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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41316  
Subject: Gold - Intermediate-term bottom? Date: 1/15/2013 11:33 PM
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New thread per the request :)

Anyways, quick update as I see it. On 1/4/13, gold made a low of 1626, and the candlestick that day actually had a long tail which suggests to my buying pressure that drove it back up that day. I think there is a reasonable probability that was the bottom for gold for two reasons, seasonality and sentiment.

1. Seasonality - In each of the past 3 years, gold has made its intermediate-term bottom roughly in the Dec to Feb timeframe.

12/29/11 - 1523.9
1/28/11 - 1309.1
2/5/10 - 1044.50

2. Sentiment - Hulbert's gold sentiment is at a bearish extreme which has marked other price bottoms:

http://biiwii.com/wordpress/2013/01/11/gold-bears-out-of-the...

http://biiwii.com/wordpress/wp-content/uploads/2013/01/hulbe...

Lastly, the short-term downtrend drawn off the 1755 top was broken to the upside with today's action. In my view, the most constructive thing now would be for slow upmove to 1800 unlike the steepness of the last move, and then hopefully a decisive upside breakout from there.
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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41205 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 1/29/2013 12:17 PM
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1650 continues to hold. It is an important test, breakthrough would continue the downtrend from October highs. If it continues to hold it would signal (to me) consolidation in advance of another test of 1800. There is a good chance we either see a long rounded bottom or a sharp spike down. Given that, short is the high percentage play (and supported by other technicals).

Been playing with Ichimoku clouds. I admit that I don't understand them, but they seem like a reliable forward indicator in metals in the few small surveys I've conducted.


unnecessary disclosure blah blah: re-established my SLV short on the 25th.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41206 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 1/29/2013 12:45 PM
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1650 continues to hold. It is an important test, breakthrough would continue the downtrend from October highs. If it continues to hold it would signal (to me) consolidation in advance of another test of 1800.

Agreed. I've got my short-term support line drawn at roughly 1645. In my view, a close below that would indicate a likely move to 1600 or perhaps a full retest of 1525-1535. More importantly to me, gold is inside a triangle formation. You've got an uptrend line that you can draw off the May low at 1527 connecting all the subsequent lows. Gold is sitting right on that line today. Then you've got a downtrend line off the Oct high at 1798. Soon, it will either break up or down through one of those trendlines and that should be good for a sizable move probably either back up to 1800 or down to 1525-1535.

There is a good chance we either see a long rounded bottom or a sharp spike down. Given that, short is the high percentage play (and supported by other technicals).

Not sure about that. I haven't seen the latest sentiment numbers but early January was very bearish which is contrarian bullish. Back in May, I took a short silver position anticipating the breakdown through 26. The ridiculously high bearish sentiment was the tell a rally was more likely than a breakdown.

FWIW, I like the fact that no one is talking about gold here, and in contrast you've got talk about a secular bull in stocks. Instinct tells me a gold-stock reversal in performance is coming in the not too distant future.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41207 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 1/29/2013 12:49 PM
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I argue that the short is the higher percentage play not because of likelihoods of direction, but rather because you are much less likely to get hurt if wrong. Alternatively, establishing an entry long position with some OOM puts would also make sense.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41211 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/6/2013 1:58 PM
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Too early to call it, but looking like a good call so far.

Anyways, pretty good sized symmetrical triangle has formed with the uptrend line off the May low and connecting all the subsequent lows and the downtrend line off the fall 1800 top and all the subsequent highs. Resolution should take place in the next week or two. If I had to guess, I'd call for an upside breakout, but either way from a trading perspective, you go long the upside breakout, or short the downside breakout. Upside targets would be 1750 and 1800, downside targets would be 1640 or perhaps even a full retest of 1525-1535.

In terms of the 1.5 year 1525-1535 to 1800 range, Louise Yamada's lines are in my head. "The wider the base, the higher in space", and the "longer the top, the steeper the drop". Whichever way it finally breaks should be good for an an absolutely massive move in that direction.

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Author: gocanucks Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41212 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/7/2013 3:13 PM
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MDC, would you buy GDX here? i just pulled up the chart and the top holdings. all appear to be at major support. GDX has also lagged GLD by quite a bit.

