Gold, Silver, and Miners Break Away

ilver and the miners are all breaking out with force. This would imply (hyper)inflation is being priced in (because of the EU bailout package). The miners have some catching up to do ...

GLD, GDX 60 min charts - 2010-04-26

• both are in the 61.8% FIB retracement region
• both are in rising channel
• both are are hitting medium term falling resistance line

Trading Plan Entry Points:

1. Breakout above medium term falling resistance line - look for confirmation of inverse HSH neckline breakout
2. At the bottom of the rising channel line with a tight stop right below the bottom channel line

Gold Miners Leading Gold - Pointing to Higher Prices

On the open GLD and GDX gapped down. GLD did recover some but still closed down, while GDX reversed and closed higher.

Be on alert ... tomorrow will be a key day

Bullish Renko Signal For Gold and Miners

Kitco Gold Index ~= GLD:UDN

I need to give credit where credit is due. The Kitco Gold Index is where I got the idea of factoring out the effect of USD currency fluctuations from the real supply-demand curve. This can easily be done by plotting a ratio of the equity to UDN. In my previous post I showed you the true picture for GLD and GDX. To show you that this methodology is valid, let's compare a chart of the Kitco Gold Index to my chart:

For a more direct comparison, I'll first show a daily line chart:

However, I prefer to use plot 3 EMA's to smooth out the "noise":

It's not an exact match to the Kitco Gold Index because I am using slightly different data. I am using data that is available to the "common" man - simple ETF's which won't mirror the underlying instrument exactly. However, as you can see, the GLD:UDN chart is pretty close to the Kitco Gold Index.

So Far So Good For Gold

Below is today's update of the 60 minute GLD chart:

GLD filled the gap with a strong move today, and $GOLD finished above $1100 which is very promising. The continuation reverse head and shoulders pattern is looking textbook:

GLD held at support on Wednesday. On Thursday, GLD stabilized with an indecision candle, but was followed up with a long white candlestick. Of course, GLD needs to follow through on this and break through the 110.5. Basically, in order to break out of this pattern and resume the uptrend, GLD needs to break through the neckline. The gold miners are saying they will:

I am using the 3 day EMA to reduce the "noise" and draw a more accurate trend line. This chart is saying that the Gold miners broke through the down trend in early March, and a higher low develops, then this is pointing to more higher highs ...

The Renko chart is also confirming the breakout - the current short term trend is still up. In my next post, we'll take a look at how GLD and GDX are performing relative to $USD.

Relative Strength Analysis - GOLD Juniors vs Seniors

Even though GOLD was beat up a bit today, GOLD did hold at support. Another good sign for GOLD is that the Junior mining companies are leading. GSS is an excellent Junior GOLD proxy:

GOLD Fibonacci Extrapolation Levels

In this post I will show you how to use Fibonacci retracement levels in reverse. Normally we use Fibonacci to find support levels within a correction downtrend. Resistance levels are usually identified by previous highs, but what if the stock is making all time new highs - for example GOLD. Let's use the Fibonacci tool to find the next resistance level in GOLD's uptrend.

The idea is to find the best fit for the Fibonacci levels. This is subjective, but using the most powerful computer on earth, the human brain, any one can use this simple approach. Note that each time GLD reached the upside target it retraced to the 38.2% Fibonacci level. This is saying that GLD upside target is around $160. What are the gold miners going to do? Lets use GDX - a proxy for the $HUI index:

It all lines up quite nicely. GDX is sporting a classic reverse head and shoulders pattern. The upside target for the breakout is $31 above the neckline at the breakout point. In order to line up with the Fibonacci target, the breakout is expected to be very soon ...