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Subject:  Gold - Updated TA Date:  5/14/2012  9:52 PM
Author:  MDCigan Number:  41065 of 41326

I don't have time right now to provide marked up charts but I wanted to provide some comments. The chart has turned quite bearish, and although I do NOT believe the secular bull market in gold is over (more on that below), I believe the probability of a very nasty drop is high.

Zooming in on different time frames...

Monthly - Gold has broken the trendline support off the 2008 low
The monthly MACD is on a SELL
Gold has traded 3 months in a row below its 10 month moving
Weekly - Weekly MACD is on a SELL
Gold has broken the key support and psychological level of
1600 and failed to hold the neckline of what would have been
an inverse head and shoulders bottoming pattern
Daily - Daily MACD is on a SELL

The ONLY remaining potential bullish interpretation I could see would be a triple bottom at 1525-1535 so how gold reacts there will be very telling

Current positioning - As noted in real-time here before, I sold half my LT position at roughly 1760. In all likelihood, I will be selling the other half tomorrow.

On a trading basis, I am short 1 mini-futures contract from 1599 looking to cover at 1535. If 1525-1535 does not hold, I suspect all hell/total liquidation will take place and I plan to short the cr*p out of it.

The price action reminds me alot of 2008 after hitting the all-time high of 1000 in March and selling down to 700 by October 2008.

In the back of my mind, I've had the 70s secular bull as a template. Perhaps it will play out similarly. In that bull gold went from 35 to 200 before dropping to 100 (50% decline) over close to 2 years before going from 100 to 800. If you take the 250 to 1900 move as the first leg, that gets you to a drop of around 1000. Interestingly, the trendline connecting the 2005 launch point and 2008 low intersects at 1000. This isn't a prediction...but simply a roadmap how it might play out. The KEY is to watch how gold acts at certain price points, and then wait for the trend following indicators to turn positive.

The price action in gold and bonds has a striking parallel:
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