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Subject:  Re: Gold - Updated TA Date:  5/25/2012  6:39 PM
Author:  MDCigan Number:  41089 of 41573

Just wanted to add a bullish interpretation as well...again I think 1525-1535 holding as a triple bottom could be realistic as well although I consider it less likely than a deeper correction.

One thing supporting this notion is that gold sentiment is just massively bearish which is contrarian bullish. Bottoms are usually made when sentiment is very bearish.

One analogue to the gold chart potentially is the 30-year U.S. Treasury Bond over the last year. You had a big upmove in July-Aug 2011 and then a correction to 135 a rebound and another correction to 135 (October 2011) followed by a large sideways trading range with support at 140. The parallels to gold would be the 135 representing 1525-1535 while 140 being 1600. In March, the 30-year broke down below 140 and I actually thought it was a major trend reversal and went short and then it bottomed exactly at 135 before reversing back up through 140 and recently hitting a new high of 148.

I had actually shorted at 138 on the breakdown of 140 but I was so wedded to the opinion of the "bond bubble" breaking that I just wasn't as cognizant of 135 being a potential reversal point so I didn't take any profits there, but instead exited on retaking the 140 level. Unfortunately, even though it was only a 2-3 point loss, I was short 2 contracts and it is $1000 a point so it was a nasty loss as a percentage of capital. The takeaway there was too married to a fundamental opinion and not paying enough attention to a powerful support point on the chart.

The chart price action in gold actually does look a lot like the U.S. bond price action in March, but for that to play out you'd have to see a sustained retaking of the 1600 level. That would be the trigger to exit any short trading positions.

One thing I believe and try to remind myself is that the chart isn't magical. Support and resistance levels don't exist in a vacuum...they exist in the context of some fundamental backdrop. I think what we are seeing the last few months is the reemergence of the debate over deflationary versus inflationary pressures and likely central bank and government responses. The Fed has been unusually quiet and the ECB again seems slow to react. In the austerity versus print money debate, it still seems like the print money advocates can't put the austerians down for the count.

I suspect if we got any indication of QEx or a rose by any other name, along with ECB action and pledges for fiscal stimulus, then the primary bullish trend in gold would reassert itself regardless of the fact that current trend indicators are negative. The hart part to me is guessing if Bernanke will do anything in the months leading up to an election for fear of appearing political or wait until afterwards.
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