A Chartist's View of the Euro Index

For the Canadians reading this site, I hope that you had an enjoyable Thanksgiving, and for the Americans reading this, my apologies for not posting for a while. The last post that was made was in regards to silver holding support. Here is an update on that chart:



The main thing to note is that when silver descended to the 200 day moving average, it immediately experienced buying pressure. Also notice that the bears cannot close the price in the blue rectangle support area. Please refer to the 2 previous posts for an explanation of this.

However, as each day goes by, I am becoming less and less confident that Silver will continue to hold this support. This is because, behind the scenes, the intermarket picture is beginning to deteriorate.

The Euro appears to me that it is now in correction mode. Whenever the Euro goes into correction mode, it has a negative influence on gold and silver. Here is a daily candle chart of the Euro index:



Last week, while on the subway, I thought of a new technique for using RSI to catch tops and bottoms. I figured that since the Euro is in a major bull market, its RSI will go deeper into overbought territory before registering a sell signal, and, on the other hand, more shallowly into oversold territory before registering a buy signal.

With this in mind, it seemed to make sense to use a less sensitive 14 period RSI for sell signals, and a more sensitive 9 day RSI for buy signals. This is what the above chart does.

In other words, in the above chart, we use the top RSI for sells, and the bottom RSI for buys. And as you can see in the above chart, the Euro has registered a sell signal. Once this occurs, the Euro has a tendency to correct until the point where it reaches a buy signal using the bottom RSI.

In conclusion, this could be viewed as a negative for gold and silver stocks for the next couple of weeks. The long term charts, as always, look excellent though, so I don't expect a significant correction. Thanks for visiting.