Extracted From the Oct 28, 2012, Market Update
US Dollar Chart: Is A Bottom Close At Hand
The chart below clearly indicates that the dollar has been consolidating for the past two months and is slowly building up momentum to break out. Its attempt to put in a bottom at 78.60 was not validated. 8 out of 10 times when this takes place, the market drops and either test its recent lows or trades to new lows before trending higher. So from a 3-6-month time frame, one could argue that the dollar has bottomed but from the 1-3-month time frame, there is still a strong possibility that it could trade below 78.60.
Randgold is a very good stock to monitor in terms of where gold prices are heading and the symbol seems to reflect this. The symbol for this stock is GOLD.
Gold bullion has shed roughly $100 from its recent high of 1794 to its recent low (Oct 24) of 1698. This stock has held up relatively well only shedding roughly $10 in the same time period. It has also been declining on relatively low volume and is currently trading right on its support line (117.00-118.00). The pattern here suggests that it could test the 125.00-130.00 ranges again before pulling back. However, as the long term outlook favours a stronger dollar, Gold bullion nor Gold stocks are expected to perform well over the longer timelines.
We are waiting for a sell signal from the dollar, or the Euro and a possible confirmation from Randgold before opening up short positions in the Euro, and Gold and a possible long position in the dollar.
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