively no matter what happens with your individual trades. And, most importantly, it will help you control the only thing a trader can control: his or her own actions.Finally, trading is a business. It can be a fascinating and sometimes thrilling business, but in the end it is a business. A trading plan helps you treat it as a business.

Successful trading begins with a winning trading plan. It’s as simple as that. If you develop a well-conceived trading plan to guide your actions in the market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul.

Here are some important elements of a trading plan.

1. Why am I trading? What are my goals?

The answers to these questions might seem obvious, but they usually are not. Take some time to ask them of yourself, and seriously consider the answers. You may be surprised by what you learn. And whatever the answers, you will have a clearer picture going forward of what this enterprise means to you, and that will help you survive any rough patches.

2. What markets am I going to trade and why?

It is often best to specialize, especially for beginning stock market traders. Many pros make a great living trading the same stock day every single day for years. Choose a market that is appropriate for your experience level and trading style. Consider other factors such as available margin, volatility and liquidity.

3. What is the concept or philosophy behind your trading methodology?

Your trading system must have a concept behind it. Whether you are a value investor like Warren Buffet or a trend trader like George Soros, you should understand why you are doing what you are doing, how your beliefs about the markets define what you will do as a trader.

4. What will be your specific method?

In other words, specifically how will you execute your trading ideas? Will you buy breakouts or pullbacks? Buy oversold or sell overbought? Or will you use specific technical setups such as moving-average crossovers or another indicator-based strategy? Under exactly what conditions will you enter? When will you know to exit?

5. How much money will you risk on any single trade? On trading in general?

This is critical. Of course, start small. But just as importantly, have a plan in place for how much you will risk, emotions don’t cloud your judgment when the time comes. The key is to find an allocation that doesn’t cause any stress but still makes the trade worthwhile financially. One of the biggest problems with newer traders is that they are trading way too big in relation to their account size. Like when you are forex trading. Trading forex at 50-1 leverage. Yes, you can do it, but that doesn’t make it a good idea.

6. What will my trading rules be?

This is also critical. Your trading rules include entry and exit rules, rules governing maximum daily, weekly or monthly losses, maximum risk on any given trade, the maximum number of trades per week, etc., etc. These rules enforce discipline and keep you out of trouble. What price will enter at, what price will I will exit. Be discplined.

7. How will I record and evaluate my trading performance?

Allow me to repeat myself: This is critical. In fact, this might be the most important element of trading for new traders in the stock market. A new trader who evaluates his trades, winners and losers, in an effort to learn what works and what does not, will make quantum leaps forward in terms of ability and profitability. If you have a working trading plan and evaluate every single one of your trades after you have closed it you have already beaten 95% of the competition.

8. What are my rules for managing profits?

What’s the problem with profits? Well, believe it or not there is one, and it’s a serious one. It’s called euphoria, and it clouds the judgment perhaps more than any other emotion related to trading. Start piling up the profits for the first time and it won’t be long before you are convinced you are king of the world. About 30 seconds later you’ll be broke, following a series of unwise and exceedingly risky trades. So have a plan for protecting closed profits when you have reached your goals for the week or the month. Don’t give them all back.

9. How will I reward myself for following my trading plan?

Don’t leave this out. Following your trading plan will bring rewards in the form of profits, but you should also consciously reward yourself for doing so because it is such an important part of successful trading. So if you finish the week or the month (or even the day) without having broken any of your trading rules, find a way to reward yourself. You deserve it. You are in rare company.

If you follow your plan you are improving your chances of becoming sucessful stock market or forex trader.

Source:singapore trader report

Money Gold and Silver Report: Market Wrap

by Douglas V. Gnazzo

Gold

Gold closed down -1.62% at $878.80 (continuous contract). During the week it hit an intraday low of 865.00. So far, the important $850.00 price level has held. From last week’s report:

$850 is a key support level, as it is the high of the last bull market, and it marks a significant inflection point for the present bull market. It is important for price to remain above this level.

MACD has made a negative crossover, which suggests more downside action to come. It appears that $850 is going to be tested.

The weekly chart below shows a possible inverse head & shoulders formation in the making.

Silver

Silver was down -3.29% for the week, closing at $12.34. Silver has broken its bottom trend line and appears to be setting up to make a negative STO cross over. In last week’s report I said:

I have been bullish on silver and remain so, especially long term, however, I’m not thrilled about the recent action. What started out as a short term correction may be morphing into an intermediate term move.

Not only did silver break its lower trend line, but as the next charts shows, it looks like the STO indicator is rolling over and setting up for a negative cross. If this occurs it would suggest that lower prices lie ahead.

