Sunday, August 31, 2008

Sign of a longer term top

I always like to keep track of the long term charts as a way to follow the true direction of a market. There's too much noise in the daily charts to really get a good idea of the big picture. Today I'm looking at the monthly charts of gold and silver. There are a couple of problems here. First both gold and silver have broken through their 12 month averages, something that hasn't happened other than briefly and by only minor amounts during this entire bull market. Silver especially is showing a very clear change of character with a major breakdown below the 12 month moving average.
Another warning that the 9 year cycle in gold has probably topped is the quarterly swing high in gold. The odds are starting to swing heavily that gold has topped out for now and will be working it's way down to that 9 year cycle low in 09/10.
The next 9 year cycle is where the real fireworks in the precious metals should take place.