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 averageWeekly - 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 patternDaily - Daily MACD is on a SELLThe ONLY remaining potential bullish interpretation I could see would be a triple bottom at 1525-1535 so how gold reacts there will be very tellingCurrent 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: http://www.robertsinn.com/2012/05/14/a-petrifying-chart-comp...
thanks. as predicted, my half position entry into GDX marked the top!
I was surpised by this and you are indeed correcthttp://finance.yahoo.com/news/jim-rogers-heres-cause-gold-14......There's an element in India in the last several months which is very strongly saying we've got all this money tied up in gold which is not good for the economy. If we could just get the money into circulation instead of locked up on Indian wives or Indian vaults it would be good for the economy. And there's also a huge group saying that one of the big reasons we have this huge balance of trade deficit is because we buy all this gold and put it in the closet. Let's stop that. Now if they did that it would be devastating for gold. Gold would certainly go down 40% - 50% from its top.This is consistent with the GMO white paper that indicated emerging market demand was a primary driver of gold prices.In any case, I sold my remaining long-term gold position today. Feels weird after having held it for so long. Even if 1525-1535 holds as a triple bottom, I would expect a fairly lengthy bottoming and repair process where the trend following indicators turn before the price really moved up much. In the 2008 drop, the trendfollowing indicators basically got you out and back in at the same price, but you never know what that downside risk is.Depending on how far gold drops, I think there could be some incredible bargains in the mining and junior mining sector in the next 12-18 months.
I am not too worried about Indian demand. The Indian Rupee has been depreciating against USD, that is keeping the gold prices high and the very high gold prices is slowing the demand. Any drop in prices will bring back demand.Also, the wedding seasons are just over and summer is typically weak in terms of demand. Indian women are routinely "burned", I mean literally burned for lack of dowry and especially the amount of gold Jewels they bring in as dowry. With over 1 Billion + population, and over 50% young enough to get married, you are looking at 150 to 200 Million women getting married over next 10 years, you have a sustained demand from India.I don't think Indian demand and the barbaric affection for gold is going to away anytime soon. What happens to Gold price is completely different but its going down because of Indian demand is bit stretch.
Although I do not at all subscribe to technical analysis <I call it reading chicken entrails, for good reason> there are fundamental factors at work providing for a Bearish Fundamental backdrop to the Market for Gold.Ehhhh..whatever works for someone. The break of 1600 was a slam dunk, and covered my short at 1535. Wish I could get easy technical setups like that each week. So far bouncing exactly where one would expect in that 1525-1535 range...up to 1549 right now. Now you just watch and wait. The thing most people never can grasp is that technical analysis isn't about predicting the next 2-3 days, or week's price action exactly right. It's about identifying price inflection points where the probabilities are shifted massively in your favor. The break of 1600 was one such point. The next would be a downside break below 1525. That would be the next high probability short setup.But if someone feels better thinking it is chicken wishbones...more power to em.
Today's action (and the divergence from broader market correlation, at least so far in the day) makes a good case for the triple bottom, if it holds.
Today's action (and the divergence from broader market correlation, at least so far in the day) makes a good case for the triple bottom, if it holds.Certainly possible, I think the break of 1600 has created the need for significant repair and personally I think sideways action between 1525-1535 and 1600 would be the healthiest from the perspective of assuming it was just a very deep correction off the high.In this time though, I think you have to be ready to flip and reverse quickly based on what global central bankers do. Its become increasingly clear to me over time since 2009 that all risk assets including gold are being driven by their policies and announcements. Its hard to know what Bernanke may or may not do in an election year.On a ST trading basis, I'd probably look to reshort around 1590-1600 with a stop at 1610.I'd be particularly interested to see what some of the gold sentiment numbers are presently along with inflows/outflows to GLD.
On a ST trading basis, I'd probably look to reshort around 1590-1600 with a stop at 1610.Looks like you get that chance today.
