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March 8, 2010

Confound It!

Gold action continues to confound eager bulls by refusing to form its next impulsive move higher, but in the grand scheme of things, we are just witnessing the type of chop shop one would expect ahead of a significant move. Gold, like any other asset, will shake off as many weak hands as possible before an impulsive move.

Gold correction

If gold slices through that mess between $1100 and $1120, I will sound the alarm sirens. In the meantime, days like today are just noise.

GLD intraday triangle

I have no doubt many weak hands got shaken by the bearish resolution of what appeared to be a continuation triangle. If gold is to find its footing now, we are going to have to see the dollar finally give way.

dollar index

A breakout to new highs on the DX in conjunction with sub-$1100 gold would stop the hearts of more than a few readers, but indications thus far suggest prices are likely to keep rising in the near term. First, equities continue to rally in the face of overbought readings... very bullish, indeed. Also, if markets were about to fall prey to bear claws, we could reasonably anticipate industrial commodities to act as downside leaders. However, the industrial bellwethers of oil and copper have held relatively firm in recent action.

gas prices on the rise

Mr. Bernanke, energy prices are beginning to crimp the economy again. Can you print us some more gas?


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