Saturday - June 17, 2006
Gold ETF Enters Support Zone
After a harrowing decline the last 5-6 weeks, the StreetTracks Gold ETF (GLD) finally reached a support zone and RSI became oversold. This paves the way for a bounce and possibly a continuation of the long-term uptrend.
A number of technical items have come together to mark support around 55. First, the rising 200-day moving average currently sits at 54.16. The fact that GLD is above this moving average and that the moving average is rising is long-term bullish. Second, the January to March consolidation provides a nice support zone between 53.5 and 57. Third, the blue trendline extending up from the August low extends to around 55 and acts as support. And finally, the current decline has retraced 50-62% of the prior advance (May-05 to May-06). Even though a classic correction pattern did not form, the distance of the retracement (50-62%) is normal for a correction.
In addition to evidence for support, 14-day RSI moved below 30 for the first time since 7-Jan-05. I should point out that GLD took another month to bottom in early 2005 and there was another support test at the end of May, over four months later. There was a short-term signal in February 2005 when RSI formed a positive divergence from early January to early February 2005 and moved above 50. The same could happen here and gold may need some time to base. Buying now is for bottom pickers and aggressive traders. The other option would be to wait for RSI to form a positive divergence and move above 50.
By Arthur B. Hill - Sat 17-Jun-06 at 02:02AM in Commodities
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Monday - June 05, 2006
Jim Rogers, Commodities and the Dollar
Jim Rogers gets the lead story in Barron’s over the weekend. Among other pursuits, Rogers worked for George Soros in his famed Quantum Fund and rode a motorcycle around the world for 20 months (see Investment Biker at Amazon.com). He not one to mince words and this paragraph sums up his outlook pretty well:
To Rogers, the past few years have witnessed another changing of the guard; commodities will rule over stocks and bonds for the next decade or more. Inflation will continue to flare and not just because of rising raw-material prices. According to Rogers, new Fed Chairman Ben Bernanke is "an amateur with no knowledge of markets" whose academic work revolved around how nations could avoid depressions by printing more money. And, finally, he throws into this witches' brew the likelihood of a collapse in the dollar as a result of America's accelerating debtor status. Rogers views commodities as the ultimate refuge from these scourges.
What would Rogers see if he were a technical analyst?
The US Dollar Index bounced off support at 80 and he would expect the index to break 80 and head much lower. This would break a 16 year support level and be mighty bearish for the greenback. Notice that the index recently broke rising wedge support (gray oval) and is already headed for a support test.
Rogers is also bullish on commodities and would view the breakout at 250 in the CRB as the start of a 20 year bull run. The CRB trended lower for 20 years so why not trend higher for 20 years. The only problem is that if the world stock markets turn south and take the world economy with them, demand for commodities will dry up.
By Arthur B. Hill - Mon 05-Jun-06 at 03:29PM in Commodities
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Tuesday - May 23, 2006
A 30% Drop in the CRB?
CHANYAPORN CHANJAROEN and CAROL MASSAR of Bloomberg report:
”Marc Faber, the money manager who told investors to bail out of American stocks a week before the 1987 Black Monday crash, said commodity prices may fall as much as 30% in three to six months.”
By Arthur B. Hill - Tue 23-May-06 at 08:55AM in Commodities
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