Examining Gold in 3 Timeframes

Gold has bounced in recent weeks and appears poised to challenge the neckline it’s formed within the reverse head and shoulders pattern. One aspect of this pattern that bothers me is that it’s so widespread and known, I’ll almost be surprised if it completes the pattern and breaks out. While I don’t invest on a hunch or a theory, I would like to see more supporting evidence that gold is really going to break out to the upside.

Here are a few things that will tell me that the gold bull is ready to get this party started. But remember it pays to wait until the trend if firmly in place before jumping on. As much as it appears gold is going to move significantly higher, it can do the opposite. Everyone was so sure a few weeks ago the SPX was going to breakdown from its head/shoulders pattern. We all know what happened then and the same could happen here.

• RSI breakout on the weekly chart and a nice stair step consolidating pattern up to the neckline. If it races straight up to the neckline, it will probably exhaust itself and get rejected at the neckline. When / if it does reach the neckline, it would be ideal if it pauses for a few weeks just a hair under it before blasting higher.

• Here on the daily view the ADX is doing something very weird. The +d1 and -d1 are both pointing down along with the ADX. This doesn’t occur very often as one is normally up and one is down while the ADX is indicative of the trend. Watch this indicator for clues as to the next direction gold is going to take. When the ADX turns up, whichever d1 is on top and moving higher will tell you which way this chart is going to move.

• On the 60 minute chart the ADX has reached its lowest levels in over 6 months and a reading this low is somewhat rare. The ADX can act like a coil sometimes building pressure when it remains low for a longer period of time. If this can flatten out a little, the next pop is going to be big. Again, pay attention to which d1 is on top when it makes its move.

Disclosure: No positions

Comments

[rick12345:]

You're ignoring the fact that inflation is the main driver in determining the gold price and therefore, breakouts. The recent surge in gold prices was an anticipatory reaction to the current rise in equity markets. If the economy appears to be moving forward people (markets) are anticipating higher levels of inflation, brought about by an icrease in business and consumer activity. Yeilds are once again falling, so I would expect the gold price to correct itself slightly. Having said that, it will be interesting to see if the dollar holds up or continues its downward trend.

Jul 27 06:57 AM

[capt Brian:]

Tea leaves, all the gurus, all the mistakes. No one is looking at reality... and it scares me a lot More and more I like annuities. More and more I am reading less and less and looking out the window. I don't know beans, but I do know economics. I understand what causes unemployment. PEOPLE NOT BUYING THE PRODUCTS OF A GIVEN COMPANY RESULTS IN THE EMPLOYEES BEING LAYED OFF IN LARGER AND LARGER NUMBERS UNTIL THE COMPANY SELLS ENOUGH TO NEED MORE PEOPLE TO MAKE THEIR PRODUCTS, NOT TO STAND AROUND.
Those laid off get to spend less money, and go home extremely worried. The places they spent now have to make due with lesser and lesser cash flow to make their ends meet.
Those laid off now become a drag on the economy because we don't let people starve in this country.
So we inflict pain on small business, forcing things on them they don't need like health insurance for employees, and the owners find ways to need less employees to reduce their exposure to government intervention.
Remember the Dept of Energy? Who created it, what it was supposed to do and when it was created. And what did it do, and what does it cost?

Does anybody out there have any memory of the reason given for the establishment of the DEPARTMENT OF ENERGY

... during the Carter Administration ? (Surprise ! Surprise !)

Anybody?
Anything?
No?
Didn't think so!

Bottom line ...
we've spent several hundred billion dollars
in support of an agency
... the reason for which not one person
who reads this can remember.
Ready ?
It was very simple ..
and at the time 'everybody'
thought it very appropriate...


The 'Department of Energy'
was instituted on 8-04-1977
TO LESSEN OUR DEPENDENCE ON FOREIGN OIL.

Hey, pretty efficient, huh ?

AND NOW IT'S 2009,

32 YEARS LATER ...
and the budget for "NECESSARY" department
is @ $ 24. 2 BILLION a year !!

it has 16,000 federal employees &
approx. 100,000 contract employees.
LOOK at the JOB it has done

Ah, yes, good old bureaucracy...

NOW -
we are going to turn the
Banking System,
Health Care &
Auto Industry
over to government?

May God Help Us -

'CAUSE the US CONRESS ain't gonna !

I am getting ready to short this market big time, I began to short it at the end of the H & S, got clipped a little bit but got out soon enough. I still believe that this market is a lot of hot air rising. I am ready go go short, and buying gold and silver...

Good luck
Capt. Brian
The Lost Navigator

Jul 27 02:22 PM