Gold Looking Good…Except, Except…

Before the holidays I could see a possible short-term rally coming in gold, which it did.  Now, it just looks like the rally may be over.  Technically, the rally continues and I can’t put my finger on it…but I just get this feeling that all is not rosy.  As a technician I follow the charts…but am on guard for a possible reversal of the short-term trend in the very near future.

This may be October all over again.  I am not a devotee of the Elliott Wave Theory but a devotee may just find meaning in the price action since the top in July/August.  It’s been a long time since I looked into the Elliott Wave. However, if memory serves me correctly I think that the Theory says that there is one more wave to lower levels. 

I will be keeping this commentary somewhat shorter than usual as I’m just recovering from three nights of power outage.  Two nights sleeping in the cold and one night finally smartening up and taking refuge at the local Holiday Inn.  I lived over a dozen years in California and don’t remember ever experiencing a power outage (earthquakes are something else).  As soon as I moved to Montreal I experienced the normal Quebec power situation, power outages.  This outage was caused by an ice storm and was unnerving in that it occurred at almost the same date as our Great Ice Storm of January 1998.  That ice storm lasted almost a week but the power outage lasted for 3 weeks before our power line was finally repaired.  Anyway, I’m deviating from the main topic.

From a long and intermediate-term the technical indicators are still all negative.  Although the gold price is still below its moving average lines in both cases the momentum indicators are above their trigger lines and heading towards their neutral levels (but still in the negative zone at present).  Consequently, from the intermediate and long-term perspective the ratings remain BEARISH.

The short-term is the only time period looking good at the present time.  Gold is above its positive moving average line and the short-term momentum indicator is above its trigger line and already in its positive zone.  From the technical standpoint the short-term rating remains BULLISH. 

Merv’s Gold And Silver 100 Index

Maybe one of the reasons I have this feeling that all is not well may be because of the potential pattern that my Index of 100 gold and silver stocks just may be in the process of forming.  We have all of the ingredients sugesting the formation of a bearish Head and Shoulder (H&S) top pattern.  We have the left shoulder in May, the head in August and the right shoulder in December.  The two shoulders have given us the “neckline” which is the solid red line.  All we now need to complete the H&S pattern is a reversal of trend with a move below the neckline.  Should that happen then this H&S pattern would give us a projection back to the lows of January. Presently, all this is a potential and not a sure thing.  CAUTION: Wait for the pattern to be completed before panicking.

At this time both the short and intermediate-term indicators are in sync.  The Index in both cases is above their respective positive moving average lines.  Both momentum indicators are in their positive zones and above their positive sloping trigger lines.  Both the short and intermediate-term are therefore rated as BULLISH. 

The long-term still has some more work to do before it becomes bullish…but is going in that direction.  Maybe in a week or two.  For now it is rated as – NEUTRAL heading towards a positive rating.

Looking at the overall performance of these 100 stocks their BULL/BEAR ratings look like this: short-term we have 93% positive and 3% negative, intermediate-term 75% positive and 13% negative and on the long-term 20% positive and 66% negative.  During the past week 92 of the stocks advanced, 5 declined and 3 remained unchanged.

Back To Retirement

This will be my last commentary as I have decided once more (the third time, I think) to retire.  I find I have been too distracted over these past many months from family and old friends.  However, knowing myself (as I have known myself for over 80 years) I just can’t give up the market cold…and therefore may from time to time come up with a commentary and have it posted here (web site administrator willing).  I think I can honestly say that the old EGO will not allow me to just go away quietly.

Readers are invited to view my Facebook page at https://facebook.com/merv.burak where I will probably post from time to time a brief sentence or paragraph on the markets (gold, energy, technology and markets in general).  However, nothing I post is meant to be a recommendation to buy or sell.  One should check with their broker or investment advisor before acting.

Merv. Burak