TSX at Support, Bullish Percent Looking Good

All Charts Courtesy of StockCharts.com


I'm just quickly going to go over a few charts on the TSX today. The TSX is Canada's main stock index, and it has many resource companies on it, so we want to see it rise when we are holding resource stocks, including gold stocks.

The first chart shows a daily chart of the TSX. I have made some annotations, which probably don't need further explanation.



The second chart is a bullish percent chart of the TSX. I explained how this chart works here. If you observe this chart, you will notice that whenever the RSI dips into oversold territory, a rally tends to develop in the TSX soon after. This is no guarantee that the TSX will rally this time, but I think it puts the odds in our favour.



That's all for the TSX analysis, but I also wanted to mention that I added some new material to this site. I added a search area, which is now available with all my other links. In addition, I added some new links, which I have under the header "Other Great Sites". Finally, I have added a bunch of book and DVD reviews, which you may find interesting.

Thanks again for visiting.

Always Keep the Long Term Picture in Mind

I'm afraid that some visitors to my site feel that I am contradicting myself when I simultaneously post evidence in favour of gold, and evidence against gold. The key point to understand is that when I do this, it is always in reference to different time frames.

One of the founding fathers of technical analysis, Charles Dow, stated that in any market there are trends within trends. Dow said that there are three trends within the stock market, which basically are short, medium, and long term trends.

A few posts ago, I said that the Euro was overbought and due for a correction. After this post, I made another post saying that the Euro was looking excellent for the long-term. A day after this post the Euro experienced the biggest decline for 2007. So, I was right when I said that the Euro was due for correction, but was I wrong about saying that it looked excellent for the long term?

Let's have a look at the long term monthly chart BEFORE the big Euro correction:


As you can see, the Euro is in a powerful uptrend, and the whole chart, in my opinion, looks very bullish. Now, lets have a look at the same chart, except AFTER the big Euro correction.


As you can see, even after the biggest correction for 2007, the Euro chart is completely unscathed, which means the long term trend is still, without a question, intact. After large corrections like the one we just experienced last week, it is important to keep the long term trend in mind.

Gold, Silver and the Euro are all in long term uptrends, while the US Dollar is in a long term downtrend. Personally, I keep about half my money in silver bullion to capitalize on this fact. With the other half I trade gold stocks on a short term basis. When I feel short-term bearish, I will go short gold stocks, but this really only has the effect of hedging my long-term core position.

Also, if anybody sees anything on the charts that indicates that gold stocks have bottomed out, let me know. I'm still not quite ready to jump back in, but maybe you see things differently. Write a comment if you do. Thanks!

Gold Stocks Damage Assessment

This was one of those weeks where anybody holding any kind of stocks likely got hit. The Dow had its worst week in 5 years, and the TSX lost more than 800 points. Gold stocks, like all stocks, went down again today. So, are we near a bottom?

Let's have a look at a CandleVolume chart of GDX, the American gold stocks ETF. I decided to show it in different colours just to give it a different effect.



The main thing to notice is how large the last 4 candles have been. This indicated that there was a tremendous amount of volume traded during these days. Falling prices on large volume is a bearish combination.

In my last post I said that there was not enough evidence to suggest that gold prices have stabilized, and I still feel that way today. The XAU failed to hold what I labeled as tentative support. Buying GDX today would be like catching a falling knife, and I am still waiting in cash until I get more evidence that we are at a bottom.

Although not shown, Canadian gold stock holders were not hit as hard. This is because the Canadian Dollar had a very bad day.

As you probably know, this fall in gold stocks was connected to a rise in the US Dollar, so let's have a look at that market to see what is going on. Below is a daily chart of the USD.



I have outlined two potential targets for the USD. If the USD index can find resistance at R1, then that would be a bullish development for gold prices.

In summary, if you are a day trader, then I would wait until there is more evidence to indicate a bottom. If you are a long term holder, then I would not be worrying very much. Also, please remember that this site is sponsored by Goldline. Thanks again for visiting.

Old Resistance Becomes New Support

Gold stocks had a rough day today. In fact, the XAU was down almost 5% intraday, and the gold ETFs did not do any better. This post will be about assessing the damage, and trying to figure out what's next, but first let's look at a previous post.

Last Friday, I said, "To be more specific, I feel that the XAU chart will likely top out on Monday, July 23." Below is a chart of the XAU, and I have drawn a dashed line connecting July 23 to the exact top of the market.


What's more important is what is going to happen next. If you look at the above chart, you will see that the XAU has closed right on its old resistance line. This is an encouraging sign, however, it is not a strong enough piece of evidence to indicate a reversal.

At this point, I can't really say what is going to happen next. Personally, I closed my short positions today, and I'm just going wait in cash until I get a better idea of what's going to happen. I'll have to examine the charts for a least a couple of hours tonight, and as I come to any firmer conclusions, I will post them on this blog.

At the very least, I can say that the long term signals that the weekly and monthly charts generated are still valid, and the charts so far have not sustained any long term damage. This means, that if you are not a day trader, this may be a good time to dollar cost average. In any bull market, it never hurts to buy on dips.

Anyway, stay tuned for a more in depth look tomorrow. Thanks again for visiting my site.