5 to 6 more weeks of rally before we hit resistance, WOW
chevy56
Gold Impresses with a Major Rally. Who was Buying?
By Roger Wiegand
February 22, 2007
www.tradertracks.com
“Gold prices had a big bounce yesterday on the weaker dollar, fresh geopoliticalnews and return of the commodities trading funds.” - Traderrog
Major Gold Price Drivers are ETF’s and Long Only Commodity Funds.
When gold had a great day like yesterday observers wonder where the action came from. The ETF’s were obviously big buyers but we think our greatest trades come from the hedgies with too much investable money and not enough homes for it.
The gold market is certainly not puny but hedge funds have the buying gas to produce our most significant moves in both gold and silver. We have repeatedly remarked about their buying power and yesterday was a perfect example. Gold and silver cycles are not finely tuned in unison but their technicals are telling me we have at least five to six more weeks of price rallies before reaching a hard resistance ceiling.
Daily Silver on 2-21-07 Broke $14.00 Overhead Resistance
This silver chart is telling us $15.20 is right ahead.
There are Two Price Camps for Gold and Silver in Spring, 2007.
“To decide, to be at the level of choice, is to take responsibility for your life and to be in control of your life.” – Abbie M. Dale
Regular disagreement among gold and silver analysts and market observers is a healthy and on-going condition. If the herd was in total agreement trader-contrarians would be running in the opposite direction. However, we are at an inflection point right now which will cause some traders to exit or hang on for more.
One of the best trader-teachers I know says, “Unless the charts, patterns and fundamentals are telling you to sell, you just better hold and stay in position for more. Obviously, appropriate risk control is mandatory.
We have reached a technical price point where gold and silver is on resistance and profit-taking might arrive with an A-B-C correction that is either mild or potentially more severe.
On the other hand, our gold and silver calendar has weeks’ left in the current cycle. While we are expecting the technical A-B-C, in our view it could be mild and a re-entry in these faster markets might limit your gains to the extent we say you better hold on.
In previous similar precious metals rallies, current strength and power were absent or not nearly as strong as what I am seeing today. Further, other commodities like crude oil and grain along with copper and some softs are all bullish. If these markets were individually bullish with the larger preponderance of the commodity group not as strong, the indication would be the funds are on the sidelines.
This is not the case as funds have covered large short positions in crude oil after its recent low correction. Further, they prefer to purchase a basket of markets to spread the risk and buy most of the entire commodities market at one time. This is why you’ll notice a substantial commodities group all bull higher at once. Watch the CRB for this indicator.
Other Important Fundamentals in Play
‘We see not a wall of worry but a wall of Scary.”- Traderrog
The Middle Eastern situation, in our view, is not improving at all. In fact, this week’s news points to new levels of risk in all markets, the forever war, and potentials for additional military aggravation.
Gold and silver bugs have watched the sinking U.S. Dollar create better metals prices. Today, this market is stuck on support and moving sideways but the primary longer trend is down. On the other hand, crude oil is often rising in tandem with gold; a situation we see today.
One major point this week, largely over-looked in my opinion, was the openly negative attitude by Japan toward Vice President Cheney’s coming visit to Tokyo. Their Prime Minister when asked the reason gave a mediocre and somewhat negative response. The Veep is in Australia right now attempting to drum-up support for the Iraq adventure. The Aussies were cordial and supportive. We don’t think the Japanese will feel the same way and Cheney’s performance will be watched closely. Never forget that Japan to a large extent holds the fiscal future of the United States in their hands.
On further news in Japan, we forecast no rate increases despite intense Japanese Central Bank discussions to do so. Things appear way too fragile over there and even more so in the United States. We do not see a wall of worry so much as a wall of Scary. A long list of problematic events is coming to head and this does not bode well for the general markets.
Hold on to your gold and silver positions and plan to purchase more. The speed of metals trading is going faster. Stay in the markets and let fast trading lift your positions
