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Erik McCurdy
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Erik is the senior market technician for Prometheus Market Insight and has been performing chart analysis since 1995. The software program that he developed to monitor long-term stock market trends has correctly identified 92% of the cyclical turning points in the S&P 500 index since 1940.... More
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Prometheus Market Insight
  • Gold Consolidation Formation Continues To Develop 0 comments
    Sep 9, 2012 4:44 PM | about stocks: GLD, SGOL, GDX

    In September of last year, our analysis predicted the development of a meaningful correction in gold. The long-term high formed as expected and the decline broke below cyclical uptrend support in May. However, the breakdown was not followed by a move down to new intermediate-term lows below congestion support at the 1,550 level and the correction subsequently developed into a consolidation formation.

     

     

    (click to enlarge)

    The Gold Currency Index (GCI) has also formed a consolidation pattern and it has begun to positively diverge from gold. While gold in US dollar terms remains well below the high in November 2011, the GCI closed above its comparable high this week.

     

     

    (click to enlarge)

    As we note often, charts do not always have a compelling story to tell, but it is important to listen to them when they do. The developing consolidation pattern on the weekly chart of gold favors an eventual resumption of the bull market and it will be important to monitor price behavior closely during the next several weeks for the next signal with respect to long-term direction.

    We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers.

    Disclosure: I am long SGOL.

    Themes: Gold Precious Metals Stocks: GLD, SGOL, GDX
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