3-11-2010 

Seasonal Gold Chart

The Seasonal Gold Chart shown above was provided and created by the Moore Research Center, Inc.

The top part of the graph contains three lines. The magenta line represents the most recent 30-year pattern. The black line represents the most recent 15-year pattern. The red line represents the most recent 5-year pattern. 

The bottom of the graph contains a representation of what gold prices have looked like in prior Bull and Bear Market scenarios, dating back to 1973. Neutral years are not shown. As I see, one of the ‘keys” is figure out which of the patterns, if any, gold is following. 

As I mentioned in last week’s report, the path gold takes in March can often be very important. In “Bear Pattern Years” the month of March has not typically been friendly to gold bulls. On the other hand if prices reverse and rally in March, prices could end up with a pattern similar to that of “Bull Pattern Years”. This would go a long way in encouraging market analysts that the probability of gold seeing even higher prices in 2010 is likely In other words, I think how the month of March ends up in terms of gold prices gaining or losing value could prove to be very important to the track gold prices take in 2010. 

According to the Moore Research Center, the first two thirds of the month of March have historically seen more downside price pressure than upside pressure. Over the past 15 years there have two years where this hasn’t occurred. Could this be the third year? I wouldn’t play for it just yet. You’ll read why below.

Daily Gold Chart

Here’s my analysis of the daily chart. 

The Swingline Study displayed as the black line now has a bearish pattern, one of making lower lows and lower highs. 

Prices are also currently trading under the 18-Day Moving Average of Closes, 1119.4, which I view as another bearish factor. 

I would like to see the Swingline Study develop a pattern of higher highs and higher lows, not one of having a lower low. This could occur if a downside correction were to take place that does not result in 1088.1 being broken.

Weekly Gold Chart

Below is a Weekly Gold Chart. Each individual bar on the chart represents one week of trading. In "red" I have plotted the 18-Week Moving Average of Closes and in "black", the Swingline Study.

Let’s analyze this chart. 

First, the Swingline Study has a chart pattern of that of a “higher high” 1145.8 with that of a “lower low”, 1061.6. In other words the current chart pattern is that of a higher high and lower low, which I view as a neutral chart pattern. 

Second, prices are trading under the 18-Day Moving Average of Closes, 1116.7, which I view as a bearish factor. 

Third, because the most recent price apex is one in which the most recent apex made is that of a higher high, the Swingline Study has a bullish bias. That bias however is neutralized until and unless prices get back over the 18-Week Moving Average of Closing Prices. 

Last, the Slow Stochastic Study is no longer oversold since both the K and D Lines, the red and brown lines on the bottom graph, both have readings over 30. This simply means prices are no longer oversold and could go either way.

Summary

Last week I wrote, “I think gold is at an important place in terms of time. Price momentum has an upside bias….I expect to see support against the 18-Period of Moving Average of Closing prices in both the Weekly and Daily Charts”. 

Since last week prices have seen downside price reversals on both the Daily and Weekly Charts. Prices at the time of this writing are trading under both the 18-Week Moving Average of Closing Prices and the 18-Day Moving Average of Closing Prices. This is not bullish. It is bearish. In fact it would become very bearish if prices were to break through 1061.6.   

I see current price resistance at the 1119.0 level. At this time until 1128.3 is taken out, I recommend having a short term bearish bias. That bias will change to a longer term one if prices trade under 1061.6. 

Since the Daily and Weekly Charts are not in synch, I consider gold to be in a trading pattern, not yet a trending one, which fits in with seeing how prices in the month of March resolve themselves. 

Price patterns are very interesting and will become more so as the Daily and Weekly Charts should eventually get in synch with each other. Whether the Bulls or Bears win out may dictate how the rest of the year plays out according to the Seasonal Chart at the beginning of this report, assuming the market takes on a bullish or bearish bias.

Twice Daily Updates

The key to keeping up with my trade recommendations is through my Twice Daily Updates and my oral updates. 

This Weekly Metal Report is designed to provide you with my current "take" on the gold market. However, what happens when my ideas change before I write my next report? That's where my Daily Updates come into play.   

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