This from the other board - just for information. I would be interested in anyone's refutation of this analysis. I have not attempted to copy the charts. I note that Chris expresses a wish that is shared by we common folk - "I’m looking for a setup with clear risk/reward features." Amen to that!

"The 50-period moving average has offered key support levels for the previous trends and if it holds true going forward, then we are not far from another rally in the dollar

There is a potentially big setup in the precious metals sector, along with the dollar which looks like it’s about to unfold. Since mid-October of last year, gold started to show signs of distribution selling. Only a month later in November, silver started warning us that some big players were taking some profits off the table also. Distribution selling is easy to spot on the charts. In short you will see heavy volume selling accompanied with strong moves to the downside.

Now if we look at the US dollar chart, we see the exact opposite price action. We see sharp rallies during October and November of last year. It’s normal to say that gold and silver move inversely to the dollar. So this price action makes perfect sense.

The interesting thing with the US dollar is that during November and December it rallied, breaking through a key resistance level and has been consolidating above support ever since. If this bullish pattern (bull flag) plays out, then it’s just a matter of time before the dollar makes another strong rally upwards. That will put downward pressure on stocks and commodities.

Take a look at the charts below…

US Dollar Daily Chart

The 50-period moving average has provided key support/resistance levels for the previous trends. If it holds true going forward, then we are not far from another rally in the dollar.

Precious Metals and Dollar Trading Conclusion:

In short, we could see a major shift in momentum from up to down in both precious metals and the equities market. Keep in mind, the market has a way of dragging out patterns/moves. So while the chart looks bearish and I think a reversal is near, things could just chop around for another month or so before a definitive breakout is made.

Choppy market conditions are great for trading options but not for short term trend traders like me. This is why you don’t want to anticipate moves (pick a top). At the moment, I remain neutral on metals and the dollar. I’m looking for a setup with clear risk/reward features.


ABOUT THE AUTHOR
Chris Vermeulen

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trading method. For six years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.