GLD, SLV - July 18, 2009

charts courtesy of stockcharts.com

Last week, in a post about Gold and Silver, I wrote:

I think, depending on individual’s risk tolerance and trading style, a decent buy signal (you should decide on your own as a trader) can be taken on the long side with stop a close below the April’s low

And

if GLD is not gonna drop like the heavy metal that it is, I would like to ideally see gold diggers firm up and rally.

Not much has changed since then.

Price has firmed up a bit, but it’s still below resistance around 92.5. MACD has given a cross, but it’s still below 0. I would watch short term momentum to see if it can comfortably get into overbought areas or not.

Notice that GLD continues to underperform S&P. That is hardly indicative of hyper-inflation-by-the-corner thesis of die-hard gold bugs.

It is all in the aggregate perception of market participants, which I call market psyche. We do not see technical signs of a rush to gold for any reason. It’s been like that since gold topped in 2008.

Also notice that GDX performance against GLD has rallied but is still below the broken uptrend line. It has not made higher high against GLD either.

All-in-all, same as last week. April low is the key. As long as it is not violated, the bullish count has a case to argue.

About SLV, I said

Here as well, the April low is of utmost importance and should not be violated or the bullish case gets a real smacking in the head

There are positive divergences on the 60-minute chart above, and a channel/falling wedge.

A break t the upside of the channel/wedge (or any other buy signal) may provide a low risk trade with the April low being the obvious price point for a stop. I may even sell some puts (or put spreads) as soon as Monday.

Here’s the 60-minute chart as things stand now

I did open positions. April Low is the cut off.

Here’s a daily chart

SLV is still below the broken uptrend line that was in effect since December 2008. For me, there is nothing much to do really, just wait and see.

Both metals are in mid-term downtrends. They both have risen from short term oversold levels. It is too early to say whether the rise has been just an oversold bounce or the beginning of the next impulse. FWIW, the rise so far looks clean and impulsive, it is a good sign, but too soon to say for sure.

Have a nice Evening!