2 plays in Gold

Here are two ideas that I have been watching as of lately. GSS and BGO are looking prime for upside momentum. As each one is not a major player in this space, I am looking to see if these two companies might be ripe for a buyout from some of the larger names. The possible breakout points can be seen on each chart as 1/22 prices have traded above the recent downward resistance level. I am more attracted to GSS as the larger formation seems to suggest that the price has consolidated at the 3.80 to 2.40 level. With metals trending higher, I suspect these two to follow suit.  ¶ 8:30:00 AM 0 comments

  What is going on in '07 2007 is looking like a lackluster year so for. For one, the DJIA was up 112 points yesterday last time I looked in the morning and glided down negative territory by the close. Why is this happening when usually Jan. is always a great time to trade? Well, as the saying goes, "Blame it on the economy stupid". Recent economic numbers that have been released suggests that the economy is facing a slowdown. December's ISM number ( which came in @ 57.1, down from 58.9 in Nov.) suggests that while moderate growth seems to be sustainable at this current time, it is slightly weaker than it was for the past couple of months/years. Given that companies were posting great profits for the last few months, expect that number to soften. This means that forecasts for companies are being adjusted and it is making the presence known by the equity market heading lower. Also, to grab an idea of the economic softening that is going on, check tomorrow's employment numbers and future econ. #'s to gauge where the economy is going.

So where does this leave us? Well, stocks are setting up for a possible downtrend. Take a look at the very detailed SPY chart above. You will notice that the SPY has been in a long uptrend since the beginning of 2006. Resistance level A and Support level A was the channel that the SPY was in from 1/1/06 to about 5/1/06. The down trend in the middle of 2006 broke Support level A, but recovered it's strength, thus leading to Support level B. As the market gained momentum, it drove higher while still keeping up with Support level B. A small breakout from 9/06 till 11/06 provided us with a new support level, Support level C. This strong trend eventually broke the original uptrend Resistance level A, which possibly signaled a huge breakout. However, the market players knew of the impending economic weakness and the SPYs broke through the Support level C. As the SPYs continued to trend a little higher, it still did not break through the Support level C, suggesting bearish indications. Thus, a new resistance level, Resistance level B. Since 11/06, the SPYs have been trading in the Support level B and Resistance level B channel. In 2007, you can see that the trend has been broken, and now Resistance level A is the new support line. Future trading will test this level. A Fibonacci retracement line of the 7/06 to 12/06 rally would leave a 61.8 retracement to 135.48, followed by 133.087 (50%), and 130.68 (38.2%). Also notice that a bearish divergence in the RSI has also been lingering since early Dec. 2006. Money flow has also been negative since 12/06.

Considering all of this, we will have to see where the markets trend to. A break in the Resistance level A will lead to future SPY weakness, possible to the Fibonacci levels described above. HOWEVER, if prices remain above Resistance level A, we could see continued upside advancement


The Metals and other commodities on the other hand seem to be in a consolidation phase, with potential to trade higher. If you look at Gold and Silver these commodities have been consolidating since the rather large run up. More recent trading in the commodities have suggested that the resistance level from the retracements have been broken (look at the charts above). As prices haven't rallied yet, we might see some upward pricing action as the USD continues to slide. Also, if the prices of these commodities rise, look for this as further indication of inflationary pressures upon the economy and FED.  ¶ 12:55:00 PM 0 comments