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Author: Smufty2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41213 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/8/2013 11:11 AM
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I am not MDC, but I do have a few indicators I follow for GDX:

Q-ratio (Barron's Gold Miners index divided by spot price of gold) has been very low for quite sometime, but now is at such a historically low point that you should expect EITHER the miners to rise big or gold to fall big time.
http://online.barrons.com/public/page/9_0210-goldmining.html...

The GDX PnF chart remains quite bearish and would need a significant rise to around 48 turn bullish
http://stockcharts.com/def/servlet/SC.pnf?c=gdx,P

The $BPGDX places GDX in oversold territory, but has not yet made a big enough turn upward to signal a bottom
http://stockcharts.com/h-sc/ui?s=$BPGDM&p=D&yr=2&...

And what I use to fine tune any bottom and top indicators, the crossover of the EMA5 and EMA18 has not occurred yet either
http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=0&mn...

So, my take is it is too soon to jump back into the miners but things seem to moving to that point sometime in the near future should the price of gold remain in the range it has been or go higher.

Smufty

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41215 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/8/2013 9:54 PM
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MDC, would you buy GDX here? i just pulled up the chart and the top holdings. all appear to be at major support. GDX has also lagged GLD by quite a bit.

No is the short answer. Technically speaking, maybe a triple bottom is about to form but I'd wait for more confirmation. In fact, the performance of GDX and GDXJ has me concerned that there will be a bearish resolution to the consolidation of GLD from the perspective that the stocks lead the commodity directionally.

This is a good post on the issues with gold mining stocks:

http://humblestudentofthemarkets.blogspot.com/2013/01/where-...

Now, theoretically, they are cheap relative to the commodity price, but I believe they are in a period of structural underperformance relative to the commodity. The way I see it, is if one is bullish on gold, then buy GLD or something similar. If you are not bullish on gold or have no opinion, then I think you stay away as well. At least to my way of thinking, I can't see the logic of buying any commodity stock on the presumption of some undervalued assets while not being outright bullish on the commodity. The only reason to buy a commodity stock IMO is because you want to express a view on the commodity itself.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41216 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/11/2013 4:50 PM
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Breakdown of symmetrical triangle and rising trendline off May low so I exited my long. I have a hard time getting short because 1. Being short is completely opposed to my fundamental outlook on gold and 2. Gold has had a number of 1 or 2 day breaks that just stop dead cold and reverse with no sustainable downtrend developing. That said, this downside break makes me think there is yet another test of 1525-1535 in the cards. In the meantime:

http://biiwii.com/wordpress/2013/02/11/dust-in-the-wind/

There are people in the “gold community” who pretty much hate me or hate the things I have to sometimes say. But I would rather be that guy than a guy imploring the troops to hold firm against the axis of financial evil. Get this, evil wins a lot of big battles.

The name of the game is and has always been stay alive first, and then win later. You are not in ‘community’ with any group of people. That just makes you part of a herd, whether or not that herd thinks it is righteous.

The plan is to be a functioning gold bull when the time is right. You can’t be a functioning bull if you are dead.


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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41217 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/18/2013 1:54 AM
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Heh...should have taken the short trade right after exiting the long. I just always find it mentally difficult to take a chart based trade that directly opposes my fundamental view. More often than not, it has been the wrong move and I should have just traded the chart and ignored my FA view.

Anyways, good stuff from Swenlin on the recent gold action:

http://blogs.decisionpoint.com/chart_spotlight/2013/02/20130...

Conclusion: Gold could be in the process of consolidating a massive up move, and it is currently headed toward a retest of the bottom of the consolidation range at 1540. Failure of that support level would suggest that assumptions about the Fed causing inflation (and an increase in gold prices) should be questioned.

I'll be interested to see Louise Yamada's take once she does another interview somewhere but I suspect it won't be too different....we are looking at the same chart and the important support level isn't a mystery to define.

For a long time, I've had the 70s secular bull in gold as my base case template where gold went up roughly 6x from 35 to 200, then spent over a year declining 50% from 200 to 100, and then finally went up 8x from 100 to 800 from 1978 to 1980. The 2001-2011 move mirrored the 6x increase, so if 1525-1535 doesn't hold as a triple bottom perhaps we will see a 50% retracement back to around 1000. I had actually thought the constructive price action from May 2012 to October 2012 had made this unlikely, but the last couple months and last week's breakdown look to increase this possibility.

