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May 17, 2008

All That Glitters

Over the past week, I've noted a suspicion that oil is in a blow-off move and that when it eventually corrects, it will take the mass of commodities with it. For this reason, I have been very tentative about getting aggressive with commodities such as copper, precious metals, and sugar, all of which appear to be in potentially explosive consolidation patterns. However, precious metals... and gold in particular... are doing things that warrant attention. Let's have a look...

commodity chart

As you can see with just a glance, gold's chart is looking quite bullish. The correction off the March high retraced perfectly to the top of the previous consolidation area. The recent action shows a breakout from the down trend, as well as the first higher high since the correction started. The wave count shows the possibility that we are entering a potentially explosive 5th wave up. And the RSI reading corresponding with the recent low is the lowest RSI we've seen since the '06 low.

Silver's chart is not so neat, as it has not confirmed with a higher high nor a down trend breakout.

silver chart

On the other hand, platinum, which lead the PMs higher during the last move, is looking robust.

platinum chart

Also very compelling is that the gold miner's ETF appears to have just broken higher out of a classic A-B-C correctional pattern.

stock chart

For the record, I augmented my silver position on Friday. Confidence events would include silver breaking out of its down trend, platinum setting a new high, and GDX continuing higher on increasing volume. Any or all of these will likely have me soaking up even more metal.


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