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Gold and U.S Stocks Rally but is it time for a Little Pullback

April 21st, 2011 · Chris Vermeulen · 3 Comments

It has been a very interesting week thus far. Monday kick started traders with a heart pounding equities sell off which sent money into the US Dollar, precious metals and bonds as the safe havens of choice.

A lot has happened this week on a technical analysis basis which I can’t really show in a written report like this. But can do so in detail within my video newsletter. There are just to many charts required and layers of analysis to cover… But I can cover some of the points and my thoughts using the charts below:

SPY 30 Minute Intraday Chart
This chart shows the volume traded at various price levels for the SP500 index. These high volume levels act as support or resistance depending if you are above or below them. On Wednesday we had large gap higher into a resistance level which the market could not break through. So I am expecting to see the market take a pause and fade back down to fill part or all of Wednesday’s gap window.

While most gaps tend to get filled. Gaps that occur right at the beginning of a new trend when momentum is strong. They generally do not fill all the way down to the bottom. I expect a couple days of sideways to lower price action. Buyers should step back in and send the market higher next week if this trend is to continue.
SPY Newsletter ETF Trader

GDX – Gold Miner Stocks – Daily Chart
Gold stocks have been underperforming the price of gold bullion for several months. This typically is not a strong sign for physical gold prices. That being said I do feel the majority of investors are seeking true safety and want to own real gold and not some highly leveraged gold stock. This to me is more of a risk off trade for global investors and it explains the performance.

From the recent price action shown on the GDX chart I am expecting to see prices trade sideways or lower in the coming days. A sideways move would actually be bullish and would signal a possible breakout to upside. So that is what I am hoping will unfold in the coming days/weeks.
Gold Newsletter ETF Trader

US Dollar Daily Chart

The dollar continues to get sold at a tremendous rate and the Fed is devaluing the currency as quickly as they can trying and save the world one dollar at a time…
The trend is strongly down but it’s starting to near a point where we should start to keep a closer eye on it for signs of a reversal to the upside. When the dollar makes a move higher and starts a rally it will put downward pressure on stocks and commodities. We must be prepared to move our protective stops ups and possibly take advantage of falling prices in the near future. Until then remain long equities and commodities.
Dollar Newsletter ETF Trader

Mid-Week Trend Conclusion:
In short, it looks as though stocks and commodities are in favor again. Monday’s panic sell off looks to have shaken the masses out of the market and the big money players were buying up all the shares they could. Members and myself are sitting nicely in our long positions and this could be the start of something exciting.

You can get my Pre-Market Trading Analysis Videos, Intraday Chart Updates and Trade Alerts with my Premium Newsletter:

3 responses so far ↓

  • 1 AU Stocks // Apr 22, 2011 at 7:26 am

    Thanks for the update, though the problem is that next week only has three trading days. Maybe all of next could be bearish, while the following week continues the uptrend.

  • 2 arianmotavalli // May 2, 2011 at 1:43 pm

    great update. I wonder what your thoughts are re: speculation of declining confidence in the USD as a reserve currency and the talk surrounding a ‘basket of currencies” as an alternative to commodities being traded under usd. This would def see some shocks to the U.S and indeed world economies. What are the chances of this happening in your opinion?

    Arian Motavalli

  • 3 Greg Atkinson // May 4, 2011 at 9:23 am

    Hi Arian, I did not write the article above but my view is that the days of the USD being the reserve currently are limited. At some point a new reserve currency will be used and I suspect it be based on a basket of currencies. Basing commodities prices etc on the USD simply doesn’t make sense any more in my opinion.

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