Anyways, from risk management perspective, the symmetrical triangle breakdown was the first warning exit signal. If one is still holding here, maybe you ride it out down to that 1525-1535 level and see what happens there, but if that doesn't hold any and all long positions should be immediately abandoned. Anyone who actually rode out a drawdown from say 1525 down to 1000 has no risk control.

I believe the endgame is still the same, but we could be in for an extended period of time when being bullish on gold looks stupid.

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Author: CM001 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41218 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/18/2013 2:46 PM
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but if that doesn't hold any and all long positions should be immediately abandoned

-MDCigan

I remember seeing Paulson owning huge position in GLD. I wonder if someone will try to push gold to a point where Paulson has to essentially do a fire sale. I know he can take delivery of the physical metal but at some point he has to liquidate.

Waiting for gold to 1000 journey.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41219 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/18/2013 3:53 PM
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I remember seeing Paulson owning huge position in GLD. I wonder if someone will try to push gold to a point where Paulson has to essentially do a fire sale. I know he can take delivery of the physical metal but at some point he has to liquidate.

Waiting for gold to 1000 journey.


Hmmm...excellent point. And he might not even have that option of taking delivery especially if there was a mass withdrawal from his funds. From my recollection, one of his funds is essentially priced in gold so forced liquidation from him could probably put enormous downward price pressure.

I'm trying to remember the link, but I think it mentioned Soros dumped a bunch as well. I think Dalio had a big position as well. In any case, if all those elephants head for the exit door, or are already in that process, then it could really drive the price down. From what I can recall, there was a reasonable basis to believe that some of the crazy low prices in late 2008/early 2009 were essentially a result of forced liquidation.

FWIW...here are the Fib retracements of the entire bull move from 253 to 1924

23.6% - 1529
38.2% - 1286
50% - 1088

Interestingly, the 23.6% retracement coincides with the major support level which so far has been a triple bottom. The 1286 coincides with major trendline support

http://blog.kimblechartingsolutions.com/2013/02/could-gold-f...

I read an interesting note today talking about Russian and Chinese central bank buying so it will fall however much it takes for them to really step up their buying. At some price they'll probably leap at the chance to trade U.S. dollar reserves for gold bullion. They'll leave massive footprints so it will show up in the chart.

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Author: CM001 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41220 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/18/2013 5:49 PM
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Here you go...

http://www.bloomberg.com/news/2013-02-14/billionaires-soros-...

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Author: gocanucks Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41222 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/19/2013 3:19 PM
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fwiw, i just bought a full position of GDX today. i think the issues with the miners are well known and supply/demand is improving on the margin. Sentiment is extremely negative. The top holdings actually all look reasonably valued and have strong balance sheet and pay a dividend.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41224 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/20/2013 7:07 PM
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fwiw, i just bought a full position of GDX today. i think the issues with the miners are well known and supply/demand is improving on the margin. Sentiment is extremely negative. The top holdings actually all look reasonably valued and have strong balance sheet and pay a dividend.

I might join you on that if and when we finally test 1525ish. If that doesn't hold, many technical analysts I follow all have price targets for gold of 1250-1300. If that happens, I expect the miners will get slaughtered but that would set up a buying opportunity like late 2008 where GDX proceeded to go up 400% in the following 3 years.

http://peterlbrandt.com/what-is-happening-to-the-metals-a-ch...

I have not seen sentiment numbers on gold or gold miners since early January. It would be nice to just see horrendously low bullish numbers like under 5% bullish. Looking at today's action, just a guess on my part, but this smells like massive institutional liquidation. I suspect some really big holders are eliminating their gold positions.

This may be shaping up to be fall 2011 in reverse. Then the trade was sell gold into its parabolic spike of 1900+ and buy the S&P 500 at 1100 into the peak of "Euro crisis fears".

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41226 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/20/2013 10:05 PM
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That's the 50-day MA and 200-day MA cross-over. I don't really look at this stuff,

Yeah, at least for me things like chart patterns, trendlines, and support/resistance levels take major precedence over specific moving averages. That said, moving average crossovers and the slope of moving averages are an easy way of defining the prevailing trend.

but I'm short at significantly higher levels (well above 1650) on the April contract, and more so in March Silver. And we're dropping further as I type in overnight action.

