How to Improve Your Market Direction Forecasting Skills (Part 5)

03/13/2009 12:01 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

Let’s turn to another commodity chart to see if we have any clues to add to the picture.

Gold futures briefly climbed back above $1000 an ounce this year, but they are currently pulling back—hovering right below the $900 an ounce area as I write this article on March 5, 2009.  Price is currently testing the green, up-sloping Sliding Parallel that has acted as support throughout the run up in gold futures prices.

chart

Will price find support in at this up-sloping Sliding Parallel, as it has in the past? Or will gold prices continue lower to test the prior swing low at $800 an ounce? What do your eyes tell you? Remember, the Australian dollar will probably follow gold’s lead…

I see that price is in an area where it may find support, but only gold prices can tell me that and show me that. I can want to see something, but only when it happens is it meaningful. Remember, the market is always right! If you think something may happen, let price show you it has begun to happen before executing a plan of attack! If you are right, there will be plenty of profits left in the move and you will have significantly improved your chances of a successful trade.

Let’s look at one more market:

chart

We’ve all heard about the massive amounts of money the US government has pumped into the banking and lending industries to lower interest rates. Have you seen any benefits from the lower interest rates?

Truth be told, longer-term interest rates spiked lower last November and have been climbing higher since. If you read the newspapers and listen to the advertisements for mortgage refinancing on the radio and TV, you’d think rates were at all-time lows. In fact, long-term rates are at last one percent higher than they were last November.

What does this chart tell us? I think we are nearing the moment of truth in the US bond market. Prices are either going to turn around and head higher—meaning yields will head back to test their lows—or there are no quality buyers of US Treasury bonds and other US assets and interest rates are headed quite a bit higher.

In many ways, the outcome of this current chart will determine the direction of the US dollar, gold, and crude oil. Let’s face it, interest rates may be the key to the US economy for the next three to four years!

Looking at the current chart, how do you vote on interest rates? Are they headed higher from here or lower from here?

My thoughts go out to all of you struggling in these difficult times.

Best,

Timothy Morge

timmorge@gmail.com
www.medianline.com
www.marketgeometry.com

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