Technical observations of RossClark@shaw.ca
The Big Picture
As long as gold holds above $460 the major bull market is considered to be in motion. This allows for a 50% correction ($493) of the complete rally from $255, a test of the support line (on a deflated basis) and a test of the 50-month moving average. This permits a cleanout similar to the equity's market correction of 1987. Such a 'financial panic' would not alter the long term picture of an extended bull market into the next decade.
Gold vs Commodities
The 50% Rule
Gold has an uncanny tendency to make 50% corrective pullbacks while in bull markets. The key is from which starting point to measure the correction. The use of an RSI(14) on weekly charts can be used to establish the last time the price was into a neutral or oversold condition. Readings below 45 have been successful for this exercise. On that basis we can use the move from $410 of one year ago to this year's high and establish an optimum target of $571. In some instances the price will bounce marginally for a week, top out below the midpoint of the preceding bounce and then take out the low by 1% before making a sustainable rally. This type of 'spring' or 'isolated low' is quite common in gold. Therefore a bounce off the initial low (assumed to be around $571) should allow for a close into the mid $560's as part of the basing process.
On the upside, the initial
rally into the summer should retrace 40% to 60% of the decline
from $730. Assuming that prices reverse from around $571, the
initial upside resistance should be in the range of $635 to $665.
1986 to 1990
Sequential Buy Setups are common at the end of corrective phases in the bull market of silver. If prices close below $11.84 through Tuesday then we will have had nine consecutive days with closes below the low of four days earlier and a 'setup' will be in place.
Seasonally, this market comes out of the weak period by the end of June and has a tendency to do well through September.
Following significant tops in the past three decades the silver market has managed to produce an oversold reading of -200 in the CCI(20) at the end of most corrections. A subsequent upside reversal through -100 confirms that the bottom is in place. Risk can then be controlled 2% below the corresponding low. (The index is currently at -155)
Since April 19th three key supports were anticipated to be the 34-day, 100-day and 89-week moving averages. Thursday and Friday's action is into support and if prices can reverse to close above $11.40 this week then the upside target becomes $13.60.
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