Nice trades. For me, this is just one more example of trade what you see, not what you believe. I exited my long at around 1650 on the trendline and symmetrical triangle break. There was absolutely nothing stopping me from going short the very next second except my belief that the fundamental macro backdrop for gold is bullish. At the present quote of 1560, that is alot of profit I left on the table that would have more then offset the two previously stopped out long positions.

I may put in a limit buy around 1527-1530 when I go to sleep. I've noticed with futures some crazy stuff can happen in the middle of the night. I'll never forget the night I was up to around 3AM or so when gold was coming off that first peak at 1900+ and I think it hit 1535 either around 1 or 2 in the morning. I literally watched it in real-time drop like 100 or 150 point in about an hour. It was actually quite amazing to watch the quotes change violently.

It wouldn't surprise me if it gets once h*ll of a bounce off that support level once this puking has exhausted itself.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41229 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/22/2013 11:08 AM
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Last week was the Chinese new year. Buying support from China evaporated. The selloff reflects worldwide sentiment outside of China, and also reflects how much metals have been buoyed by Chinese demand.

I hesitate to point to one datapoint to describe the reasons for the selloff. In fact, this really only accelerated the selloff that was already occurring. That said, if demand from China exerts its influence we could see a V bottom, even if only temporarily.



- still short

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41230 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/22/2013 3:04 PM
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Patch,

Just curious...do you have a price target to cover or some other indicator. What would cause you to close your short?

Interesting point about China. GMO had a white paper on the subject.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41232 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/22/2013 3:30 PM
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I've been listening to the arguments about industrial demand for silver for years but never heard anyone discuss economic substitution. Seems to me that once Ag went up 4-5 X that other industrial metals would get more attractive. Futhermore, I am guessing that industrial demand for Ag is relatively inelastic and that the price swings are fully accountable to speculation and proxy trading for Au.

I don't trade with price targets in mind, although I am mindful of support/resistance. When something breaks down like this it is also hard to determine technical sell points, they will typically significantly lag the market unless there is a long basing/accumulation phase.

Other than instinct, my cover will be triggered when either RSI moves above 25 or the Chaikan oscillator improves to -120k. I am fairly certain the RSI move will occur first, maybe within a day or two.

Those are also triggers for me to go long.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41233 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/22/2013 3:32 PM
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Actually, you'd see the buying in the price in the last month in the cash market leading up to the Lunar Year, which wasn't there.

or maybe it WAS there and it was the only thing slowing the decline.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41235 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/25/2013 10:52 PM
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This is looking "bottomy" to me.

Planning to put in a limit cover and a stop a little over today's high. Would prefer to exit the short closer to the bottom and I believe that the odds are with me that 28.60 silver is more likely than 29.45 in the next day or two.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41236 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 2/28/2013 9:28 PM
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FWIW....just an observation but price action looks a lot like December 2011 so far. Back in December 2011, you had a waterfall sell-off down to 1563, and then a very sharp reflexive rebound to 1640 and then a move to new lows at 1523.9 which was in fact THE LOW.

So far, since the downside break of triangle, you had the waterfall sell-off down to 1554, and a sharp 4-day reflexive rebound up to 1620, and then the big down day here which I think is the start of the next downmove to test those old lows. They don't run the market for me but I'd be more comfortable to see those levels tested and probed and hold.

Right now, no position as this is way too sloppy action to do anything IMO, but I've got a standing limit order to buy at 1528. At that price, I'll know pretty quick if any long entry is wrong.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41238 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 3/6/2013 2:46 PM
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http://biiwii.com/wordpress/2013/03/06/hui-monthly-big-pic-v...

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Author: CM001 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41240 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 3/15/2013 1:40 PM
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I've got a standing limit order to buy at 1528.

Did you end up buying? I am thinking of initiating a 1~2% position. It is boring to hold cash :)

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41241 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 3/15/2013 2:05 PM
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Not yet...if it isn't going to trade down to 1525-1535 to allow me a low-risk entry, then I want to at least some type of solid basing pattern followed by an upside breakout. The action the last few weeks has been constructive and looks like it wants to bottom here, but I want to see more evidence first.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41242 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/3/2013 12:40 PM
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No position currently, but both gold and silver have broken down the last 3 trading days after a short-term uptrend (gold) and basing (silver). I had been waiting to see which way it would break, and it broke down, but unfortunately I was too slow to react.

