GOLDReport

April 18, 2007

Observations

All in all it has been a very quiet week in gold and silver. Not much has been happening on the Iranian front. Economic Reports that were issued showed a surprise on the housing front with both "starts and permits" rising. Most of the so-called in the know experts had predicted a decline in both these numbers.

CPI was tame, leading to a short covering rally in interest rates due to hopes generated by this report of a cut in rates in the 3rd quarter.

Copper took upon itself the leadership role this week, in metal markets.

In my last report I made mention that silver was primed to move to the upside if $13.98 was taken out. It has and I am bullish. Gold is now transitioning itself. By this I mean while it remains overbought, it may not correct. It may simply be ready to add another leg up.

June Gold

I was hoping for a small downward correction last week, one that as it turns out did not develop. Rather, what gold has done is hold onto its gains and is may now be ready to add another leg up to its already impressive performance.

Markets go through phases. Some phases are bullish, others bearish and others neutral. Neutral phases often lead to trends. Trends, once developed, take on their own unique characteristics. A fellow market analyst, Peter Eliades of "Stockmarket Cycles" pointed this out to me when he was on my TV shows years ago. It struck such a strong chord with me that I have used it in my analysis over the years.

I think June Gold can easily begin another up leg right now. If it does, the next upside target price is $712. Let's look at the June Gold chart to see why I think so.

Let's first start off with the crossover of the 18 and 45-Day Moving Average of Closes. The 18-Day Average is in "red" and the 45-Day is in "aqua". When moving averages cross over, this event often tends to propel prices in the direction of the crossover if prices are trading over both as they were on this chart.

Stochastics (SSTO) are embedded. "Embedded" means that the market has left its "overbought" status and entered into a new status. That of one that says this market is now getting stronger, meaning more upside progress should be made until the "red" line, the "K" line gets back under 80. Its current reading is now 92.29.

Today prices tried to break down…unsuccessfully as it turned out. A close over $699 is now necessary to begin the process of propelling prices higher. Ideally to my Window Envelope target of $712.

Conclusion and Recommendation

Last week I wrote that if "prices were to close over $686.8, the high made on April 10th, it possible that the Stochastic Study would change from being overbought to becoming "embedded". Once embedded, markets tend to move strongly in one direction and that direction would be up." Well, guess what occurred? We're now moving up!

I was hoping to get a price break back under $680 to get long from. That did not happen. Now I have to wait for either an inside day formation or a formation where buying over the previous day's high and placing as stop under the previous day’s low can be done with under a $400 initial risk which is basically the size of the trading range of the previous day.

When I see this formation show, I will issue a buy signal in my twice daily recommendations and will of course discuss such in my nightly Audio/Video that I post on the website.

 

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Silver

The silver chart has been much easier to trade. In fact, those that have access to my twice daily updates know that on Tuesday night, April 17th I issued a buy signal that was filled on Wednesday morning for those that placed their orders on Globex Order Entry Platform.

What Now?

Let's look at the Daily Chart of May Silver below.

Silver allowed us to buy it on this morning, Wednesday the 18th, at $13.885 for those that entered Globex Price Orders to do so. As you can see this was 1/2 cent off the low of the day. Luck? Maybe, depending on the trade's outcome.

If prices get over today's high of 13.99, I would move be moving my stop upwards. I will speak more about this in the Recommendation Section.

Stochastics are embedded. That is bullish. Prices have consolidated between $13.69 and $14.17 since April 12th, which I've marked off with arrows on the above chart. Until Stochastics lose their embedded status, the market is internally getting stronger. All this is now needed is close over this pattern's most recent high to begin propelling prices up to $14.884. Yes, $14.885, the most recent high.

A falling US Dollar doesn't hurt. Copper prices racing higher don't hurt. And housing starts and permits rising only help as silver is an industrial metal.

Recommendation

Last week I stated that if $13.98 was taken out, May Silver was as a buy with $14.32 as an objective and that the stop would be $13.69.

Now things have changed a bit. The stop can be moved up to $13.815 with the first price target being $14.20. The secondary price target is now $14.48 with the longer price target being the most recent contract high of $14.885

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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Alaron Trading Corp. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.