Merv Burak's free commentary.

Thank you GAW for turning me on to him and use the link below to see the charts he is referring to. QB
http://preciousmetalscentral.com/subscriber/weeklycommentary.pdf

Friday may have killed any hope of a good rally. Gold is looking weak and the price trend has
been weakening for quite some time. Are we at the top?
GENERAL COMMENT
Much has been written over the past few weeks about the fact that gold has made it into new
high territory, even I have made some of those comments. But really, it has BARELY entered
new highs and for a strong move gold should have risen sharply into much higher levels, real
fast after the break. That it did not is a fact for worry. A short hesitation after the break is not
unusual but what we are starting to see is more than a short hesitation. It is starting to look
like a turn around of trend. More confirmation is required, technically, but at this point the risks
are getting a lot larger if one is thinking of investing or speculating on the buy side for gold or
stocks. There comes a time when it is just more relaxing to lean back in a nice comfortable
chair with feet on a stool, have a beer, watch your favorite program on TV and just wait for a
better, less risky period to get back into the market. Relaxing your brain every now and then
puts you in a much more advantageous position when you finally get back in.
Now, what are the odds that we are ACTUALLY going to go into a major reversal of trend?
Who knows? Of course the same can be said about a continuation on the up side.
Technically, we just follow the daily actions of the thousands of informed (and many
uninformed) investors who are putting their money on the line and follow their example, where
it strongly suggests a trend. We hope that the trends they set will continue into the future so
we stick with them until the technicals actually confirm that reversal of trend has occurred.
GOLD
LONG TERM
Since changing the units and reversal criteria for my long term gold P&F chart the trend
continues to be bullish. At the present time the price would have to drop to the $1110 level
before we start to worry, long term P&F wise.
There is always the P&F chart and the daily or weekly bar or candlestick chart. Not only do the
two often give us a different message but the bar or candlestick chart alone could give us a
varying message depending upon what indicators we are using with the chart or what patterns
we are looking at. That’s why I like to keep it simple using only simple indicators that have
proven themselves over many, many years of usage. Sophisticated, complicated, or just
downright difficult indicators or techniques are just too stressful on the brain. So, let’s continue
with the simple.
To gauge where we are at, with technical indicators, I look at three things; trend, momentum
(strength of trend) and often, but not always, volume of activity. That’s enough for the simple.
I throw in a trend line or a pattern where appropriate.
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Going to the long term indicators gold remains above its positive sloping moving average line.
However, the latest direction of motion is towards the line and it would not be much longer for
gold to cross below the line if we continue with downside days. The long term strength of the
price trend, as shown by my long term momentum indicator, remains positive although here
too the direction is towards the neutral level. The weakening strength can be seen by the fact
that the momentum indicator is now almost at the level it was at during the late Feb lows.
Also, the momentum indicator is below its negative sloping trigger line so although positive it is
heading in a negative direction. The volume indicator is showing the greatest strength at this
time but as I have cautioned before, too often the volume indicator is a lagging indicator at
market tops so one should view this positive volume indicator with some skepticism. All in all
the long term rating, at this time, is still BULLISH but weakening quite rapidly.
INTERMEDIATE TERM
DARN
Just as I finished the title (above) a violent storm went through and knocked out the power in
my area. That was just after 1:00 P.M. Saturday afternoon. The power was not restored until
some 10 to 14 hours later in the middle of the night. So, I’m way behind schedule with the
commentary. I’ll limit the rest to only the gold portion and get back on track next week.
Now, where was I before the storm?
Since I’m cutting the commentary today to only gold I thought I should at least show the full
gold chart from the intermediate term standpoint. Here we have the trend (moving average
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Precious Metals Central
lines), the momentum (50 day RSI) and volume indicator (On-Balance Volume). The
momentum and volume indicators also show my trigger lines. Today, let’s just take an extra
look at the momentum indicator.