At this point, both are approaching the long-term support levels of 1525-1535 on gold and 26 on silver so those are low-risk entry points. Hopefully, I can get my hands on the latest sentiment data. I'd be encouraged if bullish sentiment was somewhere around 2-5%.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41244 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/3/2013 9:20 PM
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After closing out a long on Thursday (almost always flat unless it's a trend trade not near a break, but seeing as gold was bang on my short trendline, I took a small loss for a long weekend peace of mind), I'm short at 1595 COMEX June from Tuesday. Almost the quickest 50% return on margin I've made in a long, long time. :)

Nice trade!

I agree on the base, 1525-1535, but it that goes, we;re heading to 1300 (round numbers) as next big support (Jan 24th, 2011 at 1308).

I agree that it is a likely target. Additionally, it is the 50% retracement of the entire 680 to 1924 move from 2008 to fall 2011. And if you use the box price target, that gets you to 1250...1525 - (1800-1525). It would be nice to simply break out of this trading range and be able to hopefully jump on a longer-term trend.

I'm just not sure where the central bank purchasing put is at (I think it was your link over on Deranged that talked about the Asian central bank buying). Heck, maybe they'd wait to swap dollar reserves for gold reserves at a much lower price.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41246 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/9/2013 2:12 PM
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FWIW, some recent analysis:

http://blogs.decisionpoint.com/chart_spotlight/2013/04/20130...

In contrast, the XAU (gold mining stocks) has formed a bearish head and shoulders pattern, which executed when price dropped below the neckline earlier this year. We can see that the breakdown was followed by a brief snapback before the decline continued. At this point the minimum downside target would be the support line drawn from the October 2008 low.

I've found useful the idea that the stocks lead the commodity so the price behavior in the mining stocks would suggest more downside for the commodity.

http://peterlbrandt.com/gold-chart-of-the-day-april-3-2013/

I believe that the sideways action in Gold since the September 2011 high will be resolved by a massive advance or decline. I can read this 18-month congestion in one of two ways.

Louise Yamada on CNBC

http://video.cnbc.com/gallery/?play=1&video=3000158858

She emphasizes that both the monthly and weekly momentum models are negative, and that the path of least resistance is down.

All that said, IMO, support is support until it isn't so I'm waiting for 1525-1535 to fail big time to really pile on short positions and completely abandon my long-term investment position.

At the same time, in the intermediate-term there is a downtrend line off the October 2012 top at 1800 that connects at 4 points, and currently comes in at 1630ish and short-term resistance since the beginning of 2013 at 1620ish. I'd need to see both those levels taken out decisively before I'd get long for maybe one more run to 1800. For now I'm content to watch and wait for gold to "declare" itself as Peter Brandt would say.

All in all, the current chart formations in gold and silver look pretty bearish. Most of the range trading in the 1525-1800 box has taken place in the lower half of the box which is the complete opposite of the box from May 2006 through August 2007 before the upside breakout and run to 1000.

I still haven't seen anything on gold sentiment, but I did see a stat that the short position in silver futures is at 17-year high so at least sentiment would have one contrarian bullish here despite the horrendous chart.

Eventually, this will resolve, and like Peter Brandt said it will probably be a monster move in whichever direction it finally breaks.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41247 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/10/2013 1:16 PM
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Goldman says to short gold:

http://pragcap.com/goldman-time-to-short-gold

"In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across COMEX futures and gold ETFs remain near record highs. We therefore recommend initiating a short COMEX gold position as our ECS Top Trade #8,

While bullish sentiment is at a multi-year low:

http://pragcap.com/hulbert-gold-sentiment-at-record-lows

I recent weeks I have hinted at the extremely depressed sentiment including the following important indicators:

In early March COT reported Gold short positions reached the highest level in over a decade
In early March Gold’s Public Opinion reached one of the lowest levels in at least a decade
Last week COT reported Silver short positions reached the highest level in almost two decades
Last week Silver’s Public Opinion reached one of the lowest levels in at least a decade

Currently, the Hulbert Gold Newsletter Sentiment index (HGNSI) is at -31% net short, a historical record low since the inception of the survey in 1997


The sentiment numbers would suggest taking a bullish position, but I am going to wait for either that low-risk entry at 1525 or the downtrend line to be broken.

