The weekly chart for the S & P TSX Global Gold Index (TSX Gold Index) (TTGD) has been a source of worry and concern for gold investors these past few weeks. Why?
Failing technical support at key levels has highlighted the problem of attracting new investor interest for gold stocks. We were particularly concerned when the gold index fell below its Ichimoku Cloud. It was not at all a positive sign for the future. See how quickly the gold stock chart decayed when this happened in early 2013.
Notice that gold stocks “went to sleep” for about six years after that. This is why we have been paying close attention to Friday closing levels that make up the weekly charts for gold and gold stocks.
MACD is not in a very good spot at the zero line – a cross-over would not be positive.
So, with the weekly chart for gold stocks giving some negative signals, is there technical evidence that gold stocks are set to stage another upward rally?
There is an unconventional way to look a the TSX Gold Index weekly chart. First, let’s zero in and examine the COVID low and post COVID high. Then, let’s apply our standard Fibonacci retracement studies to see what the chart shows us.
Fibonacci analysis over this specified period is quite helpful as it identifies a “double bottom” at the 265/270 level, as shown on the chart. Although this occurs below the bottom of the Ichimoku Cloud, it is indicative that gold stocks are not prepared to drop in the same way they did in 2013.
Now, let’s focus on a simple power downtrend line, the dashed black line on the chart, which shows that gold stocks are at a point where they can break out of a sustained short-term down-trend that is very defined by several points of contact along the line.
Finally, we see that Trend Momentum, the upper indicator, has made what could be described as a “magnetic repulsion” right at the point when it was about to turn from positive to negative. Solely from a technical perspective, this is very interesting. It could later become recognized as a “turning point” on the chart – when negative sentiment that was slowly degrading the weekly TSX Gold Index chart met greater positive sentiment.
Summary and Wrap-Up
Over the past month, inflation has become in focus as a “hot topic.” However, we have not seen any significant technical change on the TSX Gold Index weekly chart – until today (based on the weekly close last Friday).
Now we do.
Further “inflation news” may be what gold stocks need to bring more investor interest to companies with “clean” balance sheets and are cash flow positive.
Rising Trend Momentum and a turn back up over the power downtrend line can be the first steps toward getting MACD back above the zero line with the signal line above the trigger line and for the TSX Gold Index level to rise back above its Ichimoku Cloud.
– John Top, the technical trader
Disclosure: We own gold and gold stocks.