Gold and Gold Stocks Riding a Thin Line

by Chris Vermeulen

This week in gold we have seen prices drop lower creating a lower low. This is generally not a good sign if we want to see higher prices in bullion and gold stocks. That being said, a lot of traders are now starting to short gold because is has filling its gap lower which occurred Monday at the open due to over night commodity prices.

I am refraining from this short term play because of several things:

1. Gold is still within its support zone and could reverse any day
2. Although we have a lower low this pattern could very well be a 1-2-3 wave retrace
3. Stochastic Indicator for gold is starting to turn up indicating possibly stronger prices
4. Gold stocks are currently at a short term support level

GLD Gold Fund Trading Chart

Gold Bugs Index (Basket of Gold Stocks)

Technical Trading Conclusion:

The price of GLD has been retracing since February after making its big run from $70 to $98. We all know the market moves in zigs and zags and some bigger than others. And we all know that large moves always require some type of pause whether it’s a sharp pullback, flag, Pennant, wedge or 1-2-3 retrace before continuing in the previous direction. Only time will tell what gold will do next. We simply must manage our exposure and focus on trading low risk setups when the momentum is on our side.

5 Things to Do Before Trading

Here they are.

1. Understand your personal financial situation
2. Understand diversification
3. Select the right portfolio holder for you
4. Do all the research necessary
5. Realize that it will be a bumpy ride

Let me address them individually.

Understand your financial situation
I would actually say “financial and life” here.  Trading is part of your life, not sepeate from it. That is something you need to take into serious consideration. There is the obvious decision about how much money you can put to work in the market. On top of that you also have to think about how much time you can commit.

Understand diversification
For traders this is a bit different than for investors. Diversification in investing is attempting to keep from having all of your money negatively impacted by one set of circumstances, like a downturn in a certain sector. Because traders are in and out of positions relatively frequently, this isn’t as much of an issue. Diversification in trading is more about making sure you have sufficient trading opportunities. Generally speaking, the longer your trading timeframe the more markets and/or securities you need to play.

Select the right portfolio holder
In investing this can mean any number of things from brokers to mutual fund companies to DRIP managers. There are a number of considerations involved there. In trading it really comes down to just the broker. You need to find a broker that suits your specific needs and with which you feel comfortable. By all means seek information and feedback, but in this end this is a decision that only you can make.

Do all the research necessary
Trading is not something you can just jump into and expect to do well. It’s pretty much like any other activity worth pursuing. It takes time to get good at trading. It takes work and study and practice. At times trading will be frustrating and in the beginning it can most definitely be overwhelming with all the different markets, instruments, and ways to trade them. Realize going in that you’re going to have to put forth considerable time and effort.

Realize that it will be a bumpy ride
This one pretty much speaks for itself. There have been all kinds of adjectives used to describe trading and dozens of metaphors applied to it. While it may not make things better, going into trading with the realization that there are going to be any number of ups and downs can help make riding them out a bit easier.

Now I’m not going to say these are the five things to do before trading, but they are among the things you should do before taking the plunge.

Gold Corrects — Buying Opportunity Coming?

by Roy Martens

The first quarter of the year has passed and it was a volatile one for the markets in general.

They plunged into an abyss straight out of the gate. But last month we saw a powerful rebound. Has the bottom for this horrible bear market been set?

Only the future will tell exactly what will happen to the markets. But to me it still seems that there’s a lot more pain to suffer over the coming months maybe even years. Despite the recent concerted stimulus decisions of the governments of the G20, I’m afraid that it will get a lot worse again after this dead cat bounce is over.

All hopes are set for the outcome of these new plans that the G20 have taken, the question we have to ask is, will these proposed measures really do the job? In our view, as long as the financial system is in bad shape it will not. The banks have to become healthy again with clean balance sheets before they can jumpstart the economy again.

Another very important issue is the level of the consumer debt, which is horrible and will only get worse when the layoffs continue at the current pace. Last Friday we saw the (official) unemployment figure in the US rise to 8.5%, a number not seen since the early Eighties. My expectation is that this rate will get still worse during the year maybe even hitting 10% in 2010 because the layoffs are continuing at a very rapid pace.

Every investor will be eying the upcoming earnings season, especially the guidance for the rest of the year and 2010. This guidance could hand in a very nasty surprise for the bulls because the US economy is a consumer economy where private consumption makes up 70% of the GDP.

But these consumers need money to spend and that’s just what they don’t have because many of them have already maxed out their credit cards and with the uncertainty of employment they will try to save every penny they can to at least make basic ends meet. Consumer spending is likely to dry up even further

This will be reflected in the upcoming company guidance bringing a lot of them in trouble when consumer spending deteriorates further. This will in its turn hurt the banks again which have to write off a lot of “bad loans” to companies, delivering another heavy blow to their balance sheets.

