Why gold has made a significant move and the real question... potential upside and downside

Using GLD ETF as a proxy for Gold analysis mainly because using XGLD which is the gold index there is a lack of data for shorter term charts.

The reason the current move was significant is that we closed above that key level of resistance which was for spot around 1367 to 1369.  This was resistance 4 days in a row, resulting in significant volatility gaps up and down.   Today gold closed above at 1370 and is holding currently.

Looking for the next target in price, one would expect to see resistance at  1384 which is the 61.8% level from the previous high to low which is around the next level of resistance coming from the Jan 13th levels.  However, one would expect 50 MA which is within a couple of dollars to show resistance which it did today as prices pulled back from the days highs.  And Bollinger band at 1377  which was the top today.


So lets look at IMG.TO and YRI.TO options at 21 strike and 12 strike respectively.

Huge gain today, however, time is running out as the expiration date is this Friday.  Therefore, I am expecting to get out as soon as possible based on the potential gain over the next few days.  Most recent high is at 21.32 and bollinger band top is at 21.43.

To expect another 3-4% jump is hard to rationalize. However a 42 cent gain over 3 days which is only a 2% gain is a more fair expectation.

 
With a 12 strike, this is a similar situation with IMG.TO.  My expectation is that the price will find resistance at 12.23, hence the need to off load these options within the next couple of days.

Best case scenario, gold continues up tomorrow these gold companies may have additional pops.
Gold looks like a move to 1400-1410 is likely then an additional correction before the next "leg" up in the relentless bull rally. 

S&P500 ran in to some resistance, however the market appears to be endlessly up, despite obvious flaws with fundamental valuation.  The only way I can rationalize current prices is inflation.  Take a look at the dollar index and see the pounding of the dollar which represents a loss in relative buying power.  Therefore companies are worth more dollars but those dollars are less valuable.

Where did the resistance come into today?  the purple line, below shows you where that purple line came from.  It is the top of a Andrew's pitchfork looking back years.

As the price action is staying above major moving averages it is hard to say this is the end, remember POMO (the daily operations for QE2) have been helping fuel this "melt up" as the end is near the real question is what happens when the free money stops flowing.  What type of correction could be expected?  on the flip side, what if they announce QE3, how high could the stock market go?

Dollar index....

Where is the dollar going?  That is the real question.  It is my expectation the dollar is going to continue a decline, however a jump to the 200 MA could be in the works right now.  As the Dollar declines expect commodities prices to continue to push higher.

Rubber for instances, pushing new highs day after day.  for more information read Here

S&P 500 Monthly Chart, Andrews pitchfork

Here explains Andrew's pitchfork better that I could : Here



This can potentially explain why the market is currently finding resistance at this level.  However, this market has been relentless and therefore more interested in mining stocks.  

Platinum new 52 Week High, Gold makes a move as well

All metals had a really good move today, above is Gold and Platinum.   Silver was the strongest by far.

Yesterday I suggested that the pull back was favorable as today you can see why.  The pull back gave this stock a lot more room to run today.  4.60% increase putting my 21 strike call options in the money.   The technicals look strong, however the stock is overbought and the MACD histogram is still having higher ticks.   Expect a retest of the 20 MA with in a month or so.  At that point we could see stronger buy pressure.

Not in as good shape as IMG.TO but YRI.TO Yamana Gold is looking good from a technical stand point and with gold continuing its upward movement breaking of the 50 day MA would be very bullish.  However, the bollinger band is right above it providing stronger resistance.  Currently I am sitting on call options for 12 strike on this stock as well.

PTM.TO  I am expecting to move tomorrow.  Platinum is making new 52-week highs, and the stock bounced from the 50 MA late on Feb 8th.  MACD has just had a positive tick, however stock is over bought.  My current strategy will be take 2/3 profits at 2.49, and pick up some silver or small cal oil plays.

With Oil being so high over the last quarter I expect producing small cap oil companies to do relatively well. Will be looking into small caps and posting potential stocks that are potentially tradable.

IMG.TO IAMgold makes a new 52 week High, mutli year high stands at 21.95

This stock has made a new 52-week high.  Next major resistance is the mutli year high of 21.95, which occurred in the fall of 2009.

Gold was very strong this morning.

PTM.TO update, IMG.TO call options

The MACD cross over has occurred, expect a positive tick on the histogram tomorrow.  

I have highlighted 3 areas of similar formation and similar location with respect to the 20 and 50 MA.  Twice before the current price action, once the price got above the 20 MA, the price just hovered for a couple of days on top of the 20 MA before taking off.  This is my expectation for this stock.  The first price objective is the bollinger band and over head resistance which will be around 2.49-2.50.  From there a test of the recent highs could be likely.  The reason I am liking this stock is that if if can get above the 3.00 mark it is in uncharted waters, with platinum potentially looking to test its 2007-2008 highs of 2200.

IMG.TO is IAMGOLD corp.  I entered into a spec trade using Call options expiring next week at 21 strike price.  I expect that the move up in gold is not complete yet, I don't think it will last to long but if there is a 20-30 increase in gold over the next couple of weeks, this stock is poised to break to new highs. I would not normally buy at a bollinger band but this pull back today is actually beneficial to my trade as the bollinger band will continue to increase and there is more room for this stock to move over the next few days.

Stock market..... not much I can say about it.  It is just continuing its relentless climb higher.  Why? not really sure.  There are no fundamentals behind this move, earnings were mixed and the market has not had a major correct to provide a buying opportunity.  There are a lot of people out there that remain bullish because of the technicals which is great, but no doubt there is a major top coming up.  You don't want to be caught with a gap over a stop loss.  The metals have corrected, hence why I am more confident trading small cap mining companies as they have actually proven there is a bottom to their recent move. 

Platinum ahead of Gold, PTM.TO expectations

Comparing other mining companies (gold/silver) such as SSB, AXR, EDR,  PTM has some more room to run based on the Slow Stochastics.  These are all on the TSX.

MACD: not displayed but the cross over looks like it will happen this upcoming week indicating a "buy" signal.

As gold and silver are working their way up through decently heavy resistance areas, Platinum has made the highest high since the recent financial crisis in 2008.  Therefore there is potential for platinum to have a nice run over the next few weeks before a correction to retest that 20 Day MA