Gold, Stocks and Currencies

MINING.COM Staff Writer | June 29, 2010 | 2:44 pm Precious Metals Gold 

We had quite a day on Tuesday.  Gold started out getting smashed, then recovered.  The recovery may have been due in part to the Stock Indices crashing. Even with a $20 recovery from its lows, I expect we’ll see lower prices in the (near) future.  I was surprised to see the Gold recover without taking out the rest of the stops (arrows pointing at the lows of the bars) that hang in a row just below the market, down to about the 1212.1 area.

In the short term, it’s going to take some real strong new (panic) buying to move it up much further than Monday’s highs of 1246.0.  One thing that comes to mind might be some anticipation or result of the Unemployment Report on Friday.  (Gold chart below – click on the chart to ENLARGE)

The S&P took a real dump on Tuesday.  Closing near its lows, I expect one more bump down, to clear out any sell stops below Tuesday, and then a short term recovery back toward its moving averages. The S&P cleared out long term stops below the 1032.25 area and after a move to clear out anything hanging below Tuesday’s lows, I expect the market to turn its attention to knocking out the buy stops from people that have been selling / shorting / chasing the market down. The S&P is far away from its moving averages and I expect it to make a move back toward them.

Below is an example of a market (Cocoa) that got far away from its moving averages and then retreated back. On this particular chart the market got far away on the upside, then went down.

(Remember, there’s no guarantees with any strategy though.)

(Below) I’m looking for the Canadian Dollar to act the same way as the S&P….. Retreat to its moving averages.  If not already long, buy new lows (or perhaps around the 9423 area) for a nice short term spring back up toward the MA’s. Don’t get greedy on the upside, we’re in a downtrend (at least for the short to medium term).
The word, believable or not as it may sound, was that there were a lot of people short the Euro Currency, hence its long term drop, and when the World Cup started people covered their positions so they could focus on the Soccer tournament.  That was the move we saw when the EC bounced from its lows in the 118.84 area up to around 124.77.  Notice that the move started when the EC was far away from the MA’s.
The arrows point out a magnificent row of sell stops (beneath the lows of the bars) that can be taken out as the market resumes its downtrend. Perhaps as the teams leave the tournament the stops will get taken out and the market moves lower. (Hey, fundamentals are fundamentals, but “technically” those lows / stops are goners…. in my opinion.)  The anticipation of further crumbling of the Euro zone might have something to do with it too.
Discussion of strategies and analysis is welcome. My door is always open.
Sean E. Blair
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