The GoldHeart Indicator was developed using the GOLD-EAGLE
Gold Fund Index (GEGFI). It shows when gold equities are in "oversold"
or "overbought" conditions. An oversold condition presents a timely
opportunity to add to share positions, while an overbought condition
presents the opportunity to take profits on trading positions.
Overbought conditions, or sell signals, occur when the indicator approaches
20 or below on the indicator chart. While oversold conditions, or buy signals,
occur when the indicator approaches 80 or above. These regions demonstrate
good correlation to future turning points in the gold equities market.
Ideally, buy and sell zones should be used to begin dollar cost averaging
in and out of positions. Examination of past GEGFI correlation with the
GoldHeart Indicator demonstrate reasonably reliable price reversal areas.
Consequently, the indicator should help investors to make more prudent
and timely buys and sells.
Current Interpretation: Brief bounce but continuing to loose ground.
At last update on the 5th GE indices appeared ST oversold and were due for a ST bounce that followed on 3/6-3/12. Unfortunately that bounce was weaker than hoped for and PMs now continue to struggle under constant attack to break them down and precipitate a major sell off at a LT Monthly overbought time-price point.
In this environment Gold metal appears to be holding up better than paper. You can see the recent change on the updated Gold/XAU ratio chart. Recently that ratio has been holding near neutral between overbought and oversold conditions, but has recently shifted toward a bias to shares that have been harder hit lately.
A look at the updated GEGFI and GESFI charts shows that the MT and LT Daily waves are all in correction/consolidation mode. Unfortunately, the Weekly and Monthly charts do not look any better.
I have been warning lately about my major concern involving the Monthly XAU wave that has now made a clear LT overbought turn. In this projection I consider the ongoing Daily March value projected into the Monthly March value. I consider what is being indicated is a possible LT trend top, at least possibly in controllable paper. Many markets are now showing similar LT overbought conditions all of which may be portending to a drop in paper in an oncoming recession. I think it's time to get physical now. Act defensively. GoldHeart (March 14, 2007)