Looks like you get that chance today.Yup, just reshorted 1 mini contract at 1595...I debated going long for the bounce at 1525-1535 the other day, but passed on that one.Anyways, the principle is support once broken becomes resistance so the 1600-1610 should function as strong overhead resistance. If it doesn't, then I'm out with a small loss. Will look to cover again at 1530-1535.In my view, 1525-1535 to 1600ish is the new trading range until proven otherwise, but my bias is still for more significant downside, and the 1525-1535 not holding. I think we really need a total washout, massive outflows from GLD, and a deafening chorus of people proclaiming "the gold bubble has burst". I think those conditions would be more conducive for a lasting cyclicl bottom. Gold has only had 1 cyclical bear (2008) in the ongoing secular bull (2001-present) so it is probably due for another.The tricky part here is trying to find some reasonable long-term support levels. My first thought is to look at Fib retracement levels, with a target of the 50% retracement which is 1300 (1924-681, half of that, subtracted off 1924).
I am a coin buyer below $1000, if that helps your analysis. A 50% drop would not be surprising to me. Of course I would rather not be a buyer, ha. I'll be perfectly happy if it takes off from here.
Good call, everything is going exactly your way. Are you covering today?
Good call, everything is going exactly your way. Are you covering today?Not yet...still need to think through the chart possibilities. The textbook play IMO would be to cover again at 1524-1535, and then watch and wait and reinitiate the short on a downside break of 1524.My instincts still tell me that 1524 will fall and the price action the laat 12-13 days looks very similar to me to the chart action from 12/12/11-12/29/11 where gold sold-off hard, had a 3-4 day bounce, and then resumed the sell-off to the new low of 1524. In this case, assuming 1524 falls, the next price level that comes into play is 1487 which is the reaction low before the entire upmove from July 2011 to 1900 in September.http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/...When asked about gold and silver, Yamada replied, “KWN published a portion of my report which covered gold and silver on May 4th. At that time I wrote, ‘A break of 1,600 and the uptrend line would suggest further risk toward 1,500 or lower.’ When gold broke the $1,600 level, which represented the 2008 uptrend, it triggered the additional selling we anticipated. It’s also broken the cusp of the 2011/2012 low. So, I suspect, given the profile of the momentum, which is negative, that it could go lower, notwithstanding interim rallies. If gold were to break the $1,487 level, you would probably see gold move to $1,400. However, there is a decent amount of support (at $1,487), almost six months support between the latter part of 2010 and later. We’ll take it step by step, Eric.I really have no idea where this current downleg ends. As I mentioned before the 50% retracement of the 2008 move is 1300. If it follows the 70s secular bull, maybe 1000-1100. In any case, whereever it bottoms I think it will set up for an absolutely tremendous long-term buying opportunity.Every other secular cycle has ended with a Dow/Gold of at least 2 to 1 if not 1 to 1 (the 1980 peak). My best guess is the current sell-off is tech stocks in 1998. The last chance to get on board before the final blow-off move. I would suspect the fundamental backdrop when the happens would probably be some type of central bank moves of unprecented scale. Maybe the ECB finally caves and prints 10 trillion Euros to buy up all the sovereign debt of Spain and Italy.In any case, what I'll be watching for here is the weekly MACD to turn. Based on what I've seen with past bear market moves or severe correctiosn, the weekly MACD will be the first to turn. Waiting for price to move over the 200 DMA or 10 MMA is more conservative, and better indication the trend has turned back positive, but it doesn't get you in early enough.In the meantime, the trend is down so all rallies are to be shorted if you are trading. IMO, one should be out of investment positions in gold or hedged to at least blunt the impact of a continued downmove.I wish I had caught the 3 day bounce back up to 1599 (note how it reversed right at the key level of 1600) along with the 2 shorts, that would have been money to nail 3 moves inside 15 days.
Please keep posting your gold TA here, it looks like you have the right knack for it. I'm not trading, just collecting... really forever.
I'm not trading, just collecting... really forever.FWIW, I think the day will come where the trade of a lifetime will be to cash out most or all of your gold holdings including most physical and buy stocks and real estate, probably and hopefully broad indices will be yielding 5-7% at that point, and property will be at great cap rates. That day is probably a few years down the road if not longer.
what do u make of the fact GDX has out-performed GLD? bullish divergence?
