I see the formation of a massive Head and SHoulders formation. The head in 2000/peak of course. the left shoulder just prior to that and now we have the right shoulder finishing, Imho.
If true, my observation, the right should is lower and weaker. See how weak the Macd tops have been? Even though subtle since 2004.
Before the ultimate top in 2000, half of 1999 also had a weakening of Macd with an upward move in index
BUT same chart 2 new indicators the ROC was and is now weakening, but the Price relative signal stayed above its moving average and proved to be right on as the index moved to its ultimate top. The ROC is also forming a H and S similar to stock index, this time it is BELOW the moving average.
I like using very long term mvoing averages, to step back and see one degree or 2 larger trend. I see the slowly flattening 4oo WK has quite obviously halted several attempts to move above it, do you see that? beginning in 2004.
IMHO, any break of 2004 low should lead to a test of 2002/2003 lows and beyond perhaps.Certainly a quick move to 1400 area would be in order.
My friends, it is obvious credit expansion has fueled this economic expansion, like all good things, it will come to an end.And the inflation debate goes on, especially this week with a dramatic rise in gold.
WHat is all the fuss about gold??? Look closely at my chart. When you observe (print chart or my commentary so you can read and observe chart at same time please) the MACD and ROC, you see relatively speaking WEAK ACTION! IMHO, not confirming at all this recent upsurge in bullishness nor price. and we have smart money way short gold, large speculators long (dumb hedge funds?)
From $426 high that marked the high in both Macd and Roc. WHy isn't record housing and oil prices reflected in record metal prices?
Look at how far below the 200 and 400 WK moving avg it was beginning in 1997, it took 3 years before it approached it again, and fell for 2 more years before a break through.
It's now been about 3 years ABOVE them! And my guess? is we now move back towards them in an unexpected gold bug decline.
With rising SMA's it may be just the breather needed to come back kiss and say see ya later.
By stepping back to see BIGGER picture, we can determine what is noise and what is most likely to happen, as most see just day to day action. It took an email from a good trader to get RR to start using weekly charts again I think. No one is infalable, and overall RR commentary is a must read.
Descending tops in Silver and much weaker non confirming action IMHO. A break from recent tight range could be significant in either way.
Same weaker action in DOW and here we see converging trendline action not seen before for at least 10 years! a pause? I don't think so, has this been a 6 year topping process?
All this brought about by historic FED action, but has given us the weakest recovery in history!
This tells me something else is afoot, why I am SO cautious. The YIELD curve does not lie, it is flattening big time, so much so the FED has publically denied its relavence and this is where my story ends.
Duratek
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