GOLD (daily)Upside: In just four days, gold has fallen more than $80 on a closing basis -- nearly $130 from Monday's intraday high to Thursday's intraday low. MACD-Histogram starting to look oversold.
Resistance: 50-day MA at around $934.
Downside: Monday's spectacular shooting-star candlestick signaled exhaustion of buyers. Bulls respected top rail of channel yet again, and emboldened bears took over, selling hard. Gold sliced through bottom rail, was detained briefly at 50-day MA on Wednesday, then broke through that support as well on Thursday. RSI was repelled at around 70, creating a bearish divergence, and is now below 50, which should offer resistance. Sustained recovery unlikely until RSI falls into oversold zone beneath 30 and comes back out of it. Bearish divergences also seen in MACD and MACD-Histogram. MACD has made a bearish crossover and has lots of room to fall before approaching zero.
Support: Potential Fibonacci line at $909; potential Fib line at $848, coinciding with November high.
Bottom line: Intermediate-term correction isn't likely to end until gold forms a base, possibly around $850, for a rally. A test of the 200-day MA is not out of the question.
GOLD (weekly)Upside: Gold may retest top rail of channel from below.
Resistance: Top rail at around $950.
Downside: Breakout from channel now seen to have been a fakeout. RSI has plunged out of overbought zone, forming bearish divergence. MACD-Histogram also showing bearish divergence. MACD reversing from exceptionally overbought levels.
Support: Top of pennant, at around $850; 50-week MA.
Bottom line: The bull run from last August is over. This correction could last several months, possibly more than a year. Compare the aftermath of the last blowoff top, in May 2006.
SILVER (daily)Upside: Silver may test broken support, now resistance, at purple line and at 50-day MA. RSI approaching oversold levels, as is MACD-Histogram.
Resistance: Purple line; 50-day MA; bottom of channel.
Downside: Silver made a double top on Monday. Top rail of channel proved insurmountable this time, on a closing basis. Silver plummeted an average of a dollar a day to close below $17 on Thursday after being detained briefly on Wednesday by channel's bottom rail. RSI was repelled at around 70, creating a bearish divergence. MACD has made a bearish crossover and has lots of room to fall before approaching zero.
Support: Fibonacci 50% retracement level at around $16.25; Fib 61.8% retracement level at around $15.
Bottom line: Silver's plunge has been a typically steep one. It could take some time to repair the damage to buyers' confidence. A test of the 200-day MA is conceivable.
SILVER (weekly)Upside: Silver fast approaching bottom rail of channel, where it may pause for a possibly violent relief rally. RSI getting close to 50 mark and may bounce from a level between 40 and 50, if past experience of the aftermath of a blowoff top is any guide.
Resistance: Thin blue lines.
Downside: RSI has fallen out of bed from highly overbought levels. MACD, too, is reversing from exceedingly overbought levels. Silver looks headed for bottom rail of channel and, most likely, its 50-week MA.
Support: Bottom of channel at around $16; 50-week MA.
Bottom line: Exceptionally overbought silver's failure to reach top rail of channel was followed by fastest one-week decline in recent memory. Technical damage done to charts, reflecting abrupt loss in investor confidence, will take months, possibly more than a year, to repair. It will be quite a while before we see $21 silver again.
GDX (daily)Upside: Thursday's gap-down hammer candlestick suggests short-term bounce to close gap and test bottom rail of channel. Plenty of past volume just above $46 could provide some support.
Resistance: Bottom of channel at around $49.50; 50-day MA.
Downside: Gold-mining ETF has broken down from its seven-month channel. RSI has fallen below 50. MACD has made a bearish crossover. GDX looks likely to test its 200-day MA, although a brief bounce could intervene.
Support: 200-day MA at a little under $45.
Bottom line: GDX's failure to follow through on breakout through red line has precipitated a typically violent reaction. We could see a relief bounce as early as next week.
GDX (weekly)Upside: RSI has fallen below 50 and is near levels from which it has bounced before.
Resistance: Heavy past volume between $48 and $53 (see previous chart for clearer picture) could represent stale bulls waiting to get out.
Downside: GDX has fallen more than 15% in a week, following fakeout at top rail of blue channel. RSI has fallen below 50, creating a bearish divergence. MACD is poised to make a bearish crossover. GDX looks headed for top rail of purple channel and nearby 50-week MA. A decline to bottom of blue channel at around $40 is conceivable.
Support: Top of purple channel at a little under $45; 50-week MA, just below that.
Bottom line: In terms of price, the gold-mining ETF may be more than halfway through its decline. In terms of time, it may be many months before GDX surmounts this week's peak.
U.S. DOLLAR INDEX (daily)Upside: Monday's hammer candlestick heralded a sharp rally. RSI has risen to 40 from heavily oversold levels. MACD is poised to make a bullish crossover, also from a heavily oversold level.
Resistance: Bottom rail of channel at around 73.
Downside: Small pullback or brief congestion possible at bottom rail of channel.
Support: Monday's intraday low at 70.7.
Bottom line: Dollar could rally as far as its 50-day MA, currently at just under 75, before taking a breather.
U.S. DOLLAR INDEX (weekly)Upside: RSI has popped out of the oversold zone, making a bullish divergence.
Resistance: Bottom of previous congestion (descending triangle), at around 75.
Downside: MACD recently made a bearish crossover.
Support: Monday's intraday low at 70.7.
Bottom line: U.S. dollar is enjoying an oversold rally. The index is well below its declining 50-week and 200-week MAs, so the long-term trend is still down.
[Bonus chart] SILVER:GOLD RATIO (daily)As further evidence for the hypothesis that silver leads gold at the extremes of a move, in this case a blowoff rally, note that:
• The ratio's RSI fell below 70, from highly oversold levels, on March 10 -- a week before the March 17 top in gold and silver.
• The ratio's MACD made a bearish crossover on March 12, again allowing bulls ample time to take some profits or exit their positions.
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