FWIW, I think the day will come where the trade of a lifetime will be to cash out most or all of your gold holdings including most physical and buy stocks and real estate, probably and hopefully broad indices will be yielding 5-7% at that point, and property will be at great cap rates. That day is probably a few years down the road if not longer. ---Yeah, that's what I think as well. I figure I'll use them to buy whatever currency replaces the dollar. If gold plummets and stays down forever, that means I will incidentally live a fantastic life anyway, so it's win-win.
FWIW, here are the Fib retracements based on the 2008 low of 681 and peak of 1924:38.2% - 144950% - 130261.8% - 1156What I find very interesting and noteworthy about the 50% and 61.8% retracements is they also perfectly coincide with the correction lows of January 2011 and July 2010.
correction lows of January 2011 and July 2010. Meaning, they will be wonderful support points?
Meaning, they will be wonderful support points?Not will be but could be. The way I look at support points is to think of them as price levels where you watch closely what happens as they should be price points where buyers see "value". If they don't hold, that gives you a lot of info as well.The way I see it is you watch what happens at a potential support level, and if it does NOT hold, you don't even consider for a moment getting long until you hit the next potential support level. The prices in between support levels represent a sort of vacuum where no strong buying interest exists.At least for now, the 1525-1535 level is still in play as a potential support level but all the momentum/trend following indicators are negative. If it turns out to hold, then one by one the trend/momentum indicators will flip, first the daily MACD will go positive, and in no particular order you'll get the weekly MACD turn up, the 50 DMA will turn up, the downtrend line will be taken out to the upside.
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.
Thanks for the detailed post.The bigger question is, how low GLD can go and whether I should wait. I am planning to buy GLD close to 1% with an eventual goal of 3 to 5% if the price drops in a sustained way. I have close to 20% in fixed incomes yielding little over 7.5%, hopefully if GLD falls due to deflation fears this should act as a balance.
The bigger question is, how low GLD can go and whether I should wait.Yeah, I don't know...like I pointed out gold got cut in half in the 70s secular bull, and then in the other posts I've shown some reasonable price levels for a correction. To me, it comes down to the fact that we live in a global economic world with powerful deflationary pressures, and the main inflationary pressure is central bank money printing, and government fiscal stimulus. Its clear to me that whey they take their foot off the gas pedal, the deflationary pressures resume, so the question is how much does the economy have to slow, and stock indices fall to bring about the next round of policy action. Europe and the ECB are operating on a different plan from the Fed. I don't think the Fed would wait to see the 2009 lows on equity indices to take extremely aggressive reflationary measures.When you buy or how much you should wait is more a process question in my mind than trying to guess at a bottom. One thing I will agree with the gold critics/skeptics is that it is very difficult to value gold. I've seen variants of looking at money and credit growth versus gold price, but I'm not sure how valid that is. So I don't think you can calculate a real good "fair value" and then buy at increments below that. My solution to that and really most risk asset exposure is I want to minimize exposure when all the trendfollowing/momentum indicators are negative. Whereever gold bottoms, I won't be riding it down. I most certainly won't be buying the bottom, but odds are good when I reestablish the position, I'll be getting back in on the next multi-year uptrend.
Good post on this subject:http://www.mercenarytrader.com/2012/05/gold-vs-bonds-at-what...
Did you get stopped out of your trade? It's starting to look more and more like a double bottom back from December, with support back to June/July, before things got too hot.
