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Yamada - Gold & Silver at Crucial Points in This Cycle
With gold trading near the $1,620 level and silver approaching $30, today King World News is pleased to share with readers a piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report. This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.
Gold: Bucking the Strong Dollar.
Gold spot price (GOLDS-1,624.10) had been hovering above the recent closing low at 1,539 and below the broken support (which became resistance) at 1,600; the 10- and 40-week MAs turned down and crossed negatively; the uptrend from 2008 was violated; and the weekly (see Figure 19, arrows) and monthly momentum studies are still on a Sell, with the downtrend in place. And then Friday’s pop through 1,600 (!) on the dollar retreat (and no doubt boosted by short covering).
During other equity market declines, Gold has generally also paused / corrected. (If an investor cannot sell other items, Gold has a tendency to be subjected to selling pressure.) Additionally, commodities generally move inversely to the U.S. dollar, which has been moving up until Friday when the first pullback in many days may have resulted in the pop for Gold.
Gold last week, however, has not followed through with further declines against the strong dollar, as oil has, which might bode better for the metal....
Continue reading the Louise Yamada piece below...
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“The negative weekly momentum may try to stabilize on any follow through to Friday’s lift.
That said, there inevitably will be rallies (with or without short covering), and the move through 1,600 could carry up, as it did Friday (with the dollar pullback), toward the declining 10-week MA at 1,630, or even toward the broken 2008 uptrend in the 1,670 range. But unless the downtrend, roughly at 1,700 is sustainably penetrated, we would consider Gold to be continuing the corrective / consolidation process. Furthermore, the most important resistance remains at 1,800, the top of the former trading range. Between here and there remains consolidation in our view.
We remain currently agnostic on Gold, given the current technical observations and the sudden
confusion causing a rush out of Euros and into dollars and treasuries. The break below 1,600 had suggested potential downside risk toward 1,500 (and even 1,400) where there is support from the 2010-2011 consolidation.
It is not yet clear whether Friday’s advance is a kickback rally or the beginning of a complete reversal that could reinstate the uptrend. One day doesn’t make a trend but it can begin one. A reversal below the recent lows would suggest further work needed for Gold.
From the longer-term perspective, the negative real interest rates, against which Gold historically does well, remain in place, supporting the longer bull market view.
Silver: Approaching a Decision.
Silver spot price (SILV-29.51, see Figure 20) has been inching downward with Gold, close to but not yet violating the 2012 low or the 2008 uptrend line. While the momentum across timeframes remains negative, the MAs are on a Sell and declining and the downtrend remains in force, there is a potential positive divergence in the momentum which has not slipped to the 2011 low.
Note the developed descending triangle which suggests that were the strong support at 27 to be violated, breaking both the triangle and the uptrend, further downside could be in store toward 25 or 20. But, as with Gold, lifting through the declining MAs and the downtrend would be needed to suggest a more robust profile technically. The resistance at 30 has fended off rally attempts. To improve the pattern a sustainable lift through 30-32 would be needed. The profile is mixed.
As Managing Director and Head of Technical Research for Smith Barney, Louise was a perennial leader in the Institutional Investor poll, and was the top-ranked market technician in 2001, 2002, 2003 and 2004, before going independent. To subscribe to Louise Yamada Technical Research Advisors, LLC ("LYA") CLICK HERE.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 6, 2012