At the price peak in early Dec the momentum (strength) of the price move was quite strong
with the indicator entering its overbought zone. The subsequent decline in the momentum was
normal after such a strong move. Although the momentum went negative for a few days it
quickly recovered. As the price rallied from its Feb low to its new high in May the momentum
also gained strength but on a very limited basis. It hit a peak in May that was just slightly
better than half of its strength at the Dec peak. The next price move from its May low to its
new high in June was accompanied by still weaker momentum performance. The strength of
the price move to new highs was weakening drastically. Now, with relatively little downside in
the price move we are just about to enter the negative zone with the momentum. Is there
anyone out there that cannot understand the direction that the momentum of the price
movement is heading into?
So, let’s just quickly summarize the simple indicators. Gold is trading below its now negative
sloping moving average line (65 DMAw). The momentum indicator is still very slightly above
its neutral line in the positive zone but heading lower fast. It is, however, below its negative
sloping trigger line. The volume indicator is still the strong indicator being above its positive
trigger line but as often cautioned, it could be a lagging indicator at market tops. Putting all this
together I must rate the intermediate term as BEARISH now. The short term moving average
line (15 DMAw) is now below the intermediate term line for confirmation of the bear.
SHORT TERM
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Precious Metals Central
Back in the 1950s a professional dancer called Nicolas Darvas made a killing in the stock
market. He might have even made more money with his 1960 best seller “How I Made
$2,000,000 in the Stock Market”. We see here in the short term chart one of his most popular
trading patterns, the “box”. The box is an area of price activity with an upper resistance and
lower support. The breaking of the box by subsequent price action was Nicolas’s signal to
trade with the break-out. Traders even to this day still look for this pattern to trade with. Will
gold break below the support or rally and break above the resistance? It does look like the
support will be broken but we’ll have to wait for the actual event, as Nicolas did.
For now let’s just quickly summarize where we stand from the short term perspective. During
the week gold tried to break above the short term moving average line but the attempts failed.
It continues to trade below the line and the line continues to slope downwards. The
momentum indicator (13 Day RSI) remains in its negative zone and although it tried to gain
altitude during the week and moved above its trigger line it is once more below its now
negative sloping trigger. The daily volume action is pretty low and not giving us any real
message other than the speculators are sort of holding back their activities. Summarizing, I
can only rate the short term as BEARISH. The very short term moving average line remains
below the short term line for confirmation of the bear.
As for the immediate direction of least resistance, well the Friday action was quite negative
with the close being very near the low for the day. The aggressive Stochastic Oscillator
(another momentum type indicator) is heading lower fast and although it has already entered
its negative zone it still has a way to go to get to its oversold zone. I’ll go with the down side as
the direction of least resistance, at least for the next couple of days.
Merv’s Precious Metals Indices Table
16 Jul 2010 Merv's Precious Metals Indices Table
No.of FRI WEEKLY SHORTER TERM INTERMEDIATE TERM LONG TERM
SECURITIES Stocks CLOSE % CHNG MA MOM RS RATE MA MOM RS RATE MA MOM RS RATE
Merv's Gold & Silver 160 Index 160 3280.03 - 0.7% 3334.88 - - NEG + 18 NEG 3391.95 - - NEG - 21 NEG 3377.40 - - NEG - 9 NEG
