Tuesday, May 11, 2010
Prices had a nice rally yesterday (a), but then lost most of their gains in the afternoon(b). Prices did find support at the 200 minute EMA (c). But pay particular attention to the volume -- especially the blue line that denotes the 25 minute average of volume. The average was lower for the rally (d) than the sell-off (e).
The last two days, prices have printed very weak bars (a) right below the 10 minute EMA. In other words, prices are still in a bearish position. In addition, the shorter EMAs -- the 10, 2o, and 50 minute EMAs -- are moving lower indicating the short-term trend is down. Also note the volume situation (c). The heavy down days printed huge volume. But those numbers have backed-off for now.
Also note that riskier assets like the Russell 2000 are also below the EMAs (a). That tells us that traders are still hesitant about the markets right now.
Gold hit a record high yesterday, and the GLD chart looks very bullish. Prices are in a clear uptrend (a) and have moved through important resistance levels (b, c and d). There are also several gaps (e) in the rally. The EMA picture is very bullish with the shorter EMAs about the longer EMAs, all EMAs moving higher and prices above all the EMAs (f). Also note the heavy volume over the last 4 days (g). The only drawback to this chart is it is parabolic -- th erate of ascent is incredibly steep which no price chart usually maintains for long. In addition, the heavy volume could be a buying climax with the addition of an exhaustion gap. However, that's one possible technical interpretation. The fundamental picture is gold bullish as traders express their concern with the EU situation by purchasing safe assets -- here, gold.
Industrial metals have also dropped and are currently at a bottom. Prices started to drop with the bar (a), then moved into a sideways consolidation pattern at (b). Price then took a big move lower at (c) where prices gapped down twice in two days. Prices are currently consolidating at (d) on high volume (e) near the 200 day EMA. Also note the EMA picture (f): all the EMAs are moving lower, the shorter EMAs are below the longer EMAs and prices are below all the EMAs.
Fundamentally, this is the result of China tightening its money supply through and increase in reserve requirements. China is the largest consumer of raw materials for production.
Notice on the daily chart how prices are clustering around a 40 cent range from 19.80 to 20.20.