DOWN AT THE DEPTHS

The price of gold is forming into a sideways base that after several weeks, has experienced minimal downside. This is an encouraging sign because it’s a testament to the metal’s underlying strength. It also provides technical evidence that price has the ability to hold, and that there is indeed, “life on the floor.”

In addition to the array of sentiment and internal indicators that now all point to a major bottom; only one--- focuses on TIMING. The moving average--of gold, stocks, what have you, essentially traces price information of the past, but applied to the present. And a good rule of thumb is to wait for the moving average to catch up, flatten out, and then change direction to confirm a bottom.

But do not ignore price alone. After all, price determines its own fate and the moving average is merely a fine tuning. Together, the two provide a technical interpretation that is more insightful than observing one independently from the other.

The twenty day moving average is a case in point, and perhaps very fitting because it encompasses the short and intermediate term price action. Twenty trading sessions equates to one month of time; and most trendless markets tend to run about six to eight weeks before presenting a directional move.  Overlaid on gold, the slope is not only beginning to arc sideways, but now resisting the most recent decline. To explain this, older (minus) readings are being replaced with newer (positive) readings, which on a time scale of twenty trading days, absorbs a broader development and not so much, the short-term gyrations.

Gold remains very much locked in a basing chamber, both seen by price and a trendless moving average. But all factors included, the current bottom forming is, shall we say, “nearing the end of its time zone.”

The climate down below is improving, and looking favorable, more than it ever has before. The inevitable chain of events is predictable; where price ultimately must leave the ‘basing phase’ to begin trending again. And undoubtedly this will cause the twenty day moving average to rise.

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Darah