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Gold Narrowly Avoids IT Trend Model Neutral but Not Out of the Woods

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Carl and I have been watching the Gold chart carefully for a likely Intermediate-Term Trend Model (ITTM) Neutral Signal. However, with the rally of the last two days, both the 20-EMA and 50-EMA have slowed their descent. A negative 20/50-EMA crossover will trigger that ITTM Neutral signal. Why not a SELL signal? If the 50-EMA is still above the 200-EMA, we're looking at a LT bullish trend and we choose to move to a neutral signal (cash or fully hedged) rather than make a bearish short during a bullish LT trend.



We generally don't see many gaps on Gold, but yesterday we did. Price was lower on the day and it looks like we could be looking at a possible island which is a reversal pattern. The 1300 level has caused Gold some problems earlier in the year, but it isn't an impenetrable wall as the August breakout proved. A PMO bottom right here would certainly improve my outlook for Gold. The last two short-term bottoms on the OBV visible in the thumbnail were in a positive divergence with similar price bottoms; I see this breakout as confirmation of that positive divergence. The SCTR is starting to show some improvement and this gap up came after a test of the 200-EMA. I thought that we'd see a test much lower than that, but ultimately it wasn't necessary to clear overbought conditions for the PMO.

The longer-term picture is a bit blurry. As far as price action, the probable bounce off the declining tops trend line (the latest OHLC bar isn't final until Friday) looks good and supports a bullish conclusion. The PMO has topped and is declining, but it does look like it's decelerating.

Conclusion: The PMO is turning up on the daily chart right in near-term oversold territory just as price is bouncing off 200-EMA support. I've been bearish on Gold, but the picture is improving. Avoiding a negative 20/50-EMA crossover would be optimal to avoid a whipsaw ITTM Neutral signal. I would like to see the 1300 level recaptured. Until then, Gold isn't out of the woods.

 


Helpful DecisionPoint Links:

DecisionPoint Shared ChartList and DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking


 

Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin


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Erin Swenlin
About the author: helped create and manage the DecisionPoint.com website alongside her father, Carl Swenlin. Together, Erin and Carl launched the DecisionPoint daily blog in 2009. She hosts the MarketWatchers LIVE web show at StockCharts.com, and is also a Member of the CMT Association. Learn More
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