Stephan Bogner

"WEEKLY CHART THOUGHTS"
March 9, 2004

Welcome To The Thrust

Gold / Silver Ratio

Silver Daily 1990 - 2004

As mentioned previously, silver is rising stronger than gold. The chart above shows the opposite ratio this week and that gold is breaking down of its price formation relative to silver. The strong resistance ratio price mark at approx. 60 has been broken to the downside. Support might be found at a ratio between 50 and 40.

This chart shows that for the first time since 1990, silver built up a "clean" triangular price pattern. Contrary to the triangles before, this (green) triangle did not use any fake-breakouts and pullbacks to the apex. The lower leg has not been breached once! This can be assessed extremely positive and bullish since the discrepancy in opinion between the buyers and sellers is narrowing on a healthy basis. As marked before in 1998, the $7 silver price is strong resistance and if broken to the upside successfully, it will serve as strong support.

Silver Daily December 2003 - March 5, 2004

Gold Daily November 2003 - March 5, 2004

A shorter time frame chart of the silver price shows a triangle whose upper leg was breached sustainable at the end of February 2003. After this break, silver used a pullback to its apex and is now commencing to thrust explosively to the upside.

The above chart shows that gold as well is using a triangle, which will decide whether the gold price will take $400 as support or resistance in the future. Interestingly and contrary to the triangular price formation of silver, gold has been breaking the lower leg to the downside and has been pulling back twice. Last Friday gold was surging to its apex at exactly $400 indicating that the price action since the last couple trading days was a classical fake-breakout.

10-Year Note Sept. 2002 - March 2004

The 10-year Treasury papers show their price performance in form of triangles as well. At the moment, the T-Note is breaking to the downside fast. Whether this will be a fake breakout as it was in the middle of 2003 is not clear, but it's all the more clear that the recent triangle in the process of completing its formation.

About to Thrust

AMEX Gold Bugs Index (HUI) '96 - '04

A chart of the HUI-Index shows that most HUI-gold share holders are in weak hands (not sure whether to buy or sell) that they always need a pullback before sustaining thrust since the blue triangle in 1996. The 3-year long (red) triangle was using a fake breakout to touch its rock bottom below 50 index points. Whether the HUI gold investors have become more secure about the undervaluation of their gold shares and thus not needing a pullback to the triangles' apex another time is only desirable and creditable.

Palladium 1999- 2004

Palladium 2003 - March 5, 2004

Palladium is looking favorable as well at the moment. The first triangle in the above chart was completing with a fake breakout to the upside. Similar to the HUI Index, this fake breakout was marking a trendchange � this time a multi-year high. After the pullback to its apex, palladium was breaking fast to the downside. Crucial for the new downside trend was the price falling underneath the 200-day Moving Average price curve (red), which event was forcing the 100-day Moving Average to fall beneath the 200-day-MA. This indicates a dominant downside trend until these two price curves switch their positions again. This happened exactly at the end of 2003 with the help of triangular price formations. Since the beginning of 2004, palladium is trading well above both lines again and the MA-curves were able to switch positions: a new (upside) trend is born.

The recent triangle is being formed to explosively overcome the first resistance hurdle at about $275. If this price is broken, palladium will be on its way to adjust and catch up with all its other commodity peers. The fundamental reasons for a long-term rise in palladium prices have been laid out broadly by analysts. There is no reason to explain the fundamentals of palladium again.

Palladium 1999- 2004

The chart on the left shows where potential resistance zones might appear in the near future (red lines = strong resistance & green lines = support zones to let palladium breath in deeply before jumping over the resistance lines). Interestingly, the next resistance price lies at around $300. In case of a thrusting triangle to the upside, palladium will be rising straight forward to this price mark before pausing again for some short time. A similar big gap in resistance zones lies between $400 and $600.

Soon to Thrust

NASDAQ 1995 - 2004

The chart of the NASDAQ Index tells quite a different story when compared to the massive triangular price formations that the Dow Jones or S&P are building up at the moment.

All of the 4 triangles shown in the above, right chart needed a pullback before being able to thrust. Already, the second (green) triangle was indicating in October 1998 that many investors thought that their respective index stocks were overvalued. However, this breakout to the downside turned out to be a fake one and the NASDAQ was overcoming the 2000 points impressively and started rising in the direction of the next resistance zone (red) at about 3500 index points. The NASDAQ was breaking this resistance zone even more explosively. Despite this overwhelming breakout, the NASDAQ pulled back and marked a high with the help of a fake breakout (see similar behavior in the markets of gold, HUI, Palladium). After it became clear that the NASDAQ was on a fake rise in the past, investors left the sinking boat rapidly. A first low point was marked in October 2002 with the help of another triangle. On that day, the NASDAQ's relative performance to the U.S. Dollar Index was marking a record low. The Dollar started to decline, which helped the NASDAQ (and other U.S. stock markets) to be able to rise. Hugh Hendry explained in an interview with Barron's why a losing dollar is helping U.S. stock markets to rise and what the implications will be in the long-term. The interview can be found on top of the following internet site: http://www.odey.co.uk/press.shtml

Feel free to send me your comments and how you feel about all the triangles.

© 2004 Stephan Bogner
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Chart courtesy: www.stockcharts.com