Monday, April 13, 2009

Gold Stocks Show Bullish Divergence

As you know I've been bearish on gold for the past several weeks but am now beginning to see things change. Above is a daily chart of the XAU index (gold stocks) and in the lower pane is GLD (gold ETF). You'll notice on this last move down in gold, the XAU index is making a higher low and is showing bullish divergence.

The stochastic oscillator is also in the buy zone which tells me that gold stocks may be ready for the next leg up. For the past 5 months the stochastic indicator has done a wonderful job at timing the entry for a long trade. I don't have any buy signal right now but we are very close. As always, let's see what happens.


Anonymous said...

Hi Kevin...nice post as always. My question is why not view it the other way around? Why not view it as a bearish sign for gold stock instead of a bullish divergence for gold?

Kevin said...

We already had a move down in gold and the gold stocks did not break down. If gold decides to rally, we may see the gold stocks make a move higher.

Erik said...


900 looks like a decision spot here, for a longer term trend


Anonymous said...

I've tried doing an elliot analysis on gold's pullback to see if this is the beginning of a downtrend/pullback etc.I can only seem to fit it into a wave 4 consolidation with a goal of around 1250 and it seems to fit a triangular pattern and should break out in a couple of days.of course the other is a head and shoulder -inverted formation setting up (disclosure-long gold and silver)

Gary said...

ONe might also consider the fact that miners are the most undervalued they've ever been in history even after the huge move up from the Nov. lows.

Gold could go all the way down to $700 and the miners would still be cheap at current valuations.

Erik said...

anon, on the larger picture, the move up to 1000 looks more like a wave 2 "disbelief" to me, and the current one is a wave 3.

with the prior cycle TOP being of course it's all time highs.

the last move to 1000 did not make a new high, and there was ALOT of overlap (corrective looking pattern)...which makes the argument that gold is now in major wave 3 down.

Anonymous said...

slv's uptrend is still in play as long as april 6ths low is not taken out.same for gld

Anonymous said...

Are we there yet?
GDX jumped 4% today!


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