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Reversal of Fortune?Parker Binion To paraphrase Hobbes, the correction in gold and gold stocks since mid-July has been short, nasty and brutish. However, we are starting to see some evidence that the correction in metals and corresponding dollar rally has begun to run out of steam. First, let's look at the dollar index.
Not only does the RSI show the dollar to be extremely overbought, but the MACD histogram is making lower highs when the dollar is making higher highs. This bearish divergence indicates a weakening of the dollar uptrend, and an impending reversal. Conversely, the GLD and GDX charts show oversold conditions in addition to bullish divergence between price and MACD, with the ETFs making lower lows while the MACD makes higher lows:
The state of divergence on a daily chart can last awhile. In addition, the weekly charts of $USD, GLD and GDX do not yet reflect any divergence. So, the metals rally and/or dollar correction may not commence tomorrow. But they should commence soon. Sep 9, 2008 Parker Binion is a student of the markets who has successfully managed his own investments for 15 years. He currently runs a public chart blog at Stockcharts.com called the Divergence Report Disclosure: In the interest of full disclosure, the author advises that he is not a disinterested party in that he has personal investments gold and silver bullion and gold and silver mining shares. The author's objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, ETF, currency or commodity. Past performance is not necessarily indicative of future results. You may lose money trading and investing. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article. 321gold Ltd |
