Sunday, November 29, 2009

Gold in Parabolic trend

Gold managed to close higher for 4-th straight week just shy of $1200 mark.

ADX shows a solid strength in the move and trendlines support the assumption we are seeing the acceleration phase that will most likely result in a blow off top. I believe going with the trend is the best solution however I'm looking for early signs of topping. The sharp drop from 1194 to 1140 on Thursday, when Dubai news hit the market, in my opinion reveals the vulnerability of this relentless rise.

Already 15.5% above the previous top (1033) - Gold will have to deal with the psychological 1200 level. My first working scenario is a trend continuation. if next week we see aclose above 1200 I'd bet that we will witness even stronger buying frenzy and the acceleration might easily help the precious metal tp climb till 1220-30.

The other assumption would be that we don't touch 1200 and go straight down to 1145-25. While the RSI has been climbing steadily for the last 5 months we can see the indicator is topping and the ADX also adds similar implications as the +DI component already advanced to a new high. Fundamental themes and news flow will dominate next week as global markets will have to digest the Dubai status. That means more uncertainty and probably a lot more volatility. The Average True Range is rising which would be an early indicator for a possible start of the distribution phase characterized by high volatility and wide range trading until the distribution of the inventories is finished and the new trend ill begin,

10-Year US Treasury Note - Breakout higher is confirmed

Bond market is clearly showing signals for flight to safety.

I expect next week we see 121.50 - 122 levels exceeded. RSI is climbing steady and I expect the trend to accelerate as the ADX has bottomed already. The break of the Resistance Trend line around 119 - 3 weeks ago has been confirmed by 2 consecutive weekly new higher closes.

Sunday, November 22, 2009

10-Year US Treasury Note on the Rise - Critical Resistance at 120.17/38

10-y US Treasury Note - Weekly chart: Price is close to probing the Upper Bollinger band at 120.17. Next important Resistanc ecomes in 120.38 - the 55-Week MA.

Price consolidates with upward bias inside a rough range between 117 - 120. I'm looking at the ATR indicator for further implications of change in Volatility. There is a solid trend of range contraction and we are on the level of the Average True Range we have seen in March and September 2008. Mu take on this picture is that ranges if falling below the current 1.66 range that would most likely signal trend continuation. 55-Week MA is acting as fulcrum axis pointing the trend. Given the convergence is pivotal 55-WMA and the Upper Bollinger Band around 120.17/38 my opinion is that we might see a further advance and expansion of the BBands which would fit in the trend breakout scenario.

The Dec '08 -> March '09 Highs Trendline has already been broken the Week before and last weeks higher high is acting as confirmation to this setup. RSI is supporting the upward momentum.

S&P 500 - momentum is fading

Weekly chart shows indecision represented by last weeks forming a tiny Doji with only a marginal new High. RSI & ADX both are losing steam.

I'm looking for first test of 1065-70 level and the critical 1025 below which the uptrend will signal retreat. Price is right at the middle of the Rising Wedge pattern so we need to watch for test of the Support or for a possible squeeze to new highs - the latter seems rather difficult to me.

Crude Oil (Nymex) - Triangle break & Critical Support at 75.80 (200-Week MA)

There are 2 technical scenarios to approach the present structure of the Crude Oil's trend. However the both rely on the Critical importance of the 200-Week MA at 75.80.

First and most obvious is the Ascending Triangle breakout above 75 that happened in October. The upside is coinciding nicely with the 200-Week MA and the measured target is around $91.

Second scenario is if the Trendline Support that comes in around 76 will hold the rise. The RSI is holding a steady run above the average and that is positive for the scenario.

It is however a curious development that we have 3 weeks of indecision marked by the 3 Dojis which are also spinning tops as the Highs of all coincide. While Gold marches higher relentlessly these 3 weeks of tight range might be considered a warning to the Bulls as most obvious patterns recently failed to materialize.

Gold's relentless rise

Gold is up 69% from the Oct 2008 Lows around $680 and already 11% above it's previous $1033 top. While the trend has the momentum and the fundamental underpinning to proceed I would like to look for contrarian signals.

Just to asses the present moment we have a RSI reading high like in Nov '08 and March '09 - that saw corrections. The Trend strength measured by the Wilder's ADX is reaching the 25 threshold thus signalling the solid momentum of the movement.

As Welles Wilder had written there is a good sign for going against the prevailing trend when the ADX rises above both the +DI & -DI. The timing and the money management is critical to the success of taking such signal as we can see such a setup occurred in Jan '08 but it wasn't until the end of March '08 that the intermediate high at 1033 was reached and the correction ensued.

Pattern-wise I drew a tentative Rising Wedge wich projects a Resistance around $1175-80 level.
The stock indices become weaker and while the might be some Christmas window dressing I see the exponentially rising of the Gold Trend as a precursor of the next bout of stock indices fall.

Wednesday, November 18, 2009

S&P500 shows signs of exhaustion

The 7 month run of the S&P is exhausted and the momentum is already missing.
RSI and Slow Stochastics are both suggesting that a pullback is imminent - the question remaining is if it would be a short term, intermediate or a long term top?

