some technical observations on gld & silver

I'll start with Silver as I actually find that more attractive at the moment and it certainly makes for a couple of interesting charts...

Firstly, a weekly chart over 3 years

A flag pattern is clear. While we are yet to break out of it, there are a number of indications that the correction from $50 is over.

- We have corrected approximately 61.8% of the prior advance (not shown on chart)
- There have been 5 clear waves in the correction
- A double bottom (although not yet technically confirmed)
- Bullish divergence on the RSI7 (solid red line, top right corner)
- MACD Histogram bullish divergence (solid red line, bottom right corner)
- MACD crossover from below zero

And remember these are all on a weekly (long term) chart. In my opinion it signals an ending to the 8 month correction and the beginning of another long term bullish move.


Secondly, the daily 1 year chart

Sorry for the busy chart, but its worth studying. Firstly, the clear double bottom, although technically speaking it won't be confirmed as such until price moves above the late October high of around $35.75. The bullish divergences on the RSI7 & MACD are also clearly evident.

Short term however, price is noticeably overbought and approaching 4 different levels of overhead resistance. Now is NOT the time to get long! Daily RSI7 is over 85 and daily stochastics are over 95.

In terms of resistance, the downtrend line from the beginning of the correction and the trendline that started in May as support, which then became resistance in late October are both intersecting around $37, and horizontal resistance from the late October high & the 200 day MA are both coming in in the high 35's.

So I'm expecting a correction very shortly, but its propbably likely to be short lived as to not allow many people to get on board. I'll be watching the 20 & 50 day moving averages, though I'd be surprised if it made it back to the 50, and I'll also be watching the 38.2 and 50% retracements of the most recent move from $26, but again I'd be surprised if we made it down to the 50.

Keep a close eye on silver, I think its technically more attractive than gold right now.

Speaking of which I wanted to make a few comments on GLD, which I use as a proxy for gold as I like to study the volume. There are a couple of things I think it is worth noting as a study on turning points. This is a daily 6 month chart:

Firstly, I've just noted the breakout from the downtrend with a confirming increase in volume. Some of you who've been on here a while will remember a post that noted the importance of volume on GLD and how it gave quite clear signals at important moments. I think it was titled 'does volume mean anything to you' or something like that.

Anyway, it's not the breakout that I really want to mention, but volume is. Notice the 2 large red circles on price. One was gold's top in Sept and the other gold's bottom in December. While the bottom isn't a technically perfect double bottom, it basically is, and the top in Sept definately is a double top. But its the volume I want to point out. In both instances, the second peak/trough that formed moved to new highs/lows, but was done so on LESS volume than the first peak/trough. This is a non-confirmation of the move and is a tell tale sign that buying/selling pressure is waning and that a change in trend may be imminent...watch out for it in future because it alerts you to be on the lookout for a change in trend. And it allows you a tight stop and therefore a great reward:risk trade.

Anyway, just thought it was worth mentioning. Hope some of you find some value in the above. Best of luck to all

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p.s. Sentiment is very short term cautious on both Gold and Silver but very bullish as soon as we have a small correction.