Tuesday, November 25, 2008
DAN NORCINI'S COMMENTS AND CHARTS
Hourly Action In Gold From Trader Dan
Posted: Nov 25 2008 By: Dan Norcini
Post Edited: November 25, 2008 at 2:53 pm
Dear CIGAs,
The 100 day moving average near the $832 level provided the overhead selling resistance in today’s gold session. The chatter was that $100 worth of gains in gold over the past three trading sessions was enough of a move to bring in some short term profit taking. That is probably true although I would not be surprised to learn that the bullion banks showed up at the $830 level trying to draw another line in the sand. Dip buyers are appearing however which is a good sign as the technicals have flipped to friendly with the turn higher in the 10 and 20 day moving averages and the consistent trade above the 40 day. Thus far gold has managed to maintain its footing above the 50 day as well which comes in closer to the $800 level.
It looks as if we are oscillating around the 50% retracement level from the October peak. If gold can maintain a general consolidation-type trade around this level, it will be constructive. We are headed into a holiday shortened period in which liquidity can dry up some - that leaves the market vulnerable to wide swings in price on even relatively small orders.
Technically, a closing trade above the $835 level should enable gold to run to $850 before it encounters anything much in the way of overhead resistance. Stops are building just above today’s session high. Support lies at today’s lows and then the $790 level. Open interest numbers remain very, very low which does give me a bit of concern. Figures from yesterday reveal that a large amount of the buying was indeed short covering. It is constructive to push the shorts out as no doubt happened when the market pushed into stops that were located above the $800 - $810 level but we need fresh buying, not just short covering, to sustain prices at these levels and set things up for an extended push higher. We must see a continued increase in open interest (an end to the deleveraging) before we can mount a sustained rally.
Interestingly enough, the Euro-Yen cross was knocked lower today even in the face of the newly announced Fed plan to buy up FNM and FRE debt. Stocks initially greeted the plan with happiness but then moved lower mid-morning. That took the cross lower and as it faded, so too did gold but as that cross began to recover off its lows, so too did the gold price.
The HUI managed a close above the horizontal resistance level near 225 yesterday but could not manage (thus far) to get a second consecutive close above that level. It will need to do so in order to bring in more technically based buying into the mining shares. So far the selling in the HUI and the XAU has not been unmanageable.
The Dollar (USDX) did dip below the critically important 85 level in today’s session but it managed to claw its way back above that by mid-morning. Watch that level closely as two consecutive closes below it will begin to push the concentrated speculative long side positions into liquidation. Right now the USDX is bouncing from its 40 day moving average which tells me that the fund longs are attempting to defend their positions. If they cannot hold it there, they will be forced out and a top will be confirmed on the technical charts. Their exodus will bring the 83.50 level into play quite quickly. They know that and so do we.
(SEE CHART AT JSMINESET.COM)
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