Technically Speaking with Burak
Mervyn Burak, CMT
Well, it was another one of those weeks in the gold markets that cause analysts to have headaches. After expecting the trend to continue higher, it goes down. The question is now "was the reaction serious, or what?" Let's step back and look at the action without getting hyper.
GOLD
The gold action started the week on a bad note, it then looked like it would recover but then turned down again and then stopped again. Boy, it's a good thing I'm not a drink'n man.
At the end of the week we ended somewhat lower than where we began, but on a positive note. The action on Friday had the feel of a one day reversal type of action. On the candlestick chart the action shows up as a "doji" where the open and close are basically the same price. This doji is positioned to provide a bullish reversal signal although frankly I could not find the exact pattern in my Candlestick chart file. One more day with action on the up side would give us a "morning doji star" pattern which is very bullish for short term. Don't you just love these candlestick chart pattern designations? But let's get back to simplicity.
The action took the price of gold below its short term moving average line on Thursday but recovered to just slightly below the line on Friday. The moving average line itself has turned into a horizontal line but still very slightly on the up side. Thursday's action also broke below the short term up trend line. Although Friday's action tried to get back above to indicate a false break, it was not able to do so. Short term price momentum, although weakening, is still in its positive zone while volume action continues to oh so slightly improve. As for the aggressive Stochastic Oscillator, it went deep inside its negative zone but not quite into the oversold level. However, Friday's action is suggesting the start of a recovery which would be validated in another day or two. And finally, the short term point and figure chart is still bullish but the recent downside action has suggested that the previous upsurge may be suspect. All in all, although the action seemed very negative during the week it had not yet reversed my short term analysis. Still bullish but wary.
As for the intermediate term, everything is still bullish with the price above its positive moving average line, the price momentum still positive and volume action just starting to strengthen. And of course, the price is still above that $430 support level. As for the long term, everything here is also still bullish.
U.S. Dollar Index
Except for the fact that we don't seem to have those beautiful sounding candlestick chart patterns to identify, the action by the US$ Index is almost a direct opposite to that of gold. Still mired in a bearish trend, the Index appears to be taking a breather. Nothing is suggesting a turn around yet although the short term indicators have moved very close to reversing themselves into the positive. A few more days of upside action is still needed for them to turn.
Gold Indices and Stocks
The AMEX Gold BUGS Index is still mired inside that huge wedge pattern mentioned a few weeks back. It will still be some time before the wedge will be broken indicating which direction this Index is destined for. However, from a short term perspective the Index is acting very much like gold is acting, only more negatively. The Index had a bad Friday, closing significantly below its short term moving average line turning the line slope negative in the process. The action has also decisively broken below the short term up trend line and below a short term support. Short term price momentum indicators are still very slightly in their positive zones but heading towards the negative. One or two more down days with this Index and the momentum will go negative. Despite this negativism the aggressive Stochastic Oscillator, although negative, is showing early signs of a turn. Despite a few positives I have gone bearish on the short term direction of the AMEX Gold BUGS Index. This might change quickly should the Index reverse and move above the moving average line.
As for the PLHX Gold & Silver Sector Index, considered somewhat of a higher "quality" than the AMEX Index, the action is similar but not quite as negative. I would rate it more in the neutral going on negative category than fully negative.
For the intermediate and long term, there is still no need to change my bullish prognosis for the Induces at this time.
The African gold Indices gained significant ground last week, unlike all the North American Indices (must be the exchange rate of the Rand). Once more the Merv's Gamb-Gold Index fell the most, predictably, but is still quite some distance above its previous Dec/03 and Nov/04 highs.
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
19 March 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. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE.
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 full name and home town.
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