Erik78's  Instablog

Every higher high from 2002 to 2008 was supported with a higher high of RSI and MACD, suggestive of bullish momemtum.

The last push up to 1007 however, was not.  The push to 1007 actually rose just high enough to "back-test" the prior 6 year support rsi/mach/stochastic channel, which used to be a support indicator.  Now it a resistance level.

Gold's longer term chart is displaying negative divergance with every indicator (rsi, mach, stochastics).

Target: 720 in 2009 (the major trendline support level)

Disclosure: Short GLD, Short USO

   &nbs... Long DBA (hedge)

The U.S. dollar was hammered this last week, as oil as well as gold enjoyed a nice inverse pop, It now appears Technically very clear to me that it is time to enter for a May-June deflation swing here.

UUP is an ETF which track's the performance of the US Dollar as compared to a basket of other currencies. Every time that stochastics of UUP have gone below 20, it has signaled a swing bottom for the dollar. We also have 3 higher lows on the MACD and well as RSI, signaling an uptrend of momentum.

Disclosure:

Short USO

Short GLD

Long DBA (hedge)

The debate of inflation vrs deflation vrs stagflation has always a great one to stir the pot and evoke some of the best economic debates and insight there is.

The bottom line here is that we all want to make money in this market, with the least amount of risk exposure.  Well perhaps speaking for myself, because I surely am.

Throw your gold out the window, and load your wheelbarrows with food.

(no, not literally, that's one of those attention-grabber statements, how did it work?)

Fundamentally, I "think" that gold is overvalued here.

Fundamentally, I "think" that grains are undervalued here.

Fundamentally, what I "think" means nothing, and I would advocate to never trade of that alone.

However, when the fundamentalls and technicals both agree, now that is a trade.

When two different underlying assets which both share the same dri... force behind them (inflation in this case) create an excessive divergance in relative price between the two, a highly profitable trade opportunity arises to fade them back to the covergance center.

The trading vehicles I have selected most purely represent the gold and grains sector are GLD (SPDR gold shares ETF) and DBA (Powershares Agriculture ETF).

So let's take a look at the what the technicalls are telling us here, via 3 charts.  DBA, GLD and DBA vrs GLD

1) DBA: After hitting an intraday low of 21.52 on 5 Dec 2008, DBA then rallied to a 6 month intraday high of 27.21 on 6 Jan 2009. After pulling back to 22.37 on 3 March 2009, DBA has been in a powerfull uptrend and currenty at 26.73 as of the 8 May 09 close. DBA is currently only .48 cents away from breaking it's 6 months high set on 6 Jan 2009. After that, it appears the next resistance level is at the 32.00 level, from September 2008.

2) GLD:  After hiting an intraday high of 98.99 on 20 Feb 2009, GLD had produced a series of 3 consecutive lower highs during it's current downtrend. GLD is having difficulty breaking back above the 92 level here, which was the same resistance level which it encountered in October 2008. As GLD continues this current downtrend, it appears the next support level is the 72.00 level, established in November and Decemeber 2008.

3) GLD vrs DBA: a comparision over a 2 year period.

Disclosure: (equal amount of)

Long DBA

Short GLD

(Exit Target: when the weekly chart converges again)