Consolidation Continues for GOLD

Since I don't have access to intraday $GOLD prices, I will be using GLD as the $GOLD proxy:

Looks like another continuation head and shoulders pattern is in process. Let's look at today's action:

On the 15 chart, we can see that GLD filled the gap today, and ran into resistance. GLD needs to clear 108.60, and the next resistance zone is in the 109.5 - 110 range. Take note of the "marker". From experience, I would say do not ignore these.

Looking at the 60 minute chart, we can see a lower high and a lower low. In other words, it looks like a short term down trend has started, and I have drawn a channel. GLD did find support at the 50% retracement level, but I am expecting one more lower low to reach the 61.8% Fibonacci retracement level. Once again look at those beautiful Fibonacci fan lines.

USD Renko Strategy

Let's first look at some UUP candlestick charts:

On the intraday chart, UUP gapped up on the open, but was under pressure all day closing lower. However, it did find support at the previous gap. This could be a possible bull trap. If the uptrend line is broken on the daily chart, the next support level is at 23.28 - at the 38.2% Fibonacci retracement level. The weekly chart also shows that UUP has run into resistance as well. We are at yet another decision point. What side of the trade should you be on? Renko charts can help you with that ..

Short Term - Bullish

Medium Term - Bullish

Long Term - Bearish

The long term dominant trend is still down on the monthly Renko chart. However, the weekly Renko chart shows that the USD is still in a medium term up trend. Wait until the weekly Renko trend reverses before rejoining the USD bear camp. If you plan to short the USD, then use the daily Renko to fine tune your trade.

How to use Renko Charts

You always want to trade with the major trend - the trend is your friend. Renko charts differ from traditional price charts because they ignore the passage of time and focus on price action and trend. Other types of charts with a similar perspective are Point and Figure, Three Line Break, and Kagi charts.If you want to learn more about these, I recommend the following book: Technical Analysis from A to Z, 2nd Edition


Let's take a look at some $GOLD Renko charts:

Use the weekly chart to filter trades using the daily chart to ensure you are trading with (not against) the longer term trend.

Let's take a look at $XAU and $HUI:

Daily Renke Charts

Now, let's step way back and see the big picture for GOLD using a monthly Renko chart:

The long term trend is still  secure. Use the weekly charts to identify the dips and daily charts to time the trade execution.

Comparing GOLD Consolidation Periods

In Friday's post, "Gold is Holding On", I asked you to compare previous consolidation periods to the current consolidation in GOLD that started in Dec. The key to understanding the future lies in studying the past. In other words, "history repeats itself" which can be seen by identifying chart patterns. Chart patterns are reliable and repeatable because they are the pictures painted by human psychology and emotions.

Let's take a look at the current picture, and then step back in time:

2010

2009

2008

By visually inspecting the charts, I would say the current 2010 period has closer resemblance to 2008 that 2009. Basically, GOLD is currently consolidating after making another all time new high, as it did in 2008. If it wasn't for the stock market crash, GOLD looked like it was on its way to making a another all time new high in 2008. Instead, GOLD was forced to retest it's previous high before resuming it's uptrend. Thus, unless the stock market crashes again, expect GOLD to continue making new highs.

Another stock market crash is inevitable. However, I believe hyper-inflation will precede another stock market crash. The United States (and Europe) pretty much has no choice. The country will be running under a massive deficit for an extended period. The easiest way to "reduce" the debt is through hyper-inflation. Once the debts and deficits are under control, expect the US to take a page out of Paul Volker's playbook. Interest rates will keep increasing until finally we come full circle ... DOW:GOLD ratio back to 0.5 - 1. When that occurs, sell all your GOLD assets and move right back into stocks.

Decision Point for GOLD - Mar 19 Update

Below is the updated chart that I posted last Friday

• Big decline today on high volume
• Fib Fan line support line was penetrated
• Possible head and shoulders pattern forming
• Mar 16 gap was filled

On the intra-day chart, the picture looks short term bearish. However, as can be seen from my previous post, Gold is still holding onto the falling wedge breakout. The jury is still out ...

Gold is Holding On

Strength in the USD continues to put pressure on Gold. Gold was knocked down today but it is not out.

The falling wedge breakout is still holding. The 21 EMA is still above the 55 EMA, but GLD did cross both today on good volume. The good news is that the 89 EMA is still holding and the major up trend is still well in tact. I would also like for you to compare the Jun - Sep period with Dec - present. Tell me what do you see?

Let's add some Fibinacci Fan Lines to the picture:

Note that GLD has only retraced 38.1% and how well the fan lines work. Let's compare GDX:

The Gold miners did better on the way up, but are faring worse on the way down - as usual. Overall, GDX has performed better since Jan 2009:

Invest in Venezuela Gold via Rusoro Mining

The 3 keys to a successful mining company are : "location, location, location"  ...

1. political stability
2. security
3. infrastructure
4. transport
5. power
6. refining
7. capital
8. personnel
9. mineral resources

Venezuela has all of the above except for #1 on the list. Well, "when in Rome" ... I mean, when in Venezuela, do as President Hugo Chavez does. Chavez has given the thumbs up sign to Rusoro Mining, a Russian partner. Here's a couple of key slides from their Nov 2009 corporate presentation: