Are Precious Metals and Indexes Going Parabolic?
Source: Chris Vermeulen, TheGoldAndOilGuy (5/13/10)
How can investors lock in gains and lower overall risk during these crazy times?
Below are a few charts showing you how I see things at this time.
GLD – Gold Exchange Traded Fund
The price of GLD and gold appear to be going parabolic (straight up). The tough part about this type of price action is that large moves can happen in a very short period of time. But on the flip side, when the price reverses we tend to see prices fall just as fast if not faster. Trading this type of price action carries a very high level of risk. Those chasing it up by buying at these overbought market conditions are facing a double-edged sword.
SLV – Silver Exchange Traded Fund
Silver is trading similar to gold, but the key difference here is that silver has not broken to a new high as of yet. The high was set in 2008 just over $20 per ounce. But from looking at the chart, I think metals are ready for a breather.
HUI Index – Gold Stocks
Gold stocks have yet to breakout along with silver, as they both are nearing key resistance levels. With gold stocks and silver trading near resistance, I figure we will see pause in the coming days as traders digest the recent strong moves up, thus taking some money off the table in case prices get stuck under these resistance levels.
SPY – SP500 Broad Market Exchange Traded Fund
The broad market appears to be forming a possible short setup on the daily chart as the price continues to drift higher with declining volume. Also, indexes are testing key resistance levels and the 10 period moving average. The next few days should be interesting. . .
Mid-Week Precious Metals and Index Exchange Traded Fund Report:
In short, it looks like precious metals and the broad market could take a breather in the coming days. I'm not sure how large of a correction we will see, but I do not think it will be all that big.
Gold and silver should have a quick dip with buyers stepping back in on weakness. The SP500/broad market is a little tougher to call as last week's market crash messed things up, washing out all the stops in one day instead of weeks. . .but we could easily see a 5% drop in the market still.
Anyways, I hope this analysis helps everyone. . .
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