As usual as soon as I have time away from my charts, markets seem to enjoy taking action. And action it has been in this past week. Top of the pops of course is gold. Price is now up into the resistance of the past couple of years but that resistance actually covers the last six years of trading marking the neckline of the huge head and shoulders bottom. As mentioned many times, I have very much higher targets for gold that will end up surprising many people but for the moment I prefer to just take things one step at a time. If we can break out of this huge pattern then it would be great but if we have to spend a bit of time backing and filling in this area, then I am happy to just go with what the gold market serves up to us.
Top volume on the NYSE – GDX – gold stocks.
As I have mentioned a number of times recently, I am watching the gold price in yuan and as pointed out in my notes before my break, I had a rather bullish little pattern building on this chart which led the way on this latest sharp rise in gold. As I have further mentioned, I am thinking more and more that the trend of the yuan is becoming increasingly important in analysis of all markets and yet I see very little if any mention of this in all the loud noise. The world is changing – probably has already changed - just that people don’t realise it or can’t come to terms with such a huge shift.
US dollar quite weak but commodities were still a mixed picture. We are well aware of gold (led by palladium, again) while crude looks to have been able to complete the base pattern I have referred to. Still a bit sceptical on this pattern. But the grains were weak with wheat having a terrible few days. So hard to keep track of where we are on trade talks but the grains certainly were not happy this morning. British pound appears to be the main beneficiary of the weaker US dollar which is really hard to understand considering the political nightmare evolving there. However, I always reckon they are mad in the currency pits.
Wall Street also joined the party in my absence and has continued to rally but there are a few divergences starting to build. The problem with divergences is that they don’t necessarily suggest an immediate turnaround but are a signal to be watchful. There are a couple of ways one could try and fit the recent action into waves – one is that we have retraced to the previous Fourth Wave (which was where we started that the sharp decline into Christmas). That may not be such a “nice” outcome.
The Australian market is meeting quite stiff resistance above 6100. Finally, the banks have fronted up to take some of the weight. We are all likely to have a warm fuzzy feeling on gold stocks today as they benefit from the latest move in gold. As pointed out before, I felt that our gold index (XGD) was forming a running correction and if that was the case, it is a very bullish pattern that gave a target of around 6700.
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