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Author: Windchasers Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41249 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/10/2013 3:09 PM
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LOL, now short again in the mid 1560s, so took a 15-ish point loss, stuff happens. This is when I get hurt going forward, if we get stuck in a 30 or so point range, and the positions get flipped between long and short.

I just took a small leveraged long position on silver, for a short-term trade (4-6 weeks).

I'm no good at estimating precious metal trends based just on macroeconomic trends, like unemployment or industrial activity. Likewise, I don't put too much faith in technical analysis like Elliot Wave Theory or somesuch. But I do put some stock in sentiment analysis, mostly because I can understand how it works; how it translates to price movements in the real world. In short: When everyone is long and bullish, who is left to buy? Or, if everyone's bearish, who's going to put more money on going short?

It's the idea of the Greater Fool, except that at sentiment extremes, there are no greater fools left to buy from you.. so, the trend is more vulnerable to change. And if people have leveraged into the trend, forced liquidation can make the trend particularly vulnerable to a reversal.

Of course, this leads to plenty of missed trades where prices move for other reasons. But I'm comfortable waiting for these fat pitches, either where the sentiment is sufficiently extreme for a short-term trade, or where sentiment + macro combine to suggest a long-term trade.

~w

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Author: Smufty2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41250 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/11/2013 11:00 AM
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Or, if everyone's bearish, who's going to put more money on going short?

In most cases I would agree with this thought, but when central banks, and ginormous traders like JPM and HSBC are involved, it seems that the ability to sell exceeds the availability of actual bullion.

Sentiment is more meaningful to me with the miners than with the bullion.

Smufty

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41252 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/11/2013 1:33 PM
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One therefore has to beg the question - how do you calculate "sentiment analysis"? Given your response, without macro, without a chart, the other possibility/ies is/are what ?

By sentiment analysis, do you mean CFTC data, such as net shorts vs longs? Margined accounts? Retail or institutional? Open interest?


There are a number of metrics to objectively determine sentiment.

http://www.sentimentrader.com/

I mentioned the Hulbert gold stock letter as one above

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41254 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/11/2013 2:11 PM
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You're joking, right?

Sorry, but this is a farce if you look at that sort of s**t.

I'll take my leave here from this board. Like many others.


No, I'm completely serious. FWIW, Goepfurt's work is very well respected in much of trader community. I'm not going to go hunting for source links but I could point you to numerous traders and advisors that use some type of objective sentiment analysis as a decision making input. Not sure why that would offend you. If you believe it is gobbedly-gook you are certainly entitled but it seems almost axiomatic to me that the crowd will be wrong at major turning points. That is literally the history of tradable markets. Another one I know many people look at extensively is put-call ratio for individual stocks.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41255 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/12/2013 5:30 PM
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What a day. Had a GTC limit order to buy at 1528 that hit early in the morning. Had a 2 hour meeting at work and get out to see 1504. Exited the long at 1504 and turned around and shorted at 1504. And now 1476.

Not sure what to make of this. This is a massive chart breakdown. It makes no sense based on my understanding of gold fundamentals but the chart is the chart is the chart.

IMO, the following downside price targets are now in play. The 50% Fibonacci retracement of the entire 2008 to 2011 bull move from 680 to 1924 is 1300ish. The breakdown of the rectangle from 1525-1535 to 1800 implies 1250ish.

I am also back now to my potential 70s scenario where gold dropped by 50% from 200 to 100 from late 1974 to late 1976 before going from 100 to 800. This decline from fall 2011-? may mirror that which from a time duration may suggest a bottom later in the year.

I also exited all my long-term strategic investment positions today as well so I have no bullish positions in gold whatsoever, and am short from a trading perspective.

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Author: patchdodd Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41256 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/13/2013 8:18 AM
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This is an interesting post which may explain much of the current environment for metals:

http://boards.fool.com/is-there-a-gold-swan-30632944.aspx

Governments comprise the largest holders of physical gold, and if even some of the smaller distressed governments cashed out to ease their respective budget strain it may have triggered to dash for the exits. I have suspected for some time that we've already experienced the blowoff top, that there was simply too much interest for it to precede a crash.

