Sunday, August 21, 2011

Skating on Thin Ice - Gold

It was on a Sunday night, if I recall correctly, that the recent Silver parabolic peaked. I awoke in the morning and was in disbelief when I looked at the real time silver futures chart and the True Strength Index (TSI) indicator readings.

For better or worse, gold looks to be skating on thin ice - and on a Sunday evening, no less. I know it's been a cat with nine lives and this could just be it's use of life number seven, but it could also be life number nine.

Here is a very recent 4 hour chart of the Gold Continuous Contract (/GC). Even as I type this the red candle is getting a little bigger and brighter as the TSI is now beginning to pierce through its trend line. Then buyers come in and just barely keep the trend line from being broken. The situation looks precarious.

Whatever happens, from my vantage point it appears as if gold is skating on thin ice.


  1. beautiful charts John...calling a top in gold has been a nightmare

  2. Silver chart looked parabolic back in May. Gold's now has that look as well.

  3. @Mrmiyagi

    Even Though I am currently short gold, I must say these are two different situations. Silver was running up on excitement Gold is running up on panic. Silver was a Greed play Gold is a Fear play. Fear always overpowers greed. I might close my positions soon. Depends on what the great bernank says.

  4. Hi John,

    Do you find that TSI works best on the 4 hour chart for everything? I was looking at gold on a daily chart with TSI and it appears to be effective as well. TSI does give amazing sell signals. Do you also use it for buy signals? Sorry if these questions have been answered many times before, I am new to your blog. Thanks for your work.

  5. Hi John,
    Great analysis.

    I have been following your blog since Mar/April and have loved every bit of analysis you have presented. Markets are, after all about probabilities, and unfortunately, some people (like anon in your last post) don't realize that.

    I am studying TA and your style of analysis certainly inspires me to look beyond the set indicators.

    Presently, as far as gold is concerned, I am looking at hourly/half-hourly charts and taking paper trades based on Stochastics and waiting for a reversal signal, like in Silver, we got a signal the day Obama was assassinated.

    Unfortunately my broker in India doesn't have the TSI indicator and online services are a bit difficult to use, I am relying largely on the multiple time frame analysis of gold using stoch as my primary indicator.

    Thanks for all your insights.

  6. John,
    This is interesting indeed. Good work. I notice here how far away goldis getting from it's 200 dma. Usually this situation gets resolved back down. M-

  7. I am so sorry. In my previous post, I by mistake wrote Obama, instead of Osama

  8. Anybody know how I can get TSI on Tradestation? I found one on google to import, but it does not have the 3 different time length inputs as John has his chart set up above. Thanks!

  9. Thin ice is cracked. It either gets colder and refreezes or breaks open.

  10. Wild Bill said....

    What is that light at the end of the tunnel?.... Oh it's just a falling gold brick, for the time being. Falling to the 200dma will do just fine.

  11. John -

    I owe you thanks once again. I was ready to commit to shorting gold before you posted this, but this was the icing on the cake, so to speak, and I made the jump, even when gold was still rising!

    Long story short, I've picked up >17% (and rising) on DZZ in the last two days. The beauty of it is, I bought it at virtually the exact low point, thanks to you and the TSI!!

    No market "tool" is totally fool proof . . . but this is as close as it comes!

    Thanks again . . I'll be using the TSI to determine when to close out my DZZ position.


  12. hi john
    you are very much lost. Hope alls well with you. we truly need your guidance and analysis at this moment especially with gold having corrected to 1700 and back to 1830 close as at friday. is there a correction still expected or will gold just keep going higher along with gdx and gdxj and stocks. we are entering the start of the seasonal period ( september).We would be very grateful to read and receive your analysis and insights.thanks in advance

  13. Hi Ally - well, the markets have been waiting for Ben to drop the other shoe, so now that he has dropped that other shoe it is a little easier to see where things are heading.

    I think gold will continue to go higher and make a new high. I think the stock market will rally - at least to the 200 dma. I think the us dollar will continue to slip and likely take out the March low. With the stock market rising and gold rising, miners should break out of their consolidation and outperform the stock market.

    Some of my reasoning is as follows: the markets seem to have latched onto the idea that though Ben promised nothing, he left the door open for QE3 being announced at the September meeting. This is the 'excuse' gold and the stock market need to rally.

    The stock market has finally worn out the bulls - for example, look at the vix. Complacency has finally been replaced with genuine fear. Until there was sufficient fear in the market there were not going to be enough motivated buyers. I believe now there are.

    With gold, the completion of the daily cycle a few days ago was met with intense buying pressure and follow through. That is very bullish. Gold has been more closely tracking (inversely) the fall of the Euro for some time, than tracking the dollar. As the anticipation of the printing of more dollars strengthens, the dollar should fall and fuel gold's rise higher.

    The miners have been in a multi month consolidation and have not quite broken out. Assuming gold and the stock market perform as I expect, miners should break out and become the star players with no overhead resistance.

    Another interesting player is silver. Silver has always topped on the same day as gold in these parabolic gold conclusions. It could be different this time, of course, but I could see silver getting up to $50 and expiring just as the final spike in gold's parabola is realized.

  14. School's keeping you from your real work John!

  15. John, Looking at weekly TSI for Gold - it seems to have peaked out already and looking down. Are you saying we push to 2000+ from here for next few months??

  16. GLD is at the 61.8% fibronacci retracement of it's recent pullback on the daily chart. I wonder if there is much chance of a retest of 165 or if it is "off to the races" again. Look forward to the weekends now when we get to hear from you!