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Tuesday, November 5, 2013

Gold and Silver charts: bear market rallies flatter to deceive

Gold Chart Pattern


The following comments were made in an analysis of the daily bar chart pattern of gold three weeks back: “The only silver lining for bulls is that gold’s price appears to be trading within a ‘falling wedge’ pattern, from which an upward break out is likely.”

The upward break out from the ‘falling wedge’ did occur on Oct 17 ‘13. Trading volumes were strong, but after rising above its 50 day EMA the rally petered out at 1360 as volumes seemed to dry up.

Volumes picked up again as bears pressed sales, and gold’s price dropped below its 50 day and 20 day EMAs. The falling 200 day EMA wasn’t even tested during the brief rally, which barely lasted two weeks.

Daily technical indicators are turning bearish. MACD is barely positive, and has moved down to touch its signal line. RSI has slipped below its 50% level. Slow stochastic is falling sharply towards its 50% level.

On longer-term weekly chart (not shown), the 50 week EMA is barely 15 points away from crossing below the 200 week EMA. The ‘death cross’ will technically confirm a long-term bear market.

Silver Chart Pattern


The 6 months daily bar chart pattern of silver rallied past its 20 day and 50 day EMAs and briefly crossed the 23 level on intra-day basis. But bullish hopes were belied as bears started to press sales.

The rally was more in sympathy with gold’s rally, as economic growth continued to stagnate in Europe and USA. US Fed’s QE3 tapering programme is off the table for now, and the brief surge in price of precious metals has come to an end.

Daily technical indicators are looking bearish. MACD has crossed below its signal line and is about to enter negative territory. Both RSI and Slow stochastic have dropped below their respective 50% levels.

On longer-term weekly chart (not shown), the 50 week EMA has been falling below the 200 week EMA for the past three months. A long-term bear market is unfolding.

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