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Tuesday, August 6, 2013

Gold and Silver charts: bear market rallies fizzle out

Gold Chart Pattern

Gold_Aug0613

The 6 months daily bar chart pattern of gold was in the midst of a sharp 100 points rally two weeks back that had moved up to test the falling 50 day EMA. Such bear market rallies provide opportunities to sell.

After consolidating sideways for 8 trading sessions, during which several futile attempts were made to cross above the 50 day EMA, gold’s price has fallen below its 20 day EMA.

Daily technical indicators are beginning to turn bearish. MACD is barely positive, and is moving down towards its signal line. RSI has slipped below its 50% level. Slow stochastic has dropped from its overbought zone to the 50% level.

The down move looks all set to resume. On the longer-term weekly bar chart (not shown), gold’s price is trading below its three weekly EMAs, and the 50 week EMA is falling towards the 200 week EMA. These are signs of a long-term bear market.

Silver Chart Pattern

Silver_Aug0613

The bear market rally on silver’s 6 months daily bar chart pattern had formed a ‘rising wedge’ pattern two weeks back. The break out from the wedge was expected to be downwards.

It turned out to be more of a sideways break out that is trying to cling on to the sliding 20 day EMA. The good news for the bulls is that volumes have been strong on up-days, indicating some investment buying.

However, daily technical indicators are not holding out much hope of a recovery. MACD is moving sideways above its signal line, but inside negative zone. RSI is drifting sideways below its 50% level. Slow stochastic formed a bearish ‘double-top’ pattern inside its overbought zone, and dropped below its 50% level.

On the long-term weekly bar chart (not shown), silver’s 50 week EMA has crossed below its 200 week EMA – the ‘death cross’ confirming a long-term bear market.

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