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Old and New Gold Trix

Stewart Thomson
email: s2p3t4@sympatico.ca
Nov 18, 2008

  1. A few years back, Stochastics was the hottest technical indicator in town. It is a momentum indicator. Momentum refers to the rate of change in the price of an item. The stochastics indictor was invented over 50 yrs ago. A solid workhorse. In any technical trader's toolbox.
  2. As the gold price "pendulum" swings higher or lower, the stochastics gives buy and sell signals as the two lines cross. Known as the "D" and "K" lines.
  3. The stochastics can also give buy or sell signal signals to some traders simply by falling or rising to extreme levels. 20 and 80 are two well respected markers.
  4. If the stochastics lines begin a reversal of direction, while the price keeps in the same direction, a "divergence" signal can be given.
  5. The growth of computerized trading has produced a lot of false signals for poor Mr. Stochastics. Now traders try to anticipate the turns, causing even more false moves. The stop losses are small, but there's a lot more of them. Since gold trended down from 1030, the stochastics have generated a number of buy signals. Each rally has generally disappointed gold investors.
  6. Enter the MACD. Arguably, the most popular indicator amongst the technicans today.
  7. MACD is a slightly slower indicator than stochastics, but more reliable.
  8. Simply put, if the MACD is above the zero line, that means: the 12 day moving average is trading above the 26 day ema. If the MACD lines are both below zero, well, then 12 day ema is priced below the 26. Simple.
  9. The standard way to play the MACD for gold bulls is: wait for the indictors to fall to low levels, then rise up in a crossing of the two lines. The cross is the buy signal.
  10. A second cross at or above the zero line is seen as more positive still. The zero line is the point where the 12 and 26 day ema's are both at the same price level.
  11. Also, a "divergence" between current prices and the MACD is watched carefully. The MACD may start to turn up while prices continue down.
  12. The huge forced selling by hedge and index funds has some traders questioning the MACD now. The weekly gold charts have shown the MACD at the lowest point of the whole bull mkt several times. Making gold and silver prices seem "ridiculously cheap". And, as we all know, gold and silver prices ARE ridiculously cheap but the seasonal rally is long overdue, let alone new highs. The daily stochastics and MACD have both given some short term signals, but it's all been washed away each time. Very disappointing for gold investors.
  13. Enter the "home run" derby king. The TRIX indicator. When markets are soaked in volatility, most traders are looking to move faster and faster. That is getting them into a lot of trades, but out of them just as fast too. I would suggest that the answer to high volatility is the opposite. Trade only the biggest and most reliable signals. That calls for the Trix. If you are looking to step up to the gold plate and knock the ball right out of the park we suggest you keep a VERY close eye on our good friend Mr. Trix.
  14. Like stochastics, the Trix is a momentum indicator. More reliable than both stochastics and MACD. Following the trix requires patience. If you like watching heavyweight boxing, you will LOVE the trix. Especially on the monthly charts. The trix indicator may be a little slower, but when signals are given, they are VERY reliable and come with devastating "knockout" power.
  15. Enclosed here are the current gold charts showing the Trix indicator... alone. The first chart, the daily gold chart, shows the Trix on the verge of giving a very tradeable buy signal. Gold traders need a boost in morale right now so this is a welcome event. If we get a full signal... which could come this week.

  1. Keep in mind, that until the weekly and monthly MACD actually gives a crossover signal, there is no way the Trix Indicator is going to be giving one of its home run buy signals for Gold. That WILL come but extreme patience is needed as the fund industry is broken. And selling is now out of control.
  2. When the monthly gold chart gives its next Trix buy signal, it may be the greatest bull signal of all time.
  3. In the meantime, the Trix indicator on the gold monthly charts is suggesting, sadly, this rally may not be the final bottom for gold. As Jim Rogers has said about the stock market... "This looks like A bottom. Not THE bottom".
  4. You can also see on these charts my use of simple (not exponential) moving averages on the price chart. The 5 and 15. The 5 is enough to smooth out the short term action. While the 15 eliminates false signals. Applied to the monthly gold chart, the profits can be astronomical. In 2001 a buy signal was given at about $275 an ounce. The 5-15 moving average signal to take profits was given only once during the whole bull mkt. In the fall of this year. At $850, a fantastic run.

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Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
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