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Gold Needs to Hold $1,650 or Its Bull Market Is Over

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In this market you can't have too much information. Technicals, fundamentals, sun-spots, goat entrails; you name it and traders will try to use it to decipher stocks moving 5% at a time. Thankfully for the more traditional among us, Richard Suttmeier of Valuengine.com sticks to the traditional charts and fundamentals to arrive at his investment opinions. You can argue, as many do, that charts are "voo-doo" or fundamentals are useless in emotional markets. If you're not using one of the two you're "walking blind without a cane" as Gordon Gekko put it.

I asked him about gold's sputtering ramp higher and crude's ongoing plunge.

For gold, Suttmeier thinks the parabolic move may be ready for a pause but probably not a plunge. Markets that move in multi-percent chunks are signs of speculation and short-term exhaustion, he says. That said, and as we've previously observed on Breakout, the yellow metal has an extremely strong trendline well below current prices. In this case that means gold could pull back some $100 to the $1,650/oz level without doing anything technically wrong. "$1,650 should hold," Suttmeier says. "Break that and the bull market for gold is over."

Crude, on the other hand, is simply a function of a slowing global economy. As such, Suttmeier doesn't think oil has any upside until something is done to help the "global slowdown with regard to demand for energy." It's a matter of helping Main Street, he says, and nothing much has yet been done in that regard.

Those who think nothing could possibly happen to drive down the price of gold are advised to take a glance at the 5 year chart of crude. Back in 2007 the idea of oil going back below $100 a barrel was every bit as unthinkable as a collapse in gold is now. That's not a prediction, just a word to the wise that they should know their market history along with the charts and the fundamentals.

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