I am curious MD, why you put a lot of stock in 40 year old budget patterns. I agree that they are doomed to repeat, but have absolute doubt that their repetition is predictable. What fundamental or technical philosophy causes you to believe differently?

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41257 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 1:14 AM
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I am curious MD, why you put a lot of stock in 40 year old budget patterns. I agree that they are doomed to repeat, but have absolute doubt that their repetition is predictable. What fundamental or technical philosophy causes you to believe differently?

I'm not sure I follow your first sentence. I'm assuming you are referring to my referencing the 1970s gold bull which peaked in Jan 1980? To be clear, I don't believe for one second that a particular cycle in the past has to repeat exactly in the future. For me, past cycles are simply a way of staying attuned to possibilities, and that those possibilities don't get lost in the day to day or week to week news flow.

So we know that in the 70s bull gold declined by 50% before going up 8x in value. That happened. There is no reason it could not happen again so it is simply about staying aware to that possibility. Can you imagine what the news flow will be like if gold drops to 1000? I guarantee they'll be almost universal talk of the gold bubble that peaked in September 2011. That will be the consensus view. So to not get wrapped up in that thinking it simply helpful to know how that past cycle unfolded. I can't find the link now, but someone actually went back and looked at the news flow and announcements about gold in 1975-1976 and just as one would expect if you are a contrarian everyone was saying how gold had peaked in 1974 and was now a worthless asset to hold.

FWIW, my views on technical analysis have been heavily influenced by Peter Brandt. I don't really view technical analysis as predictive, but more as a potential roadmap indicating to you what potential price levels can be hit, what price levels DEMAND some type of action in terms of either getting into a position or getting out of a position, and simply identifying the TREND. The trend on gold is down for whatever reason. I really have no idea what fundamentally is driving it, but I'll stay short until I see some sign of capitulation, trend reversal, or the downside projected prices get hit whichever happens first. As I type this, futures are down big again to 1445 so I'm sitting on a decent profit from my 1504 entry. I just wish I had shorted the big contract GC instead of the mini-contract YG.

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Author: CM001 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41258 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 10:20 AM
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Wow! Gold price action is stunning. Glad to see that you had at least had a short position. I thought there were few posts by Bullet and suddenly missing!

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41259 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 11:32 AM
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Wow! Gold price action is stunning. Glad to see that you had at least had a short position.

Yeah, although I still wish it had been the full-sized contract. I was long the full-sized contract at 1528 and exited at 1504, and my concern on going short the full-sized contract was getting massively whipsawed. From a position sizing/capital at risk standpoint I shouldn't really be trading the full-sized contract but I felt like I had to take that chance at a major support level.

But this is what technical analysis is about IMO. Not predicting, but risk management and realizing action was needed. Once the support level gave way, that was all she wrote and I knew I had to immediately exit and go short. I'm actually surprised how easy it has become for me to "turn on a dime" and simply follow what the chart is dictating to do.

But gold over the last 2 days has illustrated why it is absolutely imperative that for the majority of securities, one MUST have some price level that triggers an immediate exit. As I type this, gold is at 1363. I was able to exit all long-term client positions around 1500. I would feel terrible right now if lack of discipline still had me holding...and I can guarantee right now there are a bunch of people long gold and hoping. Hope isn't a strategy.

FWIW, the two Fibonacci retracement levels of 1300ish and 1155ish also coincide with the price troughs of previous pullbacks (July 2010 and January 2011) so those are very reasonable price targets. The box target of 1250 also is likely. At those price levels, I would look to exit my short position based on also seeing some divergences and momentum indicators stabilizing.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41260 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 12:59 PM
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This one is for you Bullet if you are still reading...

http://www.ritholtz.com/blog/2013/04/worlds-biggest-etfcontr...

World’s Biggest ETF/Contrarian Indicator: GLD > SPY

GLD was briefly the world’s biggest exchange-traded fund. In August 2011, GLD had assets of more than $77 billion, surpassing SPY (SPDR S&P 500 ETF) for a short time. The SPDR Gold Trust’s market capitalization rose to $76.7 billion — gold briefly topped $1,880/ounce. At the same time, SPY’s “capitalization” was ~$74.4 billion.

