As shown on the chart last week, gold is in a very short term rally mode, bouncing off an intermediate term up trend line (and a final Fan Principle support line). Don't get all excited yet. It still has a ways to go before one can declare it back on the bull track. It can rally up to the $460 level before hitting a wall of resistance, at the previous Fan trend line. Will it even get up that high? Ah! Mystery.
A short term point and figure chart suggests that an upside break might come once through $430 but with a projection only to the $442 level, nothing to bet your money on. This would be in the upper portion of a P&F resistance zone so, until much more strengthening is forthcoming, my bet is on a short move and a turn around. However, as a technician, I let the continuing trading action tell me from day to day what's going on and not try to tell gold where it should go.
From the intermediate term charts, we are still in a down trend with weak price momentum. The long term is interesting. Bouncing off a final (third) Fan trend line still suggests that a long term bear has not been verified. The latest gold price is just a hair below its long term moving average line with the moving average line slope still positive. BUT, the long term price momentum is negative and getting more so. Although the rating in the table is NEGative, there is some hope that things can turn around quickly (except for that dastardly NEG momentum).
U.S. Dollar
The US$ has been trying to rally from a 1995 support but the going is not easy. Although a short term P&F projection indicates a rally to the 86 level this would put it in the upper portion of a P&F resistance zone from which a reaction could be expected. The going is, however, getting more laborious and the reaction might come a lot sooner, like about now.
It is interesting to note that a long term support exists at the 78 level, the 1992 bottom. One might expect, or hope, that any further downside action will halt there. As indicated last week, the long term momentum has been strengthening so that a major turn around to the up side sometimes in the not to distant future would not be unexpected. In the mean time much more short and intermediate term fluctuations could occur.
Gold Indices
Most of the major gold indices had a good week. Despite this, nothing much has changed in their outlook from last week.
Merv's Gold Indices
Of the North American Indices only my Merv's Gamb-Gold Index had a decline on the week. Although 50% of the component stocks advanced in this Index, a couple had major declines which affected the Index value. It should be noted that the Merv's Indices are calculated based upon the average weekly performance of all the component stocks and not weighted heavily towards only a few as most other Indices are.
The gold stocks are in a short term rally. Looking through my data on the various Merv's Indices a good 56% of the stocks in the Merv's Gold & Silver 100 Index are short term POSitive while 62% of the stocks in the Merv's Qual-Gold Index are short term POSitive. This rally has not yet had an effect on the intermediate or long term where the POSitive ratings are in the neighborhood of only 10% to 20%. Much more work yet required to turn these around.
Reading the Info table
The intermediate and long term technical information table provides the latest weighted moving average (MA), price momentum (MOM), relative strength (RS) and an overall technical rating (RATE) of each component. A + or - symbol is provided to indicate if the indicator is gaining strength or losing strength.
Mervyn Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
merv.burak@hudsonaero.com
24 January 2005
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.
Although not normally available to the public, to obtain a copy of the latest weekly technical information on the component stocks of the various Merv's Gold indices, e-mail a request mentioning this Gold-Eagle offer. PLEASE provide at least your name and home town.