Cup and handle and other observations

24/05/2010 by Philinje.

Last week smelled of de-leveraging, a la late 08. Gold got taken down or cooled off, depending on how much you believe in market manipulation by large players, but considering equities visited or exceeded the spike low of May 6, gold helpd up pretty well. It’s low of the week seemed to be at about $1166 right at Asian open on Friday. Today gold is already up to $1190 in Asian trading.

This week should be volatile. My guess is markets will try to form a bottom and there is plenty of economic newsflow this week to make that difficult. Also, tomorrow is a futures expiry date in gold so it’s likely we’ll see some more hanky panky by the big guys.

My friend Art has updated his chart and I post that here:

Art’s update

Note that he revised the minor wave 4 down target to $1170 from $1190. I’m proud to say I predicted $1170 when I posted the last version of this chart! This doesn’t mean we are out of the woods yet. There could be plenty more ambushing this week so be cautious.

In addition to the inverse Head and Shoulders pattern, there is another well-know technical pattern called the Cup and Handle. There is a strong case to be made we are forming the handle right now. Check out this article:

http://jessescrossroadscafe.blogspot.com/2010/05/gold-is-in-classic-cup-and-handle.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29&utm_content=Google+Reader

For the big picture, always helpful during corrections, check out:

http://goldscents.blogspot.com/2010/05/focus-on-what-matters.html

This one is also good in global terms with some handy charts:

http://www.theundergroundinvestor.com/2010/05/10-gold-charts-that-commercial-investment-firms-never-want-you-to-see/

Emerging markets have performed surprisingly. We all know that gold has killed equities in the US and Europe, but it also beat China by a wide margin! Brazil is almost even and India beat gold by 20%. Something tells me the BRIC markets will decline significantly if we get another major downturn, and this time gold may do ok.

Here is an excellent summary of the big picture in silver. Personally, silver’s volatile nature makes it less attractive to me, but it’s true there is great upside potential. Right at the moment silver is struggling to get near its all-time high and hasn’t really seen a break-out. But in terms of the big picture:

http://www.moneyweek.com/investments/precious-metals-and-gems/precious-metals-investing-in-silver-02011.aspx?utm_source=newsletter&utm_medium=email&utm_campaign=Money+Morning

This week ought to be a roller coaster but by the end of it we should get a clearer picture if a bottom has in fact occurred.

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