Wednesday, March 24, 2010

Gold at Pivotal Point

In its correction since December, gold now sits at a crossroads between bull and bear. As I pointed out in my post on gold a few days back, the fractal analysis has gold nearing the end of a typical 4 month phase (down since December) and at the turn point into a new cycle (up into a fast climb to over $2000 into early 2011. Technically, we see gold perched atop the critical 140 day ema that is one of the best ways of dividing bull and bear markets: (click to enlarge charts)

Here we see gold's RSI entering regular buy zones just below 40 with those points correlating very well with the 140 ema support level. We are smack on one of those right now. We will either dive through it, perhaps linked to a new leg up in the dollar, and go toward the bottom of the correction's megaphone , or we will turn and break the formation with a swift move up. This megaphone breakage would also be a break of a fractal energy level stronghold of $1128 - the shoulder level of the head and shoulder top shown. The odds would seem to favor a hold of the 140 ema, which would also be a completion of the larger scale inverse head and shoulders bottom to the correction. But who knows. Until this situation resolves itself, new positions in gold may be a little dicey. Gold does not have to dance to the tune of the USD, but to the extent that it does, it is linked to a possible turn there too as this article on China over at safehaven discusses.

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