Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold and Silver Downside Breakout Trend Consequences Analysis

Commodities / Gold & Silver 2009 Jul 12, 2009 - 05:28 AM GMT

By: Merv_Burak

Commodities

Best Financial Markets Analysis ArticleIt seems to have been almost all down hill since I last posted my commentary two weeks ago.  Gold and silver bullion as well as stocks have broken on the down side but there is still some life left.  Let’s get at today’s assessment.


GOLD - LONG TERM

          

Before getting into the weekly commentary, some comments on the head and shoulder pattern.  I have had several readers who have pointed out reverse head and shoulder patterns in gold, one a long term and one of an intermediate term basis.  I believe there have been some experts that have shown the same pattern recently.  I had shown a long term gold chart in my commentary for the week ending 19 June 2008.  You can find it in the archives of many of these sites and it might better show the patterns discussed.  The long term reverse head and shoulder pattern, as suggested to me, has the shoulders on the left and right sides of this chart with the reverse head in the middle.  As for the intermediate term pattern, the left and right shoulders can be seen on the right side of the chart with the reverse head in the middle.  Unfortunately, I DO NOT subscribe to these being reverse head and shoulder patterns.  They are more legitimately potential double top patterns which I had talked about previously.

Head and shoulder patterns are trend reversal patterns and therefore for a reverse head and shoulder to be present (suggesting an upside break) you would have had to have had a bear market move leading into the pattern.  For a normal head and shoulder the lead in trend would have been a bull market trend.  In neither of these cases do we have a bear market leading into the formation of the pattern and therefore we DO NOT have a reverse head and shoulder pattern. 

The long term P&F chart suggests that we are still in a bull market and some distance away from a reversal.  With the existing pattern that reversal would come if the move should go straight down to the $870 level breaking below the blue line and two previous lows.

As for the normal indicators, they too have still not reversed.  Although the price of gold is still some distance above a simple 200 day moving average line I use the weighted method which gives a more aggressive line.  The price of gold is still above this line but only barely.  The moving average line is, however, still in a positive slope.  The long term momentum indicator remains in its positive territory but is moving lower and is below its negative sloping trigger line.  The volume indicator has now crossed below its long term trigger line although the trigger remains in an upward slope.  So, what does all this mean?  It means that the long term rating remains BULLISH but is getting close to being down graded if the negative gold price trend continues much longer.

INTERMEDIATE TERM

In my last commentary the price of gold had just climbed above its intermediate term moving average line.  Unfortunately, it quickly reversed and broke below the line in a decisive manner and is now below its previous recent low and well on its way downward.  The momentum indicator has also moved into its negative zone and below its negative trigger line.  As for the volume indicator, it too is below its negative sloping trigger line.  All in all, the intermediate term rating is BEARISH.

SHORT TERM

          

The recent trend in the price of gold is easy to see on a short term chart.  Everything here is on the down side.  The action appears to be trapped inside a downward trending channel.  The price is below its negative sloping moving average line and the momentum is in its negative zone below its trigger line.  Both indicators have moved below recent lows.  The very short term moving average line remains below the short term line for confirmation of trend.  Everything points to a still BEARISH short term rating.

As for the immediate direction of least resistance, well the aggressive Stochastic Oscillator is giving us some hope for a reversal of short term trend, at least for a little while.  It is still in its oversold zone but has moved above its trigger line and might be heading to breach its oversold line.  Although this is not necessarily a sign of a reversal of trend it is a sign that the existing trend may be running out of steam and needs a reversal or at least a rest period (such as the period following June 15th).  I will go with the lateral trend as the one with least resistance for now.

SILVER

What goes up the mostest comes down the fastest.  Silver just can’t seem to get its act together and continues to act a lot worse than gold lately.  While gold lost 1.8% of its price during this past week silver lost 5.5% of its price.  Although it is still acting slightly better than gold over the intermediate and long term, over the past short term the performance of silver puts it in spot 22 out of 24 off the components in the Precious Metals Indices Table.  Only the S&P Gold Index and the Merv’s Qual-Silver Index had a worse short term performance.

Since its recent top in early June the trend in silver price has been almost straight down.  It is heading towards a reasonable support just below the $12 level.  Should it hit $11.50 then most likely it will continue down to test the previous low at the $8.50 to $9.00 level.

Looking through the various indicators silver is now BEARISH for all three time periods.

PRECIOUS METAL STOCKS

Most precious metal (gold and silver) stocks took a deep hit this past week.  Average losses, based upon Index declines, were in the order of 6% to 10%.  This has put all stock Indices into the BEARISH camp on the short and intermediate term.  Many Indices have also gone BEARISH on the long term but there still are some hold outs like the Merv’s Gold & Silver 160 Index, the Penny Arcade Index and the Spec-Silver Index which still maintain their BULLISH long term ratings.  The Merv’s new Penny Arcade Index is probably holding up the best, especially when measured relative to its recent gains.  It is still up 402% from its Nov low even after a 21.5% decline from its early June high.

There is no way of knowing when this latest decline in the stocks will end.  We can guess, intelligently or otherwise, but no one REALLY knows.  One must assume that a decline, once established, will continue.  For this reason probably the best policy to protect one’s capital, is to start looking for exits in individual stocks.  When the turn around comes, tomorrow or next year, you will be sitting with cash to take advantage of the new move.  If you don’t exit from your losing stocks, and the decline continues, you do not get a second chance.  You could eventually break even on the next bull move but that may be 100’s of % points from where the stock might bottom out prior to a reversal. 

In my view it is always better to err on the side of protecting your capital rather than to err on the side of an ego refusing to see the possibility of any major decline.

PRECIOUS METALS INDICES TABLE

Well, that will be it for this week.

By Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv's Precious Metals Central

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com .

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 .

To find out more about Merv's various Gold Indices and component stocks, please visit http://preciousmetalscentral.com . There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

Before you invest, Always check your market timing with a Qualified Professional Market Technician

Merv Burak Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules