ChartWatchers

A TIMELY BOUNCE FOR GOLD

 | 

After reaching an all-time high in August, gold has corrected about -18%, but a recent bounce prompts us to take a closer look to see if the correction could be over. The most encouraging technical evidence is on the weekly chart.

Note how the recent low occurred just above the long-term rising trend line. From the beginning of the correction I thought that this trend line was a logical downside target. Whether or not the bounce off this line is the beginning of a new up leg destined to take out the August highs, has yet to be determined.

Swenlin1

The fact that the support has held is very positive, but the weekly PMO (Price Momentum Oscillator) configuration is still negative -- falling below its EMA, and still somewhat overbought.

Shorter-term the daily PMO below is oversold and has bottomed, but the price line has encountered resistance at the 200-EMA.

Swenlin2

Our Trend Model for gold is currently neutral (in cash or fully hedged), and a new buy signal will not be generated until the daily 20-EMA crosses up through the 50-EMA. That will probably take a few weeks if prices continue to rise.

Bottom Line: The correction has been of sufficient depth and duration that the bounce off long-term support presents a short-term buying opportunity for those anxious to exploit the next leg up, assuming that there will be one; however, not enough tumblers have fallen into place to justify anything but very tight stops.

 

Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of DecisionPoint.com, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus