Joe Nicholson (oroborean)
April 4, 2008
“With a potential negative crossover in the MACD possible for next week, gold could face increased selling pressure if it cannot clear the 5-week sma in short order. The long term prospects for precious metals continue to be favorable, but a little patience now could prevent a lot of frustration later.”
~Precious Points: Dear Prudence, March 29, 2008
The bearish MACD crossover described in the last update happened on Monday and the cascade of selling that is probably the most memorable event of the week came on Tuesday. Continuing to find resistance at the 5-week simple moving average, the downtrend on the weekly chart continues. Notice the ascent of the 50-week sma towards $800 in the chart below suggests strong support in that area, should selling intensify.
The daily chart is a bit more constructive with Friday’s close above the negatively-sloped 5-day sma, but resistance in the RSI, a zeroline break in MACD of the slow average, and the bearish cross of the 5-day below the 50-day sma all suggest gold has suffered significant technical damage.
The late week advances, fed by weak data and a sinking dollar, and Friday’s close above the 5-day sma, suggest a declining outlook for the U.S. economy going into earnings season. This update has expressed concern for months, however, that deterioration in the European economy, particularly as the Fed reaches the end of its rate-cutting campaign, could spell trouble for precious metals. As the Euro hovers close to all-time highs against the dollar, risk is clearly to the side of a reversal and further downside for gold and silver, even if relatively minor advances are seen intraweek.
The silver chart above is a mixed picture as recent gains have formed support in the RSI at December’s lows, but the glaring failure of the 5-day sma to cross bullishly over the 50-day confirms the downtrend. Elliott wave analysis suggests both gold and silver could continue their run, even produce new highs, without precluding steeper correction later in the summer. The obvious trend continues to be down, however, and perhaps explosively so in the short term before prices stabilize and technicals improve.
Despite the recent softness of precious metals, the updated chart above from last week shows the XAU continuing to outperform the broader market, but is still near the upper end of its channel. Because mining stocks have suffered along with other stocks during the credit crisis even as metal prices rose, valuations have become attractive in companies that have contained their production costs (perhaps with exposure to soaring base metal prices) and have increased production. Declining metals prices will put ongoing pressure on mining stocks in the near term, but excellent long term prospects abound.
TTC will close soon to new membership.
We originally thought we would close the doors to new retail in June or July, but I've decided to move that up closer to May 31, Memorial Day weekend. The opportunity to join the TTC community of traders is slipping away from retail investors. If you're really serious about trading learn more about what TTC has to offer and how to join now.
So, do you want to learn how to trade short term time frames? Would you like access to next week's charts posted in the weekly forum right now? Ten to twenty big picture charts are posted every weekend. If you feel the resources at TTC could help make you a better trader, don't forget that TTC will be closing its doors to new retail members on May 31, 2008. Institutional traders have become a major part of our membership and we're looking forward to making them our focus.
TTC is not like other forums, and if you're a retail trader/investor looking to improve your trading, you've never seen anything like our proprietary targets, indicators, real-time chat, and open educational discussions. But the only way to get in is to join before the lockout starts - once the doors close to retail members, we'll use a waiting list to accept new members from time to time, perhaps as often as quarterly, but only as often as we're able to accommodate them. Don't get locked out later, join now.
Have a profitable and safe week trading, and remember:
"Unbiased Elliott Wave works!"
Joe Nicholson (oroborean)
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