After seeing Grant's bearish posts on Gold, I felt tempted to share my daily Gold homework. I do not have an overarching long-term view on 'the barbarous relic at the moment - but I watch it daily for a potential short-term upswing of, say, about $50. If I can catch a third of that upswing, I'd be very happy.
The Weekly has retreated from an overbought level (above the upper channel line) to below value. The Impulse system had turned from Red to Green, before reversing back to Red last week. It often trembles like that at important bottoms.
If Gold trades above $892 this coming week, the weekly Impulse will trurn from Red to Blue, permitting buying.
The daily chart appears to be drawing an A-B-C bottom which we saw in a multitude of stocks earlier this year. If gold continue t decline for a day or two, and then its MACD-Histogram ticks up, it will complete a bullish divergence and give a powerful buy signal. This is why I am watching Gold closely these days.
Many thanks to Grant and other Spikers and SpikeTrade Members for very thought-provoking comments!
Alex
I was off during these last 4 days. I have just read all the interesting posts about GLD. I follow it closely on the daily, weekly and monthly time frames but rarely does it send to me clear signals.
ReplyDeleteTherefore, I analyze its movements in comparison with WTI crude oil and the USD which can send less ambiguous signals. GLD has an inverse correlation with the USD and is correlated to oil to some extend. There are economical explanations which bolster up such correlations.
Unfortunately, since the beginning of the year the correlation coefficient is 0.43 between UUP and GLD and it is just starting to be inverted again (-0.15 in April). It was -0.84 in 2008 and -0.87 in 2007. Same issue for GLD and OIL: -0.62 since the beginning of the year and -0.21 in April vs 0.95 in 2007 and 0.56 in 2008 (Note that OIL is an approximation of WTI because it didn’t follow it when there was a strong contango).
For the moment, I agree with the bearish monthly view. MACD has been negative since august 08 while prices have been above the EMAs for 4 months. It could go down to the lower limit of the sweet zone of the EMA13 around 81USD.
On the daily term, we could see an uptrend. XGD, the Canadian gold miners follow closely the movements of GOLD with a 0.75 correlation coeff. since the beginning of the year and 0.68 in April. Indeed, XGD has already its MACD in phase C and could draw a divergence soon if it goes under 16.64CAD. With an average daily ATR over the last 8 days of 0.66CAD, it could reach it within a day or two.
I find GOLD particularly tricky to follow and so I thank you for sharing your opinions about it.
Have a nice evening.
Alex,
ReplyDeleteThank you for your analysis of this beautiful metal.
Didier,
Thanks for your detail and comments as well.
Last week I cashed in on a lot of American Eagles that I picked up for $310.00 an ounce. It was a nice return, BUT...I have been haunted about the possibility that this might have been a mistake. So I set out to analysize both sides of the "pulley system" - the Dollar and Gold. First of all, I think it's a mistake to get too narrowly focused. I like the bigger picture. The weekly chart above is printing out a perfectly symmetrical right shoulder. If the current consolidation triangle breaks to the upside it only reinforces this reverse head and shoulders formation. If it is to follow the symmetry, then it is time to break, perhaps after a few days - as Alex stated - setting up a bullish divergence on the daily chart. So will the dollar pull down on the other side so this gets pushed up? The dollar weekly chart shows a H&S top with a HUGE bearish divergence. If there is a 1,2,3 top in....it's more likely to be in the dollar, not gold. To the extent that it influences, the VIX is stuck in a massive descending wedge which will probably resolve sharply up this week, sending the equities down and the FEAR back up. What's brewing to make this happen? The Bi-polar Banking system - GOT GOLD??
This is just my humble opinion and I reserve the right ...if and when I'm wrong.....to change it :)
Wishing success to all -
Stephen M.
May 3, 2009 8:42 PM
Thanks, folks. As I said, though I believe GLD is putting in a long-term top, I'll buy GLD if it breaks to the upside, which interestingly enough is about where Alex said he'd buy it, too. The other thing to note is that there is significant contraction in volatility in GLD at the moment--the squeeze is in, so while we can't predict direction at the moment, the move will be violent. GDX, the gold miner ETF, is in a similar symmetrical triangle as GLD. For those who prefer a little pop in their GLD, as I do, take a look at UGL and GLL the two Ultra ETFs.
ReplyDeleteGreat discussion! Alex, your analysis an charts are very insightful! Thanks for sharing!
ReplyDeleteRodryk
I always like to go back and read old posts just like reading the trading diary. I just want to point out I was totally blind! I totally missed the set up in the daily charts- I saw something of interest in the monthly chart but totally failed to see it in the daily. Alex pointed it out- the A, B, C bottom.
ReplyDeleteAnyways I stuck my neck out in arguement on a bullish position in Gold on May 1. So far it is up 40 ticks our of your 50 so it would not have been a bad trade. I still think it is going to meander unless the top is in and the market's going to crash...
Always reserving the right to be wrong...
Good Trading,
Eric