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Metals Under Pressure

Technical observations of

Bob Hoye
Institutional Advisors
Sep 18
, 2006

Gold prices are into oversold levels with a daily RSI(14) reading of 29.08 on the 14th and follow through on the downside this morning. As noted in July, in the past two decades it has taken a reading below 32 to generate a tradable low following a military incursion. This low reading has been necessary to offset the overbought levels that occur when the conflict brings in the investors who are sitting anxiously on the sidelines. Obviously, there will be considerable overhead resistance starting around $600 to$605 (the support level of the past two months).

Prior action in gold around periods of military conflict.
The blue dots identify RSI(14) levels below 32.

Silver exhibited no signs of divergence at last week's highs, but did manage to retrace a Fibonacci 62% from the May highs. With prices down over three dollars from the September 7th highs, it is now oversold with a CCI(20) reading of -188. Anything below -150 is considered adequate to create a bottom during September-October when the market is in a rising trend (1972-74, 1977-80, 1982-83, 1987, 1993, 2002-2006). A confirmation of a bottom will occur once the CCI moves back above -150 (as seen in recent years on 10/14/02, 10/08/03, 09/13/04 & 08/31/05). Risk can then be controlled at 2% below the interim lows.

The arrows identify the CCI(20) move above -150 in the years 2002 to 2005

-Bob Hoye
Institutional Advisors


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