Is It Time for Another Gold Rush?

Looking at the index charts over the last few days, we've got some cross currents going into next week. While the daily charts show everything still intact and the Full Stohcastics being in the near to oversold zone with a lift off of Wednesday's lows, we've still not made it down to the 50-day average. This goes for the OTC Composite too.

In the charts above you'll see two red circles ― the action in those circles hold the key to next weeks market action.

If the market's going higher, there's a clear signal that should tip us off in advance…

Likewise, if the market's going lower, we know exactly what to look for…

In summary: So you see if the market wants to go higher, you know what you need to see. When it shows itself, it's time to continue buying. If it wants to go lower, you know what you need to see as well. When and if it shows itself, it's time to become a bear again.

One industry group we have our eye on is gold.

This group tends to move counter to the indexes ― when the market corrects, gold does as well, and vice versa. And in the spirit of trading what we see ― when we look at the charts of both the gold index and specific top stocks to buy, we see they have pulled back off of their highs and are finding support at, or near, the 50-day moving average. This is just what you want to see with a bullish Pullback Off Highs pattern.

Here's the chart of the index:

If the Gold & Silver Index breaks above the pink line, it's time to go long on gold and silver. That doesn't necessarily mean buying gold and silver by the ounce ― there are a few gold and silver stocks for 2010 that move alongside the Gold & Silver Index, and are much easier to trade than the metals themselves.

To give you a clue as to what we are looking for with these gold stocks to buy, below is an example of an old favorite ― Yamana Gold (NYSE: AUY) in the same set up as we are seeing now with the index.

BEFORE

AFTER

But what if the markets decide to resolve downward? On the short side, we have a couple of fast moving top stocks for 2010 that are setting up to be good short-sell opportunities. One of them is extremely extended from any kind of support, so when the big money decides to take profits, it could fall hard and fast.

To give you an example of what we are looking for these short-sell set-ups, take a look at a recent short-sell name we featured ― PLCE:

This is a change in trend pattern ― from up to down ― which is a classic short-sell pattern. The red line represents a double top or an area where the stock will likely find resistance and where we can place our stop loss. From there, it's all about a break of the pink line to the downside. When that happens, it's time to initiate a short-sell position.

Keep your eye on gold and the big indexes this week…it could be a big one.