While I'm far away from the perma-bear state of mind - there is a great chance that the illusion of the end of the "greatest recession" since "The Great Depression" was just cheap liquidity pumped into the system to lift the asset valuations. However Debt ratios remain extremely high and job market is still very weak - that means that consumption and private investments will be scarce and the economic growth can't go on on government spending only - not to mention the gigantic US debt issued in the the last 2 years.

Purely technical picture would suggest we are inside the primary trend channel (red), however the Momentum is already slowing and the price is making only marginally higher highs/ higher lows. The Sideways range channel in the last 2 months confined the advance of the move.

Last weeks advance has been followed by the indecision pattern of 2 consecutive Doji candlestick days. 1100 level is psychological Support and below we go for the 50-Day MA that held all previous corrections. However I doubt this time we will have much support there as I see a fast move towards 1025-50 area where initially the trendline support will pause the price decline.

Friday, November 13, 2009

EUR/USD - Possible Irregular H&S pattern in progress

EUR/USD Daily chart is possibly developing an Irregular Head & Shoulders pattern.
Following the lower top at 1.5044 we had a big down day along with the Key Reversal in AUD/USD, corrections from recent tops in Stocks & Commodities.

Technically the smooth Primary Uptrend Channel since June '09 is intact (black lines) and it determines the larger timeframe trading bands: Lower 1.4560 - Higher 1.5220.

On the Short term pattern that is developing inside the Primary trend channel I'm looking for a test of the Neckline around 1.4680. That level is probably to offer good sized bids but if broken it threatens the structure of the underlying Primary trend Channel.

USD Index (NYBOT:DX) - Double bottom? (part 2)

Two days ago the brief breach below 75 level resembled a breakout attempt. I've expressed an opinion that we might actually have a Short-Term Double Bottom pattern forming in progress.

Seems it is not that easy to have a sustained breakout and to my observations lately we more often witness violent whipsaws following the fake breaks. No need to mention the Pound Sterling as one of the most violent ones.

Anyway, I am kinda happy and intellectually satisfied by realizing the potential reversal. I continue to monitor the developments as the USD down trend has been quite orderly maintained since June however with the Volatility being really low in the mast few months it is highly possible that we could see some bigger moves in the very near future following the Double Bottom bounce.

Wednesday, November 11, 2009

USD Index (NYBOT:DX) - Double bottom?

There is widespread media speculation going on with the state of the USD as a reserve currency.
From IMF officials stating it's still overvalued to smart speculators looking for a bounce on the notion of the overstretched USD sellers' Open Interest in the CME futures positions.

Here is a purely technical picture: there is potential for a Double Bottom IF the 74.80 level holds - it's where last month we had a bounce. However the trend channel (green lines) is still down and intact after the Resistance trend line held the spike to he 50-Day MA.

The Volatility measured by the ATR has been very low since August '09 - and that implies trend continuation. Fundamentally while there was so much negative talk about the economic recovery we have seen all major indices and commodities relentlessly rise. That means we must go with the flow until we have a signal or proof of turning point.

Crude Oil - Bull Flag Consolidation - possible target $95

Crude Oil among all commodities has a star status for its high volatility.

I observe the chart pattern that looks to me at present as a Bull Flag consolidation range. If we measure the previous leg from the $65 low to nearly $85 high we have a target step of 20 bucks.

Now if take the consolidation low around $75 - if I breakout around $83-84 materializes in next 2 days we have a target around $95 and most probably the psychological $100 level.

This upward trend is still contained within the big channel and price is currently holding above the pivotal 21-Day MA.

While Volatility measured here by the ATR (2.57 now) has been relatively low recently in my view it is trending higher and once $83 is broken we might see a strong rise in momentum that is usually accompanying a breakout move.

Sunday, November 8, 2009

Gold is leading & Silver following

There is a market talk on the decoupling in USD and Commodities trends. I'd like to make an inquiry in this field. Here are the Weekly trends in Silver and Gold.

My first observation is that Gold is in solid breakout mode and Silver is following a bit shy. I have read some time ago that analysts prognosticated a bigger rally in Silver actually for a number of fundamental reasons like decline in production capacity, industrial demand and so on. Well technically it obviously lacks the conviction that Gold is manifesting. Here is a detailed view:

Gold closed at an All-time high the week before US Senate is voting for the Health-care plan. A sign of inflation scare coming from the rise in government expenditures and DEBT?
Technically its 5-th straight week above 2008 high ($1033). Trendline Support is working perfectly and the Resistance projection is giving notional target around $1160. We have a rising 50-Week MA and RSI trending higher above 70 line. ADX reading is rising to 20.91 - not far from the critical 25 level of sustainable Trend Strength.

Silver - at the same time is still caught in the 16 - 18 range. It has solid Resistance to overcome - the 2008 tops ($19.50 and $21.40). The case for uptrend continuation is supported by the 50 / 200-Week MA Golden Cross and the rising RSI while ADX trend indication is not as bullish as we can witness in Gold at the same time.

Lastly while Gold's last week is a bold breakout move - Silver's last week candle is a typical Harami or Inside Week pattern which calls for indecision. As great traders say buy the strongest performers - which in the case means that we can see a hard evidence of solid momentum in Gold but same lacks in Silver.