@nereus: so wird man täglich verunsichert...................

verfasst von Emerald, 05.02.2004, 21:43

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FEBRUARY GOLD UPDATE


Gold looks for a bottom!

E. B. Orlandini

Like all good things, our rally in gold and related stocks had to come to an end. Most gold analysts have been forecasting the decline since mid-October, and it just goes to show that if you stick to your position long enough, time will make you look like a genius. So what does this secondary decline in a primary bull market mean for precious metals? I'll start by telling you what it doesn't mean: it doesn't mean that we throw away the baby with the bath water and sell everything. Instead, I think it means that we are going to have one of the last great buying opportunities for gold, silver and related stocks. In order to understand the implications of the preceding statement, let's look at each one separately:

Gold - For the purpose of our analysis gold means the APRIL GOLD (GCJ4) futures contract. It closed the month of January at 402.90 after trading as low as 397.50 the day before. It is down almost $30.00 from its January 6th high of 432.30 and in all fairness, it was overvalued and it was due for a correction. Why do I say it was overvalued? I have three reasons: First, the RSI (Relative Strength Index) was above 70 and that's a level that I've only twice in the last year and maybe a half dozen times since the bull market began. Secondly, the MACD (Moving Average Convergence/Divergence) was above 5 and that's over bought, and third and perhaps most importantly, gold was trading almost 15% above its 50-day moving average (d.m.a.). That's overvalued! Currently, the 50-d.m.a. stands at 408.00 so we've corrected that part of the problem while the RSI is close to oversold and the MACD is now in neutral territory. Are we close enough to assume that a bottom is in? Honestly, I don't know but I think we are close.

Every significant correction in gold going back to the beginning of the bull market, has taken gold down to its 200-day moving average. Never below it; just right to it! The 200-d.m.a. now stands at 375.00 and as far as I am concerned, that's the risk to the down side. I have a feeling that this time might be different because gold trading has taken on a whole different feeling since mid-September of last year. The market forces that controlled gold for twenty years are now on the defensive. Therefore, I suspect that gold will not dip down to the 200-d.m.a but find a bottom somewhere in the 388.00 to 393.50 range. And maybe if the bull is really strong, and we're really lucky, we might have seen the bottom on Thursday. How will we know that? With two consecutive closes above 414.90. If the bottom does come in without touching the 200-d.m.a., it would be extremely bullish in my opinion and would imply that the coming rally could reach 485.00 in less time than most analysts think. In any event, we'll know soon
enough.

Silver - Again, when I say silver, I really mean the MARCH SILVER (SIH4) futures contract. The white metal reached a high of 679.50 on January 12th, a full week after gold topped out. By any measure, the run-up was nothing short of extraordinary, rising almost $2.00 in just over two months. Silver was also extraordinarily overvalued and still is by any reasonable measure. At its peak, silver traded more that 20% above its 50-d.m.a. and a full 32% above its 200-d.m.a. That's impressive! Also, the MACD was trading at almost twice its previous high for the entire bull market in silver while the RSI was almost 30% above its previous best mark (using weekly charts). What's more, they're still above their previous bull market highs.

As of the January 30th close at 625.00, silver is still trading well above its 50-d.m.a. which rests at 587.00 and miles above the 200-d.m.a of 5.13. Using daily charts, the RSI is in neutral territory while the MACD is still considerably oversold. Short term, I would avoid silver and I could even make a great case to short any rally that reaches 644.00, but I don't short bull markets. It is possible that we could work off this overbought condition by just drifting sideways here for weeks or even months, thereby giving the averages a chance to catch up. That range could reach from 655.00 on the high side on down to 587.00 on the low side.

Gold Stocks - I believe that the decline in the HUI (Amex Gold Bugs Index) is over and, if it isn't, the low will be a marginally new and insignificant low. You'll have confirmation of the low when we have two consecutive closes above 223.97. In short, I believe that now is the time to buy stocks as the market is truly oversold using and of the tools mentioned above. And to be perfectly honest, I never sold my stocks. I believe this Bull Market has a new flavor to it and a speculator can't risk standing on the sidelines.[1] This new flavor is brought about by the fact that gold has become money and is now entering the second phase of its multi-year bull market. This phase will be highlighted by large institutions taking a position in gold and will drive the price of gold up to a minimum of 560.00/ounce, and probably much higher.

In conclusion, we have a buying opportunity in gold stocks and one is approaching for physical gold. Silver, on the other hand, seems to need some more time. There is one possible exception to a further decline in silver prices and that involves a much greater than expected (read this to mean"reported") shortage in silver stocks. If that's the case, then all bets are off and silver is just pausing to catch its breath and is on its way to $10.00 and higher, overbought or not.

Good trading,



E. B. Orlandini

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gesamter Thread:

• @nereus: so wird man täglich verunsichert................... - Emerald, 05.02.2004, 21:43
  • Re: @nereus: so wird man täglich verunsichert... - aber Du als alter Hase.. - nereus, 05.02.2004, 21:58
    • A bissl Geduld noch.... ;-( - Zandow, 05.02.2004, 22:10
      • Re: A bissl Geduld noch.... - Zandow - nereus, 06.02.2004, 07:28