ChartWatchers

FOURTH QUARTER OUTLOOK

 | 
To be honest, I'm not a big fan of providing outlooks too far into the future because prices change continually.  As a technician, I realize charts can change daily.  Therefore, I have to be willing to change my thinking on a dime and, if you're managing your own money, you should too.  But I do like to evaluate the likelihood that a trend, either up or down, is sustainable.  With that in mind, let's take a look at gold.  A little over a month ago, I wrote about the "gold rush" being on.  Since that time, gold has risen another $100 per ounce, or roughly 6%.  I remain bullish on gold for the intermediate-term - perhaps 3 to 6 months - but short-term gold now has a few technical issues to deal with.  Take a look:
 
$GOLD 18 Month Chart 10.6.12

 First, gold is definitely overbought, so a near-term unwinding of both the RSI and stochastic is to be expected.  Second, a fairly significant area of price resistance has been reached.  The reaction highs in November 2011 and February 2012 both failed between $1790 and $1810 an ounce.  We saw three intraday highs last week in the $1790s.  Finally, traders need to deal with slowing momentum.  Take a look at the chart above and check out the lower MACD reading with the higher price action.  That long-term negative divergence does NOT guarantee a pullback in price, but it does indicate the RISK of a pullback has increased.  The fact that this slowing momentum is occurring simultaneously with price resistance makes it difficult to take any further long position in gold until one of two things happens.  I either want to see (1) a 50 day SMA test and a MACD centerline test to "reset" this momentum oscillator, or (2) I want to see the breakout above price resistance.  I'm not going to assume gold will rally right through resistance, especially when technicals are telling me that upside momentum is slowing.
 
On Monday, October 8th at 4:30pm EST, I will be hosting Invested Central's "State of the Market" online webinar where I'll discuss the fourth quarter prospects of gold and equities in general.  This webinar is reserved for annual members of Invested Central, but we always provide new annual members a 7 day, no-questions-asked Money Back Guarantee.  So if you'd like to attend this event, CLICK HERE for further details.
 
Happy trading and Happy Thanksgiving Canada!
 
Thomas J. Bowley
Chief Market Strategist
Invested Central
Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus