Technically Precious with Merv - For week ending 17 December 2010

Weakness in the recent market action has not been eliminated but as yet has not become serious.  What’s to come?

GOLD

LONG TERM

On the long term once a trend is set in motion it continues for a long time.  So it is this week, the bullish trend continues even though the shorter term action may be on the verge of changing.  Gold remains comfortably above its positive sloping long term moving average line.  The long term momentum indicator remains in the positive zone although it is moving lower and has moved below its negative sloping trigger line.  The long term volume indicator is mow in a lateral trend but remains above its long term trigger line.  All in all the long term rating remains BULLISH.

INTERMEDIATE TERM

All is still well with the intermediate term but starting to get pretty iffy.  Gold has been toying with the intermediate term moving average line but remains just above the line.  The line itself remains in an upward slope, for now.  The intermediate term momentum indicator remains in its positive zone, where it has been since late July.  It is heading lower and has shown a lower low, lower high scenario.  It is also below its negative trigger line.  As for the volume indicator, it remains slightly positive above its positive trigger line.  For now the intermediate term rating remains BULLISH with the short term moving average line confirming by remaining above the intermediate term line.

SHORT TERM

On the short term (chart not shown this week) things are not as rosy.  On Monday gold moved above a still positive sloping short term moving average line.  However, on Wednesday gold again moved below the line and this time the line slope turned negative.  The action since has been below the continuing negative moving average line.  As for the momentum indicator it moved into the negative zone on Thursday and remains there.  It is also below its negative trigger line.  As for the daily volume action that has not been very robust and indicative of a weakening interest by speculators.  The short term rating is BEARISH and that is further confirmed by the very short term moving average line having moved below the short term line.

As for the immediate direction of least resistance, that is governed by world events and who knows what might transpire during the week-end but I will go with the downside as that seems to be the direction of recent motion.

SILVER

The recent silver price action in a point and figure chart.  As often noted the red are resistance lines (or down trend lines) while the blue are support lines (or up trend lines).  The darker the line the more significant it is.  One additional line is shown, a dashed black line, which is an additional up trend support line which does not conform to the 45 degree angle criteria for trend lines but has shown to be a strong support line.  It has been touched 7 times now and could become an important support should silver break to the down side and start a real slide.  The more significant projections are also shown with two that have not yet been met.

The P&F chart suggests that silver is still in a strong bull market far from any reversal potential at this time.  Pending further up and down action silver would require a straight down move to the $24.50 level before it gives a reversal signal.  In all likelihood we will get further up and down moves long before that should happen and a different scenario will unfold.

From a long term perspective the normal indicators are still positive.  Silver price is well above its long term positive moving average line and the long term momentum indicator is well inside its positive zone with no negative divergence versus price action.  As for the volume indicator, it is reaching into new high ground and remains above its positive trigger line.  The long term rating is BULLISH.

On the intermediate term The positive indicators seem to be in no danger of changing anytime soon.  Silver is far above its intermediate term moving average line and the line remains in a positive slope.  The momentum indicator remains in its positive zone although it has indicated a negative divergence and has moved below its negative trigger line.  What this indicates is that the momentum of the recent price action is diminishing but as yet is not in serious trouble.  The volume indicator continues to move ever higher above its positive trigger line.  On the intermediate term the rating still remains BULLISH.  The short term moving average line is comfortably above the intermediate term line for confirmation of the bull.

The short term is more dangerous than the other periods.  Silver has closed just a very little bit above its short term moving average line and the line remains in a very, very shallow positive slope.  The momentum indicator has been showing a negative divergence for some time now and remains weak although it is still slightly in its positive zone.  The daily volume action peaked in early Nov and each subsequent peak has been lower and lower even as the price moved higher.  The short term is still rated as BULLISH but this could change very quickly as most indicators are so close to their neutral levels.  The very short term moving average line is also just slightly above the short term line for a confirmation of this bull but here too the very short term could drop below the short term average very quickly.  

The immediate direction of least resistance seems to be to the down side but as with gold anything can happen over the week-end to change that.

Precious Metal Stocks

Stocks in general continue to go through a topping process although the gambling and Penny Arcade stocks are moving into new high territory.  What this suggests is that any topping and reversals in the universe will most likely be short lived with a turn back into the up side and new highs to follow.  However, it is a dangerous time to be on the buy side for if the stocks do reverse and start lower there is really no telling who low they could go.  Wait for a firmer upside trend and then go with the flow.  One would definitely not be buying stocks whose short term rating is bearish.

Merv’s Precious Metals Indices Table

There will be no commentaries until after Christmas and New Years.  The next commentary is expected to be for the week ending 07 Jan 2011.

Here’s wishing all a very MERRY CHRISTMAS and a profitable NEW YEAR. 
 
 

Well, that’s it for this week.  Comments are always welcome and should be addressed to [email protected]. 
 

Merv Burak, CMT

Hudson Aero/Systems Inc.

  Technical Information Group

                   for

Merv’s Precious Metals Central

18 December 2010

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at techuranium.blogspot.com.

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer.  Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician (CMT) and tries to decipher what’s going on in the securities markets.  As an underground surveyor in the gold mines of Canada’s Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry.  As a basically lazy individual Merv’s driving focus is to KEEP IT SIMPLE.

To find out more about Merv’s various Gold Indices and component stocks, please visit preciousmetalscentral.com.  There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors. 

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