The current bounce in the markets is presenting a chance to raise some cash or at least get out at relatively high levels. With the general markets rising chances are there that the precious metals (and their stocks) will suffer a bit, thus handing us a perfect opportunity to pick up Gold, Silver and related stocks should this decline materializes.

All charts are courtesy of Stockcharts.com

GOLD

The weekly gold chart is presenting a mixed picture with possible positive or negative outcomes.

Negative is the double top pattern with negative divergence in the RSI and MACD, suggesting an imminent decline with targets at the rising blue line at $850 and the blue support zone at $700.

Positive is the possible formation of a flag pattern, similar to the one formed in 2008. If this pattern becomes valid a possible price target can be calculated at $1,200.

For now the positive outlook is preferred, at least as long as Gold remains above both the 17 and 34 w. MA. A decisive break below the 17 w. MA is a first warning sign that the positive outlook is in jeopardy.

SILVER

The weekly chart for Silver is showing a bullish outlook, provided the presented EW count (ABC, abc) is correct.

The pattern formed from the resistance level is taking the shape of a flag pattern which is a continuation pattern usually forming halfway during a move thus suggesting a price target of $19 to $20.

This outlook is valid as long as Silver holds above the MAs. However, should Silver break below them the presented EW count maybe adjusted because the possibility exists that this could turn into a 5 wave down. With A=1, B=2, C=3 and the current high at the resistance level being 4. Then there could be a wave 5 down outstanding with targets at $7 and $6.

OIL

This long term chart is perfectly showing the strong advance Oil made over the past years and the current fall from the high has bottomed or is bottoming at the horizontal support around $40.

If the presented EW count is valid the current bottom could be wave 2 of a higher order (or the A with B in progress and C yet to come). Waves 2 tend to retrace a lot of the gains made by waves 1 and in this perspective the current wave 2 bottom would fit perfectly.

The advance for oil began at $10 reaching a high of $147, the 76.4 % fibo level of this rise can be found at $42, so the current lows at $35 would fit within such a decline.

As long as the support level holds we can expect Oil to rise back towards the presented magenta fibo levels, with the 38.2% level as the most common for a (dead cat?) bounce in a strong decline. After such a bounce we should see another decline towards the $40 (a new wave 2) but first we have to see where this bounce takes Oil to.

USD

The weekly dollar chart shows that there might be trouble ahead for the greenback.

We can see that the last high wasn’t confirmed with higher highs in the RSI and MACD thus creating negative divergence with the price movement. Such divergence is almost always an early warning sign that a change in the trend is coming. In this case a new negative trend could be next. Confirmation of such a change in the trend will follow when the dollar breaks below the 17w and later 34 w. MA.

The last line of defence is at the blue support zone. A break hereof will most likely lead to much lower levels, a retest of the all time low at 72 for example.

The coming month will give us more clues on what we can expect later on this year.

COPPER

What a rise and what a fall we can witness in the chart.

The bull run started in 2001 at $61 and lasted until around the middle of 2008 when Copper touched the $408 level, a rise of over 550%. If we take a closer look at this rise from a fibo perspective we can calculate that the current fall that bottomed at $140 (closing base on the monthly chart) is almost a perfect 76.4% fibo retracement (at $143) of this rise.

Because waves 2 tend to retrace a lot of gained ground in waves 1, this fall could qualify as a possible wave 2 down. If this is the case we should see a wave 3 higher in the coming years. Wave 3 could take Copper to highs never imagined. Fibo level 162% of wave 1 triggers a price target of just above $700 for this wave 3!!

Although such a level seems impossible now, it could easily be reached if we experience a long period of hyperinflation down the road, which isn’t that imaginary with the current money creation going on in the world.

Gold Approaching 200-Day Moving Average

With a decline of 3% today, gold is on the verge of testing its 200-day moving average for the first time since early January.  With the exception of a one-day spike on the day the Fed said it would buy US Treasuries (3/18), gold has pretty much traded down in a straight line.  Even though most observers said the Fed’s action would lead to inflation down the road, the price of gold is now lower today than it was before the announcement. 

Source: Bespoken Research

Global Asset Allocation Summit

Honest Money Gold and Silver Report: Market Wrap

Gold

A key pivot point resides above near $945.00.

Silver

Silver has been acting a bit better than gold as of late. GLD corrected below its 50% level but SLV hasn’t yet to come even close to its 50% level.

Part of the reason for this however, is that silver fell much further than gold did from the long term highs, and thus had a lot more room to move back up into.

