The Dollar and Gold - What's Next?

By: Chris Vermeulen | Sun, Feb 21, 2010
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Last week was strong with stocks and commodities moving up sharply. As nice as it was to see a rally, I still have my doubts whether this move has legs behind it. As prices moved higher throughout the week we saw volume become thinner and thinner.

Basic technical analysis of the recent price action, when looking at the hourly charts is pointing to a sharp pullback. The indexes, gold and silver have both rallied (drifted) higher on declining volume as they near resistance.

Let's take a quick look at the US Dollar and Gold Charts

The US Dollar has been in a strong rally since the last week of December. The once easy money trade (short the Dollar) has been over for a couple of months but it may be another good trade if gold is rejected here at the 50% retracement level.

The next month or so will be interesting to see whether the dollar will continue to rally or drop like a rock as traders sell Dollars for another easy short trade. There is not much we can do here other than wait for a setup on the daily and hourly charts to form.

US Dollar - Weekly Chart

GLD - Gold Daily Chart

Gold still looks very bullish. Actually, the more gold pulls back the more I like the chart. This daily chart shows a very nice bull flag. The price is currently testing the upper trend channel line and this is what makes me think we are going to see a pop in gold prices or a sharp drop.

I would like to see gold pullback one more time and make a new multi-week low before heading higher. We did see extreme fear in the market 2 weeks ago which is when we took some long positions, but the lighter volume rally is not giving me comfort in adding more positions at this time.

Weekend Trading Conclusion:

In short, we nailed the market bottom on February 5th taking some long positions in US and Canadian ETF's. I tightened our protective stops for these positions a couple days later making sure to protect our hard earned money. The Canadian trades have performed extremely well for us.

Now we just wait for another low risk entry point which could happen this week depending on what the market does.

If you would like to receive my free weekly gold newsletter, please visit my website: www.GoldAndOilGuy.com

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/