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Gold Miners Index May Be Warning Us

February 10th, 2011 · Chris Vermeulen · 2 Comments

The past couple weeks I have been keeping a close eye the price of gold and the gold miners index. I check to see if its pointing to higher or lower prices in the near future using inter-market analysis, price and volume, along with technical analysis. At this time the charts are still pointing to lower prices in the coming days or weeks.

Taking a look at the daily chart of Gold
As you can see it has formed a bear flag with declining volume and the price has drifted up into a resistance level. This combination typically leads to lower prices.

With international fears floating around and the fact that inflation has started does make me a little weary of shorting gold but one thing I have learned over the years is that trading on fundamentals and news clips seen on TV is not a reason to pass on a setup if one forms in the coming days. The only thing that pays in the stock market is when the price action goes in your favor. This is why I focus on price, volume and momentum while avoiding what others are saying elsewhere. Trading is a numbers game and I put my money on the table when the odds are clearly favoring one direction. Unfortunately I am trading trades against what the masses think and feel is the right thing to do.

Gold Miner stocks are forming much of the same pattern as gold bullion but today (Wednesday) the chart actually put in a possible reversal candle. If this is correct then we should see gold and most likely silver follow suit tomorrow by moving lower and possibly even start a correction.

Gold Swing Trading Conclusion:
In short, gold stocks sold off strong today while both gold and silver closed only slightly lower. When this happens near a resistance zone, with a bearish price and volume patterns I start to look for a shorting opportunity. It has yet to happen and Iā€™m not going to jump the gun, but I am waiting for the right opportunity to take advantage of these trading instruments.

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2 responses so far ↓

  • 1 GoWest // Feb 11, 2011 at 2:23 pm

    The market seems to be taking gold profits to purchase wall street equities being ramped by QE dollars. Looks like a good chance to pick up gold cheap.

  • 2 Greg Atkinson // Feb 11, 2011 at 2:40 pm

    It could also be that gold has had it’s run for now? Certainly the excitable calls last year that gold would soon hit US$2000 an ounce look a little ambitious now.

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