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Gold Market RSI - The Haunting?

Morris Hubbartt
Weekly Market Update Excerpt
posted Oct 18, 2010

Gold and Precious Metals

KEY CHART #1: GOLD via SGOL-NYSE

Buy and Sell recommendations should be added at the recommended price.
The Surge Index System Buys Weakness and Sells Strength

Super Force Gold Bullion Analysis:

• Gold has a Surge Index 100 Sell Signal as of Oct. 1st.
   
• This is the maximum Surge Sell Signal.
   
• I am a Long Term Bull as it relates to GOLD. I bought more physical bullion when many were predicting much lower prices and better entry levels back in July. I bought and I'm not selling my physical gold. Longer term, I'm convinced Gold and Silver will be much higher.
   
• The main analysis in this Update is a look at the weekly Gold chart. I have included chart #2.
   
• What I would like to focus on is RSI analysis. High RSI is like overhead weight on price, especially on the weekly chart. Notice the area in which RSI is at now. In the past, in this Bull Market, this reading has brought price down.
   
• Note, the corrections are varied in size. I've included what I see as Initial and Secondary Support.
   
• It always pays to be prepared for such weakness; you never know when a normal correction expands into something much greater. Again the key to successful investing is buying weakness and selling strength.
   
• I personally am prepared for all action in this sector. I want to own more Gold and Gold Stocks. Use my Surge Index System to time your buys.

KEY CHART #2: GOLD - Weekly

KEY CHART #3: GOLD JUNIORS via GDXJ-NYSE

Super Force Gold JUNIORS Analysis:

• There is currently a Surge Index 100 Sell Signal on GDXJ as of Sept 8th.
   
• My strategy has been to sell strength and to buy weakness; I set my orders to re buy 3% from the sell price on GDXJ. The Superforce 60 trading service has booked 8 round trip trade wins since the lows of July. Gains range from 3-5%. With zero losses.
   
• Price has had a fabulous move from the July lows. That is when my largest buys were entered. I made a note on this chart at the time, stating where additional capital was allocated. GDXJ is up some 46% from those lows to the highs this week.
   
• That said, there are warnings on this chart. Note that distribution days are adding up. This is a warning that those who have owned the shares longer term are releasing their shares to those chasing price.
   
• I would say Friday's decline shows the highs will likely be tested sooner rather than later. Topping in a sector is generally a process and not an event.
   
• When a sector is up 46% in several weeks, price chasing is suicide. I re buy the sector only after already booking profits. My longer term strategy is to add to my position during the next correction. Yes, there will be a correction!
   
• As mentioned above, there is a Surge 100 Sell on GDXJ. Although there is a sell, I hold a core position of approximately 50%. When weakness occurs, I will enlarge my core position and trading position.

KEY CHART #4: GOLD STOCKS via GDX-NYSE

Super Force Gold Stocks Analysis:

• A Surge Index 75 Sell Signal was issued Aug 31st.
   
• My strategy for Gold and GDX for many weeks has been to take profits and re buy 2% under the sell price.
   
• This strategy has been an effective way to protect profits and continue to maintain nice trading and core positions.
   
• Gold followed by Gold Stocks are by far my largest holdings.
   
• Many of the same warnings mentioned above apply here as well.
   
• I want to mention the blue vertical lines. In many charts I use what I call the "Price Volume Wedge". This is a perfect example of the final outcome. This timeframe in GDX warned of a coming correction. As can be seen here, the correction played out just as the "Price Volume Wedge" warned.
   
• As mentioned above, this has been a powerful rally. New money should ideally wait for a fresh Surge Index Buy Signal. Now is not the time to blindly buy.
   
• Follow a proven strategy. Use the re buy program for profits already taken and wait for the Surge System when putting new money to work. It may be tempting, but do not chase price, period.

KEY CHART #5: SILVER via SIVR-NYSE

• There is a Surge Index100 Sell Signal as of Sept 7th for SILVER. This is the Max Sell Signal on Silver.
   
• Volume is telling this week. Thursday was very strong in price and volume. One thing I begin to watch as rallies mature is excessive volume. This may qualify as the rally is extended and volume does appear excessively heavy.
   
• Again, this is an asset that I hold a large core position in and one likely going much higher in the long term.
   
• In the shorter term Silver is seriously overbought.
   
• The one thing worth mentioning here is the US Dollar. Later in this Update I will give an in-depth look at the Dollar. There is more and more evidence that the dollar is turning, at least in the short term. This can cause a correction in the precious metal sector. Silver is up 38% from its recent bottom in late August.
   
• Use a proven winning strategy in this volatile metal.

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