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Subject:  Re: Gold - Updated TA Date:  8/27/2012  7:30 PM
Author:  MDCigan Number:  41161 of 41341

Silver moved up by another 10% and now it is trading above 200 DMA. I assume you have closed your short.

You assume correctly. :) I actually closed it on 8/21 at 29ish as that was the 2nd daily close over the trendline off the April 2011 top. I have a couple rules I generally follow that are intended to prevent catastrophic losses and also minimize whipsaws. Always respect trendline breaks. That is the market sending you a powerful message that whatever existing trend was in place has likely reversed. But then I require 2 days to minimize the chance of a false signal.

Shorting it was a bad trade. On the bearish side, I had my fundamental opinion of global economic weakness leading to the next break to the downside, and I was looking at the giant descending triangle off the April top at 50 and the horizontal line at 26ish, but I disregarded two powerful signals that I should have heeded that it wasn't a high probability trade. Firstly, and most important, bearish sentiment towards silver was sky high. As a general rule, I think one should avoid placing trades in alignment with mass sentiment. The crowd is almost always wrong at the extremes. Additionally, the 5/16 low of 26.73 along with the 6/28 low of 26.10 had a MACD divergence. This is where price makes a lower low but the MACD indicator makes a higher low. I've seen that enough times to know better. That same divergence took place with the broad market back in October 2008 versus March 2009.

One thing about charting/TA is it isn't always crystal clear and you couuld have contradictory indicators. I need to get better about passing if most everything isn't aligned in the same direction.

Switching back to gold, you now have 4 daily closes above the 200 DMA. Depending on how the rest of this week plays