Strengthening Technicals

After some tinkering around with time periods, the following daily bar chart of the ratio of $GOLD:$CRB started to reveal a couple of its underlying secrets.

• The RSI oscillator - set at 20 days - seems to have hit support
• The MACD - set to highlight the differential between the 15 day MA and the 40 day MA - seems to be tentatively rising, and has just given what may turn out to be a buy signal
• The level of 1.45 seems to show a "double bottom" support level - which some will argue is potentially bullish.

Ratcheting back to the weekly chart, we get an even more interesting picture:

• Although the RSI - set at 10 weeks - seems to have some minor downside potential, it could conceivably bottom around here.
• Although the MACD - with the differential set at 10 and 20 weeks - could still have some downside, the shape of the histograms indicates that there is a possibility the ratio could be bottoming (In other words it could go either way)

On balance, what has caught my attention is that if the daily ratio rises from here, it is likely to penetrate a down trendline to the upside and, if this happens, and the weekly chart bottoms out here, there could be some significant upside to the ratio - given that the RSI is currently at a relatively low level.

Note the large number of gaps that have manifested on the weekly ratio chart - all of which have subsequently been covered. This is indicative of some highly charged "emotional" behaviour which has been masked by the charts of the individual counters which do not show these gaps. Logic dictates that if commodities are going to rise then gold should rise with them. There is no obviously apparent reason why the two counters should not move smoothly in the same direction. Clearly, the gaps are pointing to other possibilities flowing from an emotionally charged environment.

If we look at the weekly gold chart on its own, an interesting picture emerges:

• The RSI has just broken above the 50% level.
• The 40 week Moving Average support line held
• The MACD histograms are starting to rise back to the neutral level.

On balance, this chart is looking bullish

Now, if we look at the $CRB chart on its own, we see the following:

• Its RSI chart is reaching for a higher level (it broke up through the 50% level a couple of weeks ago)
• The MACD may have given a buy signal as it crossed over (although such buy signals are less compelling if they do not occur ion negative territory)

What all of the above is telling me is that Commodities have recently been stronger than gold, but that gold may have reached a point where it will start to outperform commodities - at least for the foreseeable future.

Now, if we look at the commodities chart from a Point and Figure perspective, we see that it has not yet given a new buy signal on the 3% X 3 box reversal scale.

Conclusion

Until the P&F chart of commodities gives a full blown buy signal, what we appear to be facing is a gold price which will rise relative to commodities in the short term, but this rise will be limited by the fact that it will still be in "catch-up" mode relative to commodities - ie It will still be behaving within the boundaries of a commodity.

However, if the Commodities' chart gives a buy signal - and in the process rises to a new high - then it seems likely that gold will become a "star performer" in the months ahead.

For the sake of completeness, the charts below show the more speculative (and gold leveraged) $HUI chart in P&F 3% reversal and both daily and weekly bar chart form

P&F

The high pole reversal warning gave rise to a down move which might very well have ended and, if it has ended it will have ended above the rising trend line - which, in turn, might give it a shot at rising to new highs

Daily

The daily chart below is looking a bit overbought and tired, and could pull back somewhat. However, it seems to want to penetrate the upside resistance of the 50 day MA which, in turn, remains above the 200 day MA. This is technically quite strong

Weekly

On the weekly chart, the $HUI is also showing signs of potential strength.

• The MACD looks like it wants to turn up
• If this happens, the histograms will enter bullish territory
• If this happens, the RSI oscillator is likely to go into +50% territory

If 2 and 3 happen, we might see some strong up moves.

Overall Conclusion

There are tentative signs that the leveraged gold shares may be positioning to make an assault on the previous highs, and that the gold price might become quite energised - both in absolute terms and in relative terms (relative to commodities) if the commodities reach for new highs.

The reader should be cautioned that all of this is tentative. However, as we sit here at this point in time, these are distinct possibilities.