From Bearish to Neutral

Gold stocks started the week continuing last week's bearish momentum, but that momentum was lost toward the end of the week. Both Canadian and American gold stocks are retesting the breakdown point that occurred on Monday. This chart, showing Canadian Gold stocks, shows what I mean:


The above chart is a daily chart of an ETF that does twice the performance of the Canadian Gold Stocks Index, and the ticker symbol is HGU.to. As you can see, there was a quadruple bottom breakdown that occurred on Monday, which seemed to me to be quite bearish at the time. Although gold stock rebounded sharply on Friday, this gap area is going to be resistance, in my opinion.

The next chart is a daily chart of GLD. Obviously, there is a triangle forming, and many analysts see this as a bullish development, and that is a definite possibility. My advice for trading this is do not jump the gun on this formation. Gold and gold stocks are notorious for failed breakouts.


My options expired yesterday, so I probably won't be looking at the charts all that much next week, and I am sure most people have better things to do at this time of year than to technically analyze gold stocks! Hope everyone has a good Christmas.

Bad News for Gold Stocks

Everyday I examine 81 charts which are related to the gold market. Besides the 3 posted already, here are 2 more charts that caught my eye this week. First we have a daily chart of GDX:


I mentioned in another post that I thought gold stocks were forming a bearish head and shoulders pattern. This pattern is becoming more mature, and, in my view, has been activated. The downside target is what is labeled "Target 1" in the above chart.

Target 2 refers to the unfilled gap left from the beginning of September. I think that GDX would not descend past this area of support.

The next chart shows a weekly chart of GDX:


The main point of focus should be on the large red candle that occurred on heavy volume last week. There is absolutely nothing bullish about that candle. This is another reason that gold stocks look bad right now.

Technical Analysis of Currencies

Many interesting developments occurred for this past week, so this week's posts will be more in depth than usual. Let's start off by looking at the Euro versus US Dollar. This currency pair broke down quite badly this week. In fact, the Euro did not experience this level of selling in one day since 2004. Here is a point and figure chart that outlines the damage:


This chart has 0.5 box size and a 3 point reversal. It goes back until the end of July 2007. As you can see in the above chart, the Euro has formed a triple bottom sell signal, which, of course, is very bearish. This shows that the bulls have lost a key battle at an important support zone, and that the bears are now in control.

The above chart also shows a triple top buy signal that occurred back in September. Because this pattern is the opposite of the pattern just mentioned above, you may want to check out this article.


A defeat for the Euro must mean a victory for the US Dollar, and the following daily chart shows that was in fact the case:


If you observe the above chart, you will see that the bulls are in control of the US Dollar right now. This is evidenced by the extremely tall white candle formed on Friday, and by the MACD Histogram, which is showing that the short term trend is up.

On the November 17th post, I suggested that US Dollar strength was in the pipeline. On December 1st, I showed that the US Dollar Index was putting in some bullish candles, and that the bulls won a battle at the 75 mark. It would be worth checking out these posts, since the lessons learned will inevitably be applicable to some market situation at some point in the future.

Here is final chart showing another perspective of the US Dollar. It is a weekly chart, and the indicator on the bottom is the ADX indicator:


I showed a similar chart using the ADX Indicator in this article. However, my predictions turned out to be totally wrong, and the indicator gave a false signal. One would think that after this failure, I would be dubious of using this indicator again, but the difference here is that the above chart is a weekly chart, and not a daily.

The way signals are generated is when the thin blue line crosses above 35. This indicates that the trend is near exhaustion, and that a period of rest is needed. I feel that this method of using this technical indicator is more reliable than the daily version.

There will be another post to come later on today. Thanks for visiting.

Two Charts of the TSX

We all know what happened today, so I won't go into the details. In this post I'll just show two charts that may give you a perspective not shown in other sites. Firstly, we have a daily a chart of the TSX:


You'll have to click on the chart to read the annotations. The main thing is that the TSX failed at the confluence of two sources of resistance, and that the candlestick put in today is bearish.

Now, let's have a look at an intra-day chart of what unfolded. In this chart, each candle represents 5 minutes of price action and it covers three days.


Also worth mentioning is that every sector was hit today, and gold stocks did not escape the carnage today. Gold stocks are at a very important juncture as suggested in the last post. A defensive viewpoint is definitely warranted at this time. Thanks for visiting.