GOLD

Chart source: www.Sharelynx.com

The last 8 trading days gold for gold marked high and low points within a trendchannel that is still intact  - despite last Friday's sell off. The gold price crashed more than $10, but found strong support at the lower trendline at $417. The balance sheet for the last 8 gold trading days shows that there were at least 18 small triangles of which only 4 broke to the downside. Even as they broke to the downside, they were not sustainable and can be labeled as fake-breakout, because the downside movement did not hold and the gold price continued to move higher after the sudden crashes. This can be assessed as bullish.

Chart source: www.Sharelynx.com

The trading hours before the sudden crash of the gold price on Friday show that the price of gold fluctuated above important resistance at $423 in a bullish fashion: Even though all triangles could not thrust sustainable to the upside, they broke to the upside slightly before entering another triangular consolidation period. Just minutes before 8:30am NY and the release of ought-to-be-price-influencing fundamentals, gold was within a small triangle which was completing in a bullish thrust right before NY Trading session began. The triangle was already breaking out and thrusting to the upside, but suddenly the price of gold crashed to $417 within minutes. It should be clear that there was one big position being sold and not many investors selling in a domino effect. If the data was that sound and influencing, why did the price of gold not enter in a short downside trend for the entire trading session? Why did not many sell, but only one?

Chart source: www.Sharelynx.com

The thrust out of the triangle #1 was signaling "danger," because it was going "over the top" (firstly over $430 and secondly already more than +$6 that day). Hence, the gold price collapsed. But it was not a fake-breakout, because afterwards gold was trading above its apex, rising again to build up another triangle (#2) to decide whether to surge this time. The "danger" was clear, because the triangle had bullish overreactions. Hence, the gold price collapsed before building up another triangle (#3). Some hours later, gold began to break the upper leg and started rising and "the danger" was obvious when the gold price shot over $430 for some minutes. After this sharp and short thrust to the upside, gold was again tending lower. The next triangle #4 was finishing minutes before NY started trading at 8:30am. The breakout and pullback were successful and the thrust started bullishly more than +$3 within minutes. Hence and due to the negative fundamentals for gold, the price HAD to crash. The manner in which the price crashed helps to evaluate the impact of that fundamental data for the goldprice. The price crashed heavily only once, therefore there was "one big seller." In the hours after the crash, gold was trending higher. This can be assessed as bullish.

SILVER:

Chart source: www.Sharelynx.com

Chart source: www.Sharelynx.com

Silver was breaking out of a protracted triangle extremely bullish by going over $8.10. After this impulsive breakout, silver pulled back to the apex shortly before starting to rise fast in a thrust. Interestingly, this thrust was accompanied by extreme selling pressure which can be seen in the many spikes down to $8.10. But even 8 sell-offs at $8.10 were not enough to hold the price of silver down from rising. Silver surged above $8.20 building a small consolidation triangle before rising sharply again (freely – this is how a thrust should look like). Because the next consolidation pattern at $8.30 was still giving bullish signals by wanting to break out aggressively to the upside, there was "only" one position being sold this time, which managed to make silver crash.

Chart source: www.Sharelynx.com

Taking a closer look at Friday, one can see how the dramatic break down of the silver price was not at all profound and sustainable. Because silver closed right above the previously marked apex at $8.27, one can label this breakdown as a "fake-breakout." Analogous to the price of gold, there was only one position being sold and not many, which event would make the price trend lower for hours or even days. The behaviour of the price shows how profoundly the market thinks about such releases of fundamentals, which should influence the price for quite some time. But the price of gold and silver show also that the market did not follow to sell, but instead bought. This can be seen as extremely bullish for both gold and silver! If such big fundamental data is influencing the price of metals for several minutes only (and not for hours or even days!), then these fundamentals are not at all important influencers.

U.S. DOLLAR INDEX

The small green triangle which was introduced first as a negative one (because it broke down to 87.5) and then as a neutral one (because it held at the apex for four days) must be classified now as a positive one. It is now clear that 87.5 is the apex and not 88.5. Thus the moves before can be understood better, because the surprising holding at the previous apex was the breakout before the pullback to 87.5. At the moment, the USD is trying to thrust above major resistance at 90. Oftentimes at critical and important price marks, original chart patterns do not change, but are being prolonged. This is what happened to the small triangle I showed at first. Right now, the bearish triangle was successfully turned into a bullish triangle. This can only be achieved with time and immense pressure.

But if last Fridays positive data for the USD was not pressure enough to shoot the Dollar above major resistance at 90, what else should do the job?

Last 3 trading days show, that the USD was trying to overcome 89.4. The second triangle at 89.2 was meant to cross that hurdle. Even though the breakout was rather successful, the thrust that should have followed looked not at all bullish. Heavy trading forced the Dollar to go down. Since this decisive triangle was not able to thrust correctly, the following bullish triangle was to decide whether the thrust was only postponed. Not like the one before, this third triangle was completing correctly, because it was thrusting to the downside (and not holding near the apex – that’s why another triangle was being flared up). The breakdown was confirmed by another short consolidation triangle which shot the Dollar beneath major resistance line. At the moment, the Dollar is trading at its shoulders above the green necklines, because now it is clear that the last 3 trading days were to build a major top at 89.4 with the help of a head and shoulder formation. Should the green line be breached to the downside, the implications would be a further falling Dollar.

The fashion which the Dollar was being traded the last intradays makes me still believe that the thrust out of the big (red) triangle is a fake-breakout. Same applies to the current triangle that was building up for 4 weeks:

The MACD curves show that the Dollar turned bearish approximately 17^th of March. The breakout was not powerful enough to make these 2 curves cross again to transform the bearish signal into a bullish one. Not even the "positive" fundamentals from Friday and the ongoing thrust could force these line to cross. As soon as they cross, the Dollar turns bullish for some time. This cross will most likely be definite if the Dollar makes it to hold above 90.

Gold – Tuesday 6th April 2004

Silver – Tuesday 6th April 2004

US Dollar Index – Wednesday 6th April 2004

Chart courtesy: www.sharelynx.com, www.stockcharts.com, www.ino.com, www.kitco.com