Gold and Stocks Rally, but Is it Time for a Little Pullback
Source: Chris Vermeulen, TheGoldAndOilGuy (4/20/11)
"This could be the start of something exciting."
A lot has happened this week on a technical analysis basis which I can't really show in a written report like this. But can do so in detail within my video newsletter. There are just to many charts required and layers of analysis to cover. . .But I can cover some of the points and my thoughts using the charts below:
SPY 30 Minute Intraday Chart
This chart shows the volume traded at various price levels for the SP500 index. These high volume levels act as support or resistance depending if you are above or below them. On Wednesday we had a large gap higher into a resistance level, which the market could not break through. I am expecting to see the market take a pause and fade back down to fill part or all of Wednesday's gap window.
Most gaps tend to get filled. Gaps occur right at the beginning of a new trend, when momentum is strong. They generally do not fill all the way down to the bottom. I expect a couple days of sideways- to lower-price action. Buyers should step back in and send the market higher next week if this trend is to continue.
GDX – Gold Miner Stocks – Daily Chart
Gold stocks have been underperforming the price of gold bullion for several months. This typically is not a strong sign for physical gold prices. That said, I do feel the majority of investors are seeking true safety and want to own real gold and not some highly leveraged gold stock. This to me is more of a risk-off trade for global investors and it explains the performance.
From the recent price action shown on the GDX chart, I am expecting to see prices trade sideways or lower in the coming days. A sideways move would actually be bullish and would signal a possible breakout to upside. So that is what I am hoping will unfold in the coming days/weeks.
U.S. Dollar Daily Chart
The dollar continues to sell at a tremendous rate and the Fed is devaluing the currency as quickly as they can, trying to save the world one dollar at a time. . .
The trend is strongly down but it's starting to near a point where we should start to keep a closer eye on it for signs of a reversal to the upside. When the dollar makes a move higher and starts a rally, it will put downward pressure on stocks and commodities. We must be prepared to move our protective stops up and possibly take advantage of falling prices in the near future. Until then, remain long equities and commodities.
Mid-Week Trend Conclusion:
In short, it looks as though stocks and commodities are in favor again. Monday's panic selloff looks to have shaken the masses out of the market and the big money players were buying up all the shares they could. Members and myself are sitting nicely in our long positions and this could be the start of something exciting.
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