CHARTWORKS - MAY 30, 2006
Gold - Technical Update
Technical observations of RossClark@shaw.ca
Jun 1, 2006
Gold managed to achieve an RSI(14) reading of 44.73 at last week's
low. This satisfies the "mid 40s" target we established
on May 16th and we are now getting a reasonable rally. However,
it is likely to undergo another test of support before a sustainable
rally is possible.
Gold should have difficulty at $672 to $680 on the current rally.
This would be expected to coincide with the CCI(8) reading getting
above zero (currently -40). From there we'd like to see a rolling
top with a decline into the June 6 th to 13th time window. Two
scenarios can then develop:
1. If the low close of the
next two weeks holds above $653 then we can look forward to a
move to new highs in July.
2. If $653 is violated then we can look forward to a deeper correction,
taking out the $632 low of May 24 th.
As outlined on May 16th, once
this second declining phase is under way then a "close above
the previous six days' closes will signal that the consolidation
has run its course."
The worst case scenario for
gold would involve a 50% correction of the rally from last year's
low of $410 ($570). Gold has a reliable history of creating spike
lows at 50% retracement points. Using a weekly RSI(14) reading
to identify deep corrections to use as starting points, the following
fifteen dates offered excellent buys; 08/17/73, 07/05/74, 01/10/75,
04/28/78, 03/21/80, 11/07/80, 10/08/82, 11/28/86, 02/12/88, 09/03/93,
04/22/94, 10/26/01, 03/21/03, 04/30/04 & 02/04/05.
Due to the overall weakness in the global equity markets, it
is likely that bullion will outperform the mining stocks in the
early stage of the resumption of gold's bull market.
CHARTWORKS - May 30, 2006
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