Market Recap for Nov 15, 2010

Today much like last week I am still searching for an entry point into the metals markets as we’ve continued this consolidation period after an eventful set of trading days last week. There was no major news out of the gold and silver markets today and also no news of a possible tightening of Chinese monetary policy.

The slow stochastics indicate that we should be buying at this point but there are a few red flags that came up when I saw this today. One is the RSI which is saying that the price activity can go lower and not be overbought relative to recent prices. The RSI is a good detector of false signals from other technical indicators and I believe this could be a case where it is calling out the stochastics. Also the MACD has just begun to cross the 9 Day moving average which indicates a weak bearish signal. The most important piece here is the temporary support level of 24.88 which held as the silver market reversed later in the day. If this level is broken tomorrow the next support level could likely be in the area of the October 7th reversal. On the other hand if it does not break, it could signal a buy, but at this point the chart is very broken and should be watched closely. Also, if you pull the chart back to a 2 year frame, you will notice that the stochastics are hovering near overbought territory and the RSI is extremely overbought which can give us and idea of how long and how far a retracement can be at this point.

The USDX did not manage to close above 78.36 which were the highs of the previous two bounces. If it can close above it tomorrow, we may be able to call that double top defeated and say that it is in an confirmed uptrend. Once again, the stochastic is a shorter term oscillator and the RSI is telling you that it can go higher in this case even with an overbought stochastic.

Remaining cautious here may mean missing the right buy, but with the chart’s being as broken as they are, it’s much better to miss out on a small move to the upside than it is to get stuck with the bag all the way down.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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