Gold prices shot up on Friday as investor’s move their money into a safer
investment as the broad market continued it crash the day before breaking the
October bottom. Once the price of gold climbed over the $760 mark which was a
short term resistance level the price shot higher as new buyers jumped in and
short covering took place pushing gold to climb $57 in one day which you can see
in the chart below.
Spot Gold Prices – 3 Day Intraday Chart
Now, looking at the daily chart of gold below, it appears that it has put in
a double bottom with a nice rally higher. Also confirming this move may not be
over yet is the MACD cross over and the strength of gold. Its best to waiting
for a low risk setup before any money should be put to work. We are getting
close to possible buy signals if things continue to hold up over the next week
or so. Gold will find resistance between $800 - $825 and could take a breather
for a few days which could provide a great setup if we are lucky.
Daily GLD Gold Price Chart
Gold stocks shine as they rally big on Friday out performing the price of
gold and possibly putting in a higher low for the HUI which could be the start
of an upward trend. Keeping a close eye on the performance of gold stocks will
help confirm a low risk setup for trading gold (GLD, DGP, and Spot Gold). If
gold stocks are performing well during a gold buy signal I generally put more
money to work on that trade as opposed to gold stocks underperforming the price
of gold.
Daily Gold Bugs Chart (Gold Stocks)
A longer term look at gold stocks performance which is shown in the chart
below is the fact that they are bouncing off long term support which has been
tested 5 times. This is very bullish for gold and gold stocks as well.
Monthly Gold Stock Chart
Slippery Oil Prices
Oil Traders cannot believe the slide in oil since June this year. Last
Thursday oil closed below $50 which is a long ways of its $150 high not to long
ago. A couple interesting things show up on my oil chart which I thought are
worth pointing out. Obviously the price of oil is severely oversold and due for
a dead cat bounce if not a “V” shaped bottom. But although prices continue to
slide the momentum is starting to shift to the up side. The MACD is trying to
move higher which is a good thing and also the fact that oil is at the bottom of
it channel. Also energy stocks are out performing the price of oil like crazy!!!
This is extremely bullish and a bounce in oil will send energy stock soaring. I
will note that a lot of energy stocks pay a dividend and with their share prices
being pushed down to these extreme levels, investors are starting to buy because
the dividend rate is so high and most of these companies make solid earning year
after year so at these prices the shares look attractive to many.
Oil Trading Chart (USO)
Conclusion:
I don’t try to predict market direction because it’s a fools
game, I do think we have some exciting times just around the corner if the
market does find support in the next week or so. I have been in cash since
August waiting for a setup but volatility is ridiculously high and I don’t put
my money to work if I’m risking more than 3% on a trade. Gold Stocks are
starting to have money flow back into them and oil is starting to look like its
downward move is almost exhausted. I continue waiting for a proper setup with
low risk as I believe in taking the safe middle section of trends and not trying
to pick tops or bottoms.
I am a full time daytrader and swing trader
specializing in trading GLD, GDX, XGD.TO, SLV and USO. I provide my trading
charts, market insight and trading signals to members of my newsletter service.