Silver’s daily chart shows it bumping into overhead resistance and backing off. Its 50 ma offers good support, and below that its rising trend line does as well.

To the upside, $13.55 and 13.75 offer immediate overhead resistance levels that would be bullish if taken out, followed by $14.00.

by Douglas V. Gnazzo

Gold testing downside support

“Just one week after the Federal Reserve devalued the dollar by announcing that they would start buying US Treasuries, one would think gold would be in rally mode and in overbought territory. However, while gold had an initial spike following the Fed’s announcement, since then the yellow metal has come back down to earth. Gold is currently close to testing its 50-day moving average, which is a level that has provided reasonable support over the last few months. If that level fails to hold, the next level of support is around its 200-day moving average at 859.”

Source: Bespoken Research

Gold Bounces Off Support Again and Internals Look Strong

By Chris Vermeulen

Gold bounces off support again today with some indicators pointing to much higher prices.

GLD Gold ETF Fund – Daily Trading Chart

This week gold has been pulling back after last week’s massive one day rally. Hopefully that rally was not a one-day wonder but rather a sign that smart money is still moving into gold and not most retail traders trying to make a quick buck.

Gold Stocks/Gold Bullion Ratio – Weekly Chart

This chart shows we now have a clean breakout, which is extremely bullish for the price of gold. This signal is not fully confirmed until we have the closing price Friday at 4pm ET.

GDX Gold Miner Stocks Fund – Daily Trading Chart

This chart shows a nice rally to the February resistance level with a small bull flag and a daily close above resistance. Wednesday’s price action is very bullish but our support trend line is much to steep for gold stocks to maintain. Those with a high-risk appetite may like this, but I prefer to wait for a more conservative setup.

The USD is Half Way Done It’s Move

The Dollar broke down sharply a few weeks ago and is now forming a bear flag chart pattern. This pattern generally forms at the half way point of a move. If the trend continues, we can expect to see much lower prices for the USD in the next 1-2 weeks.

Gold Trading Conclusion:

While gold bullion is looking a little top heavy, the internals like gold stocks and the USD are shouting the opposite. Gold is currently at support, which is generally a good place to add to positions. If the price of gold breaks down from here, there is a clean exit point, which is a daily candle close below the support level on the GLD gold fund chart.

Bespoke’s Commodity Snapshot

Trading Rules and Guidelines

Here are ten overriding principles that have survived the past five years, through bull and bear markets:

1. Always live to fight another day
2. Entries must have a statistical edge
3. Patience and discipline
4. Be a jellyfish (swim with the current)
5. Trade only liquid securities
6. Focus on trying to capture the middle 80% of a move
7. Know your exit points when you open a position (and stick to them!)
8. When in doubt, reduce position size by 50%
9. Limit losses to 2% of total equity for any single trade
10. Start each day with a clean financial and emotional slate

The above list is relatively generic, but it helped provide me with a framework for organizing how I would approach trading as a business, what strategies I should adopt, how those strategies should be executed, and ultimately defining what success should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even more important, I believe, is the process that one goes through in order to arrive at these rules and to make sure that as new market situations unfold and new blind spots are revealed, the rules and guidelines are enhanced to maximize the opportunity for the trader to continue to grow and develop.

Posted by Bill Luby

Successfully Using Gann Indicators

Successful using of Gann tools for finding and exploiting trading opportunities require good timing, talent and knowledge. But ones you are an expert they can offer you above average profits and can offer significant market knowledge as Gann indicators cover past, present and future market on a single screen. The basic requirements of successful Gann set are,

1. Determination of time-units. Gann studies (preferably) require squaring of time and price; this set up can give the 45 degree angle for 1×1 angle. If the chart is not properly scaled traders can’t draw lines based on angles; instead they can use ratios (e.g.: 2×1 angles indicate 2 unit of price movement for one unit of time).
2. Time periods. Although Gann indicators can be used to any time periods, they offer better results when used in intermediate time periods (weekly or 10-day charts).
3. Determination of highs or lows to draw lines. Traders can use recent highest high or lowest low to draw the lines. It would be better to use Fibonacci tools and pivot points to determine these line originating points.
4. Slops of lines. Gann lines should always be plotted to right side; downwards if from a high (resistance) and upwards if from a low (support). The most used slops are 8×1, 2×1, 1×1, 1×2 and 1×8. Market rotates according to ‘Rule of All Angles’, which is when one angle is broken then the price, moves to next angle.
5. Clustering with other indicators. Traders should use appropriate time indicators to get better results with Gann indicators. Fore example Fibonacci time zones and retracement levels are excellent tools to use in conjunction with Gann indicators to predict market movements for long time periods.

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