Saturday, June 16, 2012

Possible Trading Opportunity In Gold



When analyzing a market it's always good to start with the big picture which is why we are looking at the monthly chart of gold posted above. As you can see, GLD is in a clear uptrend and has been for quite some time.

What I find interesting about the above chart is that the pullback we seeing take place right now is almost identical to the pullback from four years ago in terms of time. In 2008 the gold market sold off for 8 months which is exactly what we are seeing happen right now.  Last month marked the 8th month of the decline which began in September of 2011. You'll also notice that the gold market
is right at the bottom of an up trending channel which may provide support.

What this suggests to me is the POSSIBILITY of a potential rally in the gold market. Now just because gold is behaving similarly to what has happened in the past does not  necessarily mean it will happen again in the future which is why I look for other clues


Above is a weekly chart of gold futures and in the lower panel (red line) is the net position of the commercials.  The higher the red line is, the more of a net long position the commercials are holding. As you can see this is the largest net long position the commercials have acquired in several years. If you look closely at the price chart it's pretty obvious that the 1500 level in gold is acting as strong support as of now.

In summary what all this suggests to me is the POSSIBILITY for a rally to take place in the gold market.  Gold is in a long term uptrend, we are seeing a pullback that is similar to what we've seen in the past, the commercials are holding a large net long position and gold is holding a weekly support area. Now all I am waiting for is some kind of buy trigger to get me in the market on the long side. As always. we'll see what happens. 

8 comments:

Jeff said...

Kevin,

Wonderful to have you back! Thanks for your always interesting and insightful analyses.

Jeff

wer1 said...

Kevin, Ty as always you appear, just in the nick of time to keep me on track! Keep these coming;-) wer1

Anonymous said...

Hi Kevin,
Thank you for the great chart, could you please send the site which you used to chart the commercial index, because i'd like to see how other commodities fare, thank you!

Best,
Mark

Kevin said...

Thanks guys.... Mark, the website for the COT charts is barchart.com...its free.

Anonymous said...

Shouldn't you be using log charts ?

Anonymous said...

Kevin,

Are you going to do routine posts again. It would be great knowing as all of us want to check in if you are going to post.

Thanks
bob

Kevin said...

Every now and then I will post a commentary if I see somethng that might be of interest.

Anonymous said...

Kevin, I realise this post is a month old and I take on board what you are saying but to me the strongest current pattern that I see is a 9 month descending triangle.

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