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Update
(I was on the road again Wednesday, so missed the action in SLGLF. Had to drive clear across state to pick up a horse. Glad that trip is over.)
When I left Tuesday, I placed a limit order at .09 – that price target didn’t happen yesterday, perhaps today.
After Wednesday’s price decline, we are now reaching a critical juncture. If this current correction is a normal bull market correction, the price needs to be contained around about the .618 fibonacci retracement level of .09. If the price falls below this support level, it would be bearish, resulting in even lower prices, I believe.
Ok, for those of you who can appreciate technical analysis, here is what I’m seeing this morning after yesterday’s price action.
On the daily chart, we came very close to the .09 target by reaching a low of .092; however the close was at .096 – although the price range did stay below the 10 day intraday downtrend line. The price low is getting very close to the long term 200 day moving average – a crossover of this MA would be bearish – so I will be watching today to see if the intra-day prices cross below this MA – although right now I am not expecting that to happen today. The 200 day MA is a long term trend indicator. Looking at both the daily and weekly charts, the price is resting just above the 200 daily & weekly MA’s. This MA should give pretty good support, however the upward trendline from the November 2006 low, was breached yesterday – ever so slightly – now this could just be an overshoot of the trendline and not be a bear sign, as overshoots do happen when there is extreme sentiment in either direction.
Although, there are other indicators that are not very positive, so I am still seeing weakness in the chart. Volume has been in a downtrend since December and, as yet, volume has not broken above the downtrend. I would want to see a volume break out above the downtrend line coupled with a nice uptick in price. That would be a bullish sign.
Ok, here is what some of the other tech indicators are suggesting. On the daily chart: MACD still not a bullish crossover but is reaching extreme oversold area. RSI still negative. William %R broke above its downtrend line and then came back and retested it and held – slightly positive sign. Slow STOCH has turned up and broken above downward trendline – slightly positive sign.
On the Weekly chart: I am seeing more bearishness on the Weekly chart than on the daily chart – this concerns me. As mentioned in my prior post, the weekly MACD has crossover in overbought territory – this will be putting a damper on higher prices. Also, the RSI and slow STOCH have both broken below the neutral zone and are bearish. STOCH has also broken below its upward trendline and is heading for extreme overbought territory but is not there yet – another bearish sign. And, as mentioned above, price is sitting just above the long term 200 MA. The Weekly chart is putting a lot of downward pressure on the price, so I’m not seeing much strength that could push prices up substantially at this juncture. Additionally, the HUI (Amex Gold Bug Index) has been in an ascending triangle since fall of last year, and it is looking like it might breakdown through the uptrend support line of the triangle – this would be bearish if it does actually breakdown through support – it is currently testing this support. Normally, ascending triangles are bullish formations, but if the triangle fails and is broken to the downside this would be a bearish sign. So, watching what happens in the HUI might be a good thing. Further, a break below the long term upward trendline from the May 2006 low – would be really bearish if that happens. On the other hand, the XAU looks like it has formed a symmetrical triangle, which is a continuation pattern – normally, a continuation pattern implies that price will continue the trend. However, the norm is for a breakout of the triangle in the prevail trend direction – this does not always happen, and a break in the opposite direction can happen – in this case it would be bearish.
I know Expertuis is expecting the PM low here to hold and higher prices to resume (see post #1863) – I respect Expertuis’s input, but I am not as optimistic at this current time (I really hope he is right). A few more days of action in the PM market will tell the story, I think.
Bottomline: I believe the daily chart is showing that the downward action in price is running out of steam. However, the price must hold and rebound soon, because a break below .09 would suggest even lower prices and perhaps a bear market, instead of a bull market correction. The action for the next couple of days should give us a clue which way the price will go. My current thought is that we will see a SLGLF rebound in daily price action soon, but that it may just be a technical rebound and then we will see prices go lower – as the Weekly chart is suggesting could happen. Some bullish news out of SLGLF headquarters would probably be a good thing right now, and if it doesn’t come soon, then I doubt we will see much upward momentum.
Caveat: I don’t try to predict the future, I only express what the charts are suggesting the future may hold. Sometimes the Magic Genie has a trick or two up her sleeve that cannot be anticipated. Like the saying goes, “A fool and his money are soon parted.” Just don’t be a fool and play the penny stock market with the family’s grocery money.
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