I have nick names for various True Strength Index (TSI) indicator patterns. What I am going to show you today is what I call “The Hot Air Balloon Landing”.
William Blau, the inventor of the TSI, was fond of using his indicator set to (25,13). I have found this setting to be an extremely accurate representation of longer term trend. Those readers who prefer to trade trends as opposed to the hand to hand combat action of day trading [use TSI (7,4)] really should give the (25,13) TSI setting a good hard look.
Anyway, today’s charts use both the TSI (25,13) and TSI (7,4) settings.
This first chart is of the PowerShares DB Gold Double Long ETN (NYSE:DGP). What we observe is that as gold has been trending higher, momentum trend has been fading. In effect, the rise in price representing a pleasant ride aboard a hot air balloon is coming to an end as the momentum of the experience is falling and about to come to an end. Thus, the hot air balloon is coming in for a landing.
Additionally, we note that the faster TSI (7,4) has not only crossed below ZERO, yielding a SELL signal, but has also made a trend line break – another SELL signal. At some point fairly soon I would expect the TSI (25,13) to ‘land’ on ZERO and then cross down through it yielding a SELL signal in gold’s upward trend of the past 5 months.
This second chart uses the same two TSI settings for a glimpse of the trending and trading momentum of the ProShares Ultra Silver ETF (NYSE:AGQ). As silver has been stronger than gold for the last several months, we would expect this chart to be similar but not quite as obvious – and this is indeed the case. TSI (7,4) has not quite yielded either the trend line break or ZERO crossover SELL signals as has gold, though that event appears inevitable. Longer term trend, as evidenced by the TSI (25,13) is indeed coming in for a landing but the TSI reading is still comfortably above ZERO at +.22. It would not surprise me if the latter reading simply ‘touches down’ on ZERO – representing the conclusion of the correction coming – then rebounds strongly upwards.
In any event, I view it as just a matter of time now for both gold and silver to begin a correction that will ‘land’ the hot air balloon and thereby prepare for the next exciting departure to the blue skies above.
The TSI Trader is a website dedicated to the deployment of the True Strength Index (TSI) indicator for buy and sell signals related to gold’s secular bull market. The TSI indicator is freely available at FreeStockCharts.