Technically Precious with Merv
Boy! What a week. Nobody seems to have a handle on what the heck is really going on. After a sharp day and a half of upside moves gold seems to have stabilized but with an upward bias. To try and guess what's to come would be foolish in this market so let's just see where we are and not worry to much about which way gold will go. It will get there, wherever there is.
Although the move during the week was quite sharp and the long term P&F chart has given us a bull signal, that signal has been pretty weak and the calculated move is only to the $930 level, which it almost reached on Thursday. I don't think that enough consolidation has taken place to warrant a concerted long term move. Maybe some more lateral movement might take place before gold continues upward. I would be more impressed with this upside rally once it makes new highs, at least to the $1000 level to exceed the July highs.
The action during the week did move the long term momentum indicator through its neutral line into the positive zone but the price of gold itself has still remained below its negative sloping moving average line. The volume indicator remains below its long term negative trigger line. All in all, the move by the momentum indicator was enough to upgrade the long term rating slightly to the - NEUTRAL level. Another good upside week should move the price above its moving average line but it's best to wait for that to happen and not jump the gun.
On the intermediate term things are just a little bit more encouraging. Gold breached its intermediate term moving average line and the line itself turned oh so slightly to the up side, so slight it is difficult to see, but still upwards. The momentum indicator has also so very slightly breached its neutral line and moved into the positive zone and above its positive trigger line. As for the volume indicator, it is the one indicator that has not shown any inclination to move with the upside. It is in a lateral trend, still below its negative intermediate term trigger line. Despite the volume weakness the other indicators have pushed the intermediate term rating into the BULLISH camp, although that bullishness is still very iffy at this point.
With a volatile market as we have had over the past few days it is difficult to assess the short term market, however, I'll go with my normal analysis and see where that gets us.
On the short term gold has turned all the indicators to the up side. The price is above its positive moving average line and the momentum indicator has crossed into its positive zone above its positive trigger line. The short term moving average line has also crossed above the very short term line for confirmation of the short term positive trend. With all this happening the short term rating can only be a BULLISH one.
As for the immediate direction of least resistance, one might think that would be to the up side. The trend is in that direction, however, the aggressive Stochastic Oscillator has moved below its overbought line and seems to be suggesting weakness is in store, at least for the immediate future. The trend is upward. The strength is diminishing. Which is going to take charge is anyone's guess.
Since reaching its high in March of this year silver has basically been in a downward spiral, with one brief attempt at a reversal. The weakness in silver continues even with the volatile upside action of the past week. Unlike gold, silver did not exceed its previous highs from a month back. The price is still some distance below its intermediate term moving average line and the momentum indicator remains in its negative zone. Much more upside action is required to get silver back into a positive trend.
The P&F chart shown this week indicates several projections for the price move. A couple of these have already been met but there still are two that may put a damper on any upside potential.
PRECIOUS METAL STOCKS
After the beating that the precious metal stocks took over the past couple of months it was inevitable that we would get a good bounce sooner or later. Most of the major Indices showed gains in the 12% area while the various Merv's Indices showed a wide difference depending upon the sector. The quality stocks made the big gains, on an average, while the more speculative or gambling variety of stocks were in the dumper. The Merv's Qual-Gold Index, with 30 of the highest quality and largest companies, gained 11.8% on an average. The most speculative Index, the Merv's Gamb-Gold Index of 30 gambling variety of stocks, lost 2.5%. In between those two extremes we had the Merv's Spec-Gold Index with a gain of 5.0%. For the full universe of 160 precious metal stocks, the Merv's Gold & Silver 160 Index averaged a gain of 6.0%. So, whether this was a good, bad or so-so week depended very much on what category your stocks were in. Of course there were individual winners and losers in all sectors.
Despite the huge gains made by many stocks during the week there was really little effect on the overall ratings of these stocks. On the intermediate term we still have only 13% rated as bullish and 79% as bearish. On the long term it's even worst with only 5% bullish and 88% bearish. So, a lot more work needs to be done before we can jump with joy and proclaim a new bull market in precious metal stocks.
Any analyst can pick the bottom of the market several times before finally being right. Technicians understand that going with the indicators we will never be able to pick the bottom of the market. What we do is tell you when the bottom had been met and that the direction is now reversed. This could be anywhere from 5% above the bottom to 25% above the bottom. When the reverse is noted then the odds of being in the right direction with the market becomes much, much higher. As noted, we are not there yet
Merv's Precious Metals Indices Table
Well, that's another wrap.