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Written by Ross Clark & Bob Hoye
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Wednesday, 27 October 2010 09:45 |
As of Friday gold has registered the most oversold reading since May 21 in our Summation
Index. When such readings occur in an uptrend they are classified as Springboards that are
initially capable of pushing a market from an oversold condition back toward resistance. In an
accelerating uptrend (i.e. 1978-1980) this is all you expect to see before the next leg to new
highs. If we are to experience a more methodical uptrend then a second oversold condition
would likely occur after a retracement rally of 30% to 50% of the decline from $1387 to $1315
(~$1350). Such a secondary low would be expected within two weeks and find support at the
50-day simple moving average (currently $1286), the 20-day Bollinger Band and the breakout
line of the December-June highs. Any close above $1360 would indicate that the bottom of the
correction is in place.
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