Technical Analysis Worth Revisiting

A month ago, Przemyslaw Radomski wrote a techically-based analysis of the gold market that compared the most recent decline to ones past. The three earlier ones showed that a correction seemed to end before it actually did, and the real end pulled gold down even lower before it was over. Although stretched out, the current correction does fit the pattern Radoimski identified a month ago. His article is well worth reading, or revisiting, because it did turn out to be prescient.

Just below is Radomski's original annocted chart [commentary's in the accompanying article] with an updated version of the same chart following it:





As the latter chart indicates, the most recent correction resembles the from June-July '09 and August-September '08. Given the current Eurocrisis, the earlier one seems the better fit even if the snapback exuberance level has been more like the one from seven months ago. Note that the current chart's stochastic oscillator is touching the 20 level, indicating GLD's on the verge of being oversold right now. Also note that the RSI on the top has topped out at a level that most resembles the August-September '08 correction.

I should also point out that, although the resemblance between now and the '08 correction is most evident, the drop back then was sharper than the one now. That's clear from the latter chart too. Please note that the resemblance does not indicate there'll be a rocket-up in the near future like the one in late September of '08.