Bring Out Your Dead!..Wait I’m Not Dead Yet!

• Posted by Greg Harmon
• on January 4th, 2011

The action in the metals today reminded me of this segment from the movie, Monty Python and The Holy Grail. Gold had its biggest one day drop in like forever today down $40 at one point and the Gold ETF, GLD  down almost $4. The Silver ETF, SLV was down over $1.50.  The Platinum and Palladium ETF’s PPLT and PALL were also down big.   The steepness of the fall had many calling for the death of these metals.  But was it really that bad?  Let’s look at some charts.  Starting with GLD below.

The fall today, although large, found support at the 50 day Simple Moving Average (SMA) and the recent trend support from mid November. The 50 day SMA has been support since September. Also the Relative Strength Index (RSI) is still in bullish territory. If GLD breaks these support levels then there is more short term downside, but it is not dead yet. Now for Silver, via the SLV shown below.

SLV looks to have taken the worst beating, piercing its 4 month rising trend line. Support was found at the 28.60 area, which was a consolidation zone in December. If SLV does not retake this trend line tomorrow look for more downside to the intersection of the 50 day SMA and the 27.20 support zone. Where GLD is hanging on, SLV may be on life support. This slight difference in strength between GLD and SLV fits with the long term view put forth two weeks ago on Gold and Silver, looking for a correction in the Gold/Silver ratio and better prospects for Gold longer term.

I wrote about Copper as a proxy for economic activity last night, but what about Copper on its own. Let’s move on to Copper and the ETF, JJC, whose chart is below.

JJC has been in a rising channel since August, and it still is. In fact it is in the top of that channel. JJC has found support at the shorter term steeper trend line today. If it were to lose that then there could certainly be a big pullback, but it is far from the point to call the uptrend over. Far from being dead.

Platinum and Palladium also had big pullbacks in their ETF’s PPLT and PALL today. Their charts are below.

But both stocks found support today at the uptrend lines that have been in place for the last 4 to 6 weeks and tested often. Both also have interim support before price would reach the 50 day SMA. Wounded but not dead.

So let’s not be too quick to call the metals dead. They are bruised, beaten down and maybe they just need a clubbing to the head to put them on the wagon, but they are not dead yet.

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