Stephan Bogner
"WEEKLY CHART THOUGHTS"
April 7, 2004
GOLD
Chartsource: www.Sharelynx.com
Thelast 8 trading days gold for gold marked high and lowpoints within a trendchannel that is still intact - despite last Friday's sell off. The gold pricecrashed more than $10, but found strong support at thelower trendline at $417. The balance sheet for the last 8gold trading days shows that there were at least 18 smalltriangles of which only 4 broke to the downside. Even asthey broke to the downside, they were not sustainable andcan be labeled as fake-breakout, because the downsidemovement did not hold and the gold price continued to movehigher after the sudden crashes. This can be assessed asbullish.
Chartsource: www.Sharelynx.com
Thetrading hours before the sudden crash of the gold price onFriday show that the price of gold fluctuated aboveimportant resistance at $423 in a bullish fashion: Eventhough all triangles could not thrust sustainable to theupside, they broke to the upside slightly before enteringanother triangular consolidation period. Just minutesbefore 8:30am NY and the release ofought-to-be-price-influencing fundamentals, gold waswithin a small triangle which was completing in a bullishthrust right before NY Trading session began. The trianglewas already breaking out and thrusting to the upside, butsuddenly the price of gold crashed to $417 within minutes.It should be clear that there was one big position beingsold and not many investors selling in a domino effect. Ifthe data was that sound and influencing, why did the priceof gold not enter in a short downside trend for the entiretrading session? Why did not many sell, but only one?
Chart source: www.Sharelynx.com
Thethrust out of the triangle #1 was signaling "danger,"because it was going "over the top" (firstlyover $430 and secondly already more than +$6 that day).Hence, the gold price collapsed. But it was not afake-breakout, because afterwards gold was trading aboveits apex, rising again to build up another triangle (#2)to decide whether to surge this time. The"danger" was clear, because the triangle hadbullish overreactions. Hence, the gold price collapsedbefore building up another triangle (#3). Some hourslater, gold began to break the upper leg and startedrising and "the danger" was obvious when thegold price shot over $430 for some minutes. After thissharp and short thrust to the upside, gold was againtending lower. The next triangle #4 was finishing minutesbefore NY started trading at 8:30am. The breakout andpullback were successful and the thrust started bullishlymore than +$3 within minutes. Hence and due to thenegative fundamentals for gold, the price HAD to crash.The manner in which the price crashed helps to evaluatethe impact of that fundamental data for the goldprice. Theprice crashed heavily only once, therefore there was"one big seller." In the hours after the crash,gold was trending higher. This can be assessed as bullish.
SILVER:
Chart source: www.Sharelynx.com
Chartsource: www.Sharelynx.com
Silverwas breaking out of a protracted triangle extremelybullish by going over $8.10. After this impulsivebreakout, silver pulled back to the apex shortly beforestarting to rise fast in a thrust. Interestingly, thisthrust was accompanied by extreme selling pressure whichcan be seen in the many spikes down to $8.10. But even 8sell-offs at $8.10 were not enough to hold the price ofsilver down from rising. Silver surged above $8.20building a small consolidation triangle before risingsharply again (freely � this is how a thrust should looklike). Because the next consolidation pattern at $8.30 wasstill giving bullish signals by wanting to break outaggressively to the upside, there was "only" oneposition being sold this time, which managed to makesilver crash.
Chartsource: www.Sharelynx.com
Takinga closer look at Friday, one can see how the dramaticbreak down of the silver price was not at all profound andsustainable. Because silver closed right above thepreviously marked apex at $8.27, one can label thisbreakdown as a "fake-breakout." Analogous to theprice of gold, there was only one position being sold andnot many, which event would make the price trend lower forhours or even days. The behaviour of the price shows howprofoundly the market thinks about such releases offundamentals, which should influence the price for quitesome time. But the price of gold and silver show also thatthe market did not follow to sell, but instead bought.This can be seen as extremely bullish for both gold andsilver! If such big fundamental data is influencing theprice of metals for several minutes only (and not forhours or even days!), then these fundamentals are not atall important influencers.
U.S.DOLLAR INDEX
Thesmall green triangle which was introduced first as anegative one (because it broke down to 87.5) and then as aneutral one (because it held at the apex for four days)must be classified now as a positive one. It is now clearthat 87.5 is the apex and not 88.5. Thus the moves beforecan be understood better, because the surprising holdingat the previous apex was the breakout before the pullbackto 87.5. At the moment, the USD is trying to thrust abovemajor resistance at 90. Oftentimes at critical andimportant price marks, original chart patterns do notchange, but are being prolonged. This is what happened tothe small triangle I showed at first. Right now, thebearish triangle was successfully turned into a bullishtriangle. This can only be achieved with time and immensepressure.
Butif last Fridays positive data for the USD was not pressureenough to shoot the Dollar above major resistance at 90,what else should do the job?
Last3 trading days show, that the USD was trying to overcome89.4. The second triangle at 89.2 was meant to cross thathurdle. Even though the breakout was rather successful,the thrust that should have followed looked not at allbullish. Heavy trading forced the Dollar to go down. Sincethis decisive triangle was not able to thrust correctly,the following bullish triangle was to decide whether thethrust was only postponed. Not like the one before, thisthird triangle was completing correctly, because it wasthrusting to the downside (and not holding near the apex� that's why another triangle was being flared up).The breakdown was confirmed by another short consolidationtriangle which shot the Dollar beneath major resistanceline. At the moment, the Dollar is trading at itsshoulders above the green necklines, because now it isclear that the last 3 trading days were to build a majortop at 89.4 with the help of a head and shoulderformation. Should the green line be breached to thedownside, the implications would be a further fallingDollar.
Thefashion which the Dollar was being traded the lastintradays makes me still believe that the thrust out ofthe big (red) triangle is a fake-breakout. Same applies tothe current triangle that was building up for 4 weeks:
TheMACD curves show that the Dollar turned bearish approximately17th of March. The breakout was not powerfulenough to make these 2 curves cross again to transform thebearish signal into a bullish one. Not even the"positive" fundamentals from Friday and theongoing thrust could force these line to cross. As soon asthey cross, the Dollar turns bullish for some time. Thiscross will most likely be definite if the Dollar makes itto hold above 90.
Gold� Tuesday 6th April 2004
Silver� Tuesday 6th April 2004
USDollar Index � Wednesday 6th April 2004
Chartcourtesy: www.sharelynx.com,www.stockcharts.com,www.ino.com, www.kitco.com
Feelfree to send me your comments and how you feel about allthe triangles.
HAPPYTRADING, GO GOLD & GATA!
