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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. His... More
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  • Gold Holds Above Uptrend Support 0 comments
    Nov 16, 2012 9:00 PM | about stocks: GLD, SGOL, GDX

    Gold closed slightly lower today, holding above support at the lower boundary of the uptrend from May.



    (click to enlarge)

    Our Gold Currency Index (NYSE:GCI), which tracks the intrinsic value of gold as an international currency, is also holding above its comparable uptrend support level. However, a slight positive divergence has developed between the GCI and gold in US dollar terms. Notice that the GCI is holding well above the short-term high in early November and that its momentum indicator and price oscillator are both in positive territory. As longtime readers know, divergences between the GCI and gold in US dollar terms usually forecast the direction of the next meaningful move, so the slight positive divergence is a bullish short-term development. It will be important to monitor this divergence during the next several sessions.



    (click to enlarge)

    With respect to cycle analysis, the beta low (Pending:BL) of the current short-term cycle is overdue and it could form at any time. The move above the last beta high (NYSE:BH) during the alpha phase rally suggests that cycle translation is in question. A strong beta phase rally would signal the likely transition to a bullish translation and forecast additional gains.



    (click to enlarge)

    From an intermediate-term perspective, it remains likely that the latest intermediate-term cycle low (ITCL) formed in late October. The character of the initial rally phase of the new cycle will indicate if the bullish translation from May is likely to persist, so it will be important to monitor the rebound off of the latest ITCL.



    (click to enlarge)

    With respect to technical analysis, the consolidation formation on the weekly chart that we have been monitoring since early September continues to track the bullish scenario that we outlined at the time, favoring an eventual resumption of the long-term uptrend.



    (click to enlarge)

    The consolidation formation has entered a crucial stage of its development and market behavior during the next several weeks will likely signal if the secular bull market is preparing to resume. Therefore, it will be important to continue monitoring gold closely.

    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.

    Stocks: GLD, SGOL, GDX
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