Technically Precious With Merv

For week ending 20 May 2011

It seems that speculators just are not sure where to go with gold. The continued Middle East upheaval has become sort of a ho-hum thing. What do we need next to move the darn metal? The hesitation suggests that the next major up move may still be some time away.

GOLD

LONG TERM

Despite the ho-hum nature of the recent action the long term prognosis for gold has not changed. We still have the price of gold above its positive moving average line. We still have the long term momentum indicator in its positive zone but still below its negative sloping trigger line. The volume indicator continues to track in a lateral direction and remains above its positive trigger line. Putting it all together the long term rating remains BULLISH.

INTERMEDIATE TERM

Things are not much different in the intermediate term, although it is much closer to a possible turn around. Although the price of gold had dropped below its intermediate term moving average line earlier in the week the line remained positive and the price quickly moved back above the line, where it closed on Friday. The intermediate term momentum indicator remained in its positive zone throughout the week but had been mostly below its negative sloping trigger line. On Friday it did move above the trigger but the trigger line slope remained negative. As for the volume indicator, it had been moving above and below its trigger line and closed on Friday just above the trigger. The trigger here has remained positive throughout. Putting it all together the intermediate term rating remains BULLISH. This is confirmed by the short term moving average line remaining just slightly above the intermediate term line.

SHORT TERM

The short term seems to have gone into a holding pattern once the first plunge was over. Although not a certainty I look at these plunges with a view to seeing if there is a bottom to them. Usually, if the plunge is not the precursor to something more serious, the low of the initial plunge and the high of its quick bounce set the stage for the boundaries of a lateral move. As I said, it’s not a certainty but something to start with. The chart shows these lower and upper limits. We are now waiting to see if the upper (resistance) level will hold or if the rebound goes even further. For now let’s see where we actually are.

The price of gold has been moving in a basic sideways drift for about two weeks now. As such it is inevitable that the price and the short term indicators will start to oscillate above and below their respective moving averages or trigger lines. As of the Friday close the price is once more crossed above its short term moving average line and the line has also just very slightly turned to the up side. The short term momentum indicator has once more moved into its positive zone and closed the week above a now positive trigger line. As for the daily volume activity, that is still relatively low although it looks like it is starting to perk up a little. Overall, the short

term rating is now BULLISH but could change very quickly with a day’s worth of negative market action. The very short term moving average line remains below the short term line and has not yet confirmed this short term bull.

As for the immediate direction of least resistance, today that looks very much like the up side but not too enthusiastically. It may have a day or two to goi before reaching that upper resistance level. After that, who knows?

SILVER

Silver seems to have taken a more critical plunge than gold and it is not rebounding as gold is. Maybe just too many speculators have jumped on silver and now are having second thoughts? The long term indicators are still in their positive zones but only slightly. The long term rating remains BULLISH for now.

The intermediate term, however, is not all that bright. The price remains below its negative sloping intermediate term moving average line and the momentum indicator remains in its negative zone just slightly below its negative trigger line. The volume indicator has now firmed up a bit but is still below its negative trigger line. The intermediate term rating isBEARISH, confirmed by the short term moving average line remaining below the intermediate term line.

On the short term we are in a transition phase. The price has just crossed back above its short term moving average line although the line has not yet turned to the up side. The momentum indicator has crossed above its trigger line with the line turning up but both are still inside the negative zone. The daily volume action remains low. For Friday, the short term rating has improved to a + NEUTRAL rating just below a full bull. The very short term moving average line remains just slightly below the short term line suggesting that a full bull rating was not yet appropriate.

PRECIOUS METAL STOCKS

I guess the Penny Arcade Index says just about all there is to say about the precious metal stocks. Not that they are all moving lower, most advanced during the week, but that with the pennies in a serious down trend the universe cannot be far behind. The speculative and gambling variety of stocks are usually the first to get dumped by the speculators before they start to dump their better variety of stocks. Anyway, this is a WARNING, not a forgone conclusion as to what will happen to the universe ahead.

Well, that’s it for this week. Comments are always welcome and should be addressed tomervburak@gmail.com.

Merv Burak, CMT