Merv's Gold & Silver 100 Index 100 356.72 - 1.9% 365.96 - - NEG - 21 NEG 371.60 - - NEG - 18 NEG 364.95 + - NEG - 6 NEG
Merv's Qual-Gold Index 30 105.54 - 1.6% 107.83 - - NEG - 12 NEG 108.09 - - NEG + 8 NEG 104.12 + - POS + 7 POS
Merv's Spec-Gold Index 30 470.67 - 1.3% 486.06 - - NEG - 24 NEG 502.70 - - NEG - 22 NEG 501.78 - - NEG - 18 NEG
Merv's Gamb-Gold Index 30 686.04 - 0.3% 692.27 - - NEG + 16 NEG 703.83 - - NEG - 23 NEG 703.02 - - NEG - 5 NEG
Merv's Qual-Silver Index 10 1219.01 - 2.1% 1258.54 - - NEG - 22 NEG 1288.71 - - NEG - 19 NEG 1288.59 - - NEG - 24 NEG
Merv's Spec-Silver Index 25 1588.90 - 1.2% 1613.74 - +POS + 11 - N 1639.98 - - NEG - 24 NEG 1654.85 - - NEG - 10 NEG
Merv's Penny Arcade Index 30 1850.26 - 2.7% 1913.90 - - NEG - 20 NEG 1947.60 - - NEG - 14 NEG 1903.61 + - NEG - 1 NEG
S&P/TSX Global Gold Index 30 355.45 - 1.7% 365.15 - - NEG - 14 NEG 365.63 - - NEG + 3 NEG 350.82 + +POS + 11 POS
NYSE Acra Gold BUGS Index 15 443.87 - 4.0% 460.51 - - NEG - 6 NEG 461.97 - - NEG - 11 NEG 446.83 + - POS - 16 - N
NYSE Acra Gold Miners Index 43 1339.59 - 3.8% 1388.64 - - NEG - 10 NEG 1394.10 - - NEG - 9 NEG 1344.78 + - POS + 13 - N
PHLX Gold/Silver Sector Index 16 167.39 - 4.4% 173.50 - - NEG - 9 NEG 174.81 - - NEG - 17 NEG 172.06 - - POS - 19 NEG
Dow Jones Precious Metals Index 13 345.55 - 4.4% 357.21 - - NEG - 5 NEG 358.33 - - NEG - 16 NEG 351.79 - - POS - 17 NEG
Dow Jones U.S. Precious Metals 3 112.76 - 5.0% 115.67 - - NEG + 2 NEG 112.61 + - POS + 2 POS 107.03 + +POS + 3 POS
S&P Gold Index 1 138.66 - 4.9% 141.74 - - NEG + 1 NEG 136.85 + - POS + 1 POS 129.12 + +POS + 2 POS
CBOE Gold Index 8 199.54 - 3.7% 206.12 - - NEG - 13 NEG 207.55 - - NEG - 13 NEG 203.60 - - POS - 21 NEG
FTSE Gold Mines GOLD MINES In 19 3296.16 + 1.4% 3322.73 - - NEG + 8 NEG 3315.02 + - NEG + 6 NEG 3207.81 + +POS + 15 POS
FTSE Gold Mines AMERICAS In 11 2830.13 + 1.4% 2865.83 - - NEG + 15 NEG 2868.14 - - NEG + 4 NEG 2762.71 + +POS + 12 POS
FTSE Gold Mines AFRICA Index 4 3064.40 + 1.5% 3059.25 - - NEG + 7 N 3046.76 + - NEG + 10 + N 2948.28 + +POS + 20 POS
FTSE Gold Mines AUSTRALASI 4 13828.30 + 1.1% 13785.05 + +POS + 3 POS 13524.31 + +NEG + 20 POS 13463.09 + +POS + 23 POS
Johannesburg Gold Index 6 2436.02 - 0.7% 2481.37 - - NEG + 19 NEG 2490.84 - - NEG + 5 NEG 2403.42 + +POS + 22 POS
U.S. Dollar Index N/A 82.49 - 1.7% 83.85 - - NEG + 23 NEG 85.04 - - NEG - 12 NEG 83.44 + - NEG - 4 NEG
Gold Bullion price N/A 1188.20 - 1.8% 1211.60 - - NEG + 17 NEG 1216.62 - - NEG + 7 NEG 1180.73 + - POS + 8 POS
Silver price N/A 17.79 - 1.6% 18.12 - - NEG + 4 NEG 18.24 - - NEG - 15 NEG 17.90 + - POS - 14 - N
Developed by Hudson Aero/Systems Inc., Technical Information Group
Merv’s http://preciousmetalscentral.com
Precious Metals Central
TO SUBSCRIBERS
The storm power black-out has put me behind schedule. I will be completing the other
sections but they may be a little late in getting posted. Bare with me.
Merv
Well, that’s another week.
Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for
Merv’s Precious Metals Central
18 July 2010
For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically
Uranium with Merv blog at http://techuranium.blogspot.com.
During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun
goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician (CMT)
and tries to decipher what’s going on in the securities markets. As an underground surveyor in the gold mines of
Canada’s Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several
Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv’s driving focus is to
KEEP IT SIMPLE.
To find out more about Merv’s various Gold Indices and component stocks, please visit
http://preciousmetalscentral.com. There you will find samples of the Indices and their component stocks plus
other publications of interest to gold investors.
Before you invest, Always check your market timing with a
Qualified Professional Market Technician