I missed this detail in real time (I caught the Bond version in 2003). With the benefit of hindsight, its easy to say this was a contrarian signal. Not that you should short GLD, although that surely was a wonderful trade. But rather, that SPY was attractive, as this was a sign of extreme dislike for equities.


One could easily compile a very long list of data points where extreme sentiment metrics basically close to nailed an inflection point. I just find it difficult to see the view that sentiment analysis is rubbish especially since it really is an offshoot of technical analysis.

Now the thing to do will be to keep a watchful eye for when it is time to be contrarian bullish

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Author: Windchasers Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41261 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 1:33 PM
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One could easily compile a very long list of data points where extreme sentiment metrics basically close to nailed an inflection point. I just find it difficult to see the view that sentiment analysis is rubbish especially since it really is an offshoot of technical analysis.

Huh. Well, I see the relationships between sentiment extremes and market extremes as a tautology - of course when (average, money-weighted) sentiment turns, demand turns, and so prices also turn.

It's like those charts that "show" that your average investor is really bad at timing the markets during panics, because the most selling occurs near the bottom.

Well, duh, that's what makes it the bottom. Once more people prefer buying to selling, the market turns up. Similarly, peaks in mutual fund redemptions come close to coinciding with lows in the market because redemptions force selling.

The question is "can you predict in advance if we've reached a bottom in sentiment?"
And here, sentiment indicators can give you an idea of how extreme the current sentiment is, of how unlikely the current event is, and the odds of negative sentiment soon being "exhausted". Certainly sentiment is not perfect, but it is another tool in the toolbox.

~w

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41262 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 1:36 PM
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One could easily compile a very long list of data points where extreme sentiment metrics basically close to nailed an inflection point. I just find it difficult to see the view that sentiment analysis is rubbish especially since it really is an offshoot of technical analysis.

I consider technical analysis at its very best to be nothing other than an attempt to quantify crowd psychology in a specific context - in other words, sentiment analysis.

A resistance level, for example, isn't some magical attribute of the charts or the stock. It is about a price point where a lot of people either are sighing in relief as they get out of the stock without a loss, or selling because they don't believe the price is suffiently likely to go higher. The first of these is why a support level that gets broken often becomes a resistance level. This also explains why resistance levels are far more common at or near nice round numbers than at, say, something dollars and 37 cents.

How successful this attempt at quantification is, varies. It seems to me that, to date, the more complex the analysis the less reliable its conclusions - but I'm not offering that as a universal or unchanging statement.

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Author: MDCigan Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 41263 of 41316
Subject: Re: Gold - Intermediate-term bottom? Date: 4/15/2013 5:49 PM
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I consider technical analysis at its very best to be nothing other than an attempt to quantify crowd psychology in a specific context - in other words, sentiment analysis.

I absolutely agree. I tend to think of price formation as a tug of war between selling pressure and buying pressure. Technical analysis is simply an attempt to assess who has the upper hand, and when certain outcomes such as pattern resolutions indicate that one side is about to overwhelm the other (such as the last 3 days in gold).

A resistance level, for example, isn't some magical attribute of the charts or the stock. It is about a price point where a lot of people either are sighing in relief as they get out of the stock without a loss, or selling because they don't believe the price is suffiently likely to go higher. The first of these is why a support level that gets broken often becomes a resistance level. This also explains why resistance levels are far more common at or near nice round numbers than at, say, something dollars and 37 cents.

Completely agree.

How successful this attempt at quantification is, varies. It seems to me that, to date, the more complex the analysis the less reliable its conclusions - but I'm not offering that as a universal or unchanging statement.

FWIW, I tend to agree the more complex stuff like Elliott Wave analysis or various esoteric indicators are less reliable...at least I haven't seen a high level of reliability to actually trade off. Simple support/resistance, trendlines, and pattern resolutions are reliable enough to give you some edge IMO. Just recently, you had a huge down move in Japanese Yen once the head and shoulders pattern broke, and now with gold breaking the rectangle support you basically had the Kraken unleashed. Catching a few of those moves is plenty to make some decent profits or to trigger exits before long profits evaporate.

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