Did you get stopped out of your trade?Yes, I got stopped out 6/8 on the second short trade for about a $15 per ounce loss after making about $63 per ounce on the first short trade. I had another shot to cover at 1535ish, but the window was brief and I forgot to put a limit order in. Anyways, the daily price action had started improving in my view, and the candle on 6/8 with the long tail indicated to me to get the heck out of the short.Actually, on a short-term trading basis, I went long yesterday at 1624. I'm looking for at least a test of the declining 200 DMA where I would be inclined to liquidate the long and flip back short again.On a longer-term basis, the price action the last 20-25 trading days indicates to me that my initial thought of a much deeper correction is probably wrong, and that most likely gold has formed a triple bottom at 1525-1535 (Sep, Dec, May) and the May is actually a triple bottom itself. The way I see things is gold had every opportunity to just blow through 1525-1535 and it DID NOT. That is very telling in and of itself.If you recall in one of my previous comments, I did mention one thing working against the notion of a big cecline was that gold sentiment was already excessively bearish. I haven't seen the most recent figures, but my sense is the consensus view is the bull market in gold ended in September 2011 at 1900. From a contrarian standpoint, that means it probably hasn't.From a psychological standpoint and sort of that Soro's reflexivity concept, if and when gold finally takes out 2000, I suspect you could see a tidal shift. Every time gold makes a new secular peak, I think more people jump on the long-term bull market bandwagon when it becomes clear the drop was just another correction. There are still alot of empty seats. It still isn't a crowded trade especially at the big money institutional level. When the pension fund consultants finally capitulate and say every pension fund should have 10% in gold, we will know we are closer to the ultimate peak.On a shorter to intermediate-term basis there are 3 huge overhead resistance levels that need to get taken out decisively before I'd think a major upleg was in force. You've got the declining 150 DMA, the declining 200 DMA, and the trendline that connects the 1900 and 1800 tops. That trendline currently intersects at 1710 while the 150 and 200 DMA are 1675 and 1659. Ideally, those would get taken out and then some consolidation with still negative sentiment. That would be my trigger to load the boat, and probably switch from trading 1 mini contract, to being long 2 full sized contracts.In terms of the fundamental factors driving the recent price action, I suspect the market is beginning to anticipate and price in some type of upcoming central bank policy measures. I think for a moment there, the markets including the gold market was actually believing the BS that central banks could sit back and do nothing. Ultimately, there is no answer to the debt problems except print more money. Not sure what the next fancy name for it will be.
FWIW, I'm starting to think the 06-07 is the most likely analogue to the current price action. There was a peak in May 2006 of 730 and then a furious sell-off down to 540ish for about a 25% drop. That mid 500 level was tested extensively and then a slow drift upward until the breakoout in September 2007. So you had about a 15 month consolidation.The peak of 1924 to the drop of 1524 is about a 21% decline so it is comparable along with the extensive testing of 1525-1535. Perhaps we've just started the slow drift upwards. A 15 month consolidation puts the next upleg at January 2013. Maybe a Obama reelection with mounting trillions in debt as the catalyst?
Maybe a Obama reelection - MDCiganWith that one stroke you made billions of chineese and Indians praying for his reelection.
What do you think will happen to Gold if Euro Zone dis-integrates?
What do you think will happen to Gold if Euro Zone dis-integrates?Hard to say....I'd really just be guessing. A very messy break-up should send deflationary shockwaves through the global economy which would be bearish for gold, but you also could see Europeans using gold as a flight to safety.FWIW, I got out of my long gold trade the day before the Fed/Bernanke announcement at around 1607.I believe the extremely choppy, almost schizophrenic price action in gold represents the massive uncertainty on a day to day basis as to what the Fed and more importantly the ECB will do.At least to me right now, I get the sense that most markets (except U.S. stocks) are starting to consistently price in continued deflationary expectations (U.S. Treasuries, crude oil, the broad commodity complex)FWIW, I'm watching silver right now for a potential short trade. Silver is tracing out the mother of all descending triangles off the April top of 50. 26 and change has been a bounce point about 5 times since early 2011. A close below 26 to me would suggest a sizable downmove perhaps retracing all of the bull move starting in summer 2010 which would take silver back to the mid to high teens.
Any updated thoughts on Gold. The ascending triangle and the secular bull of last 3 or 5 year period is gone and we are now in sideways consolidation (I am pretty sure, I have no idea what the above means!).The last time Gold had a lengthy sideways move is from Apr-06 to Aug-07, and then the world started collapsing and printing presses worked non-stop and gold hit the peak.Is gold now tied to QEIII? If there is no QEIII are we looking at Gold breaking down 1500 mark? It bounced off of that low multiple times in May and then recently at 1555.There is no catalyst to buy gold unless we are assured of another round of easing by FED.Interested in your thoughts.
Any updated thoughts on Gold. The ascending triangle and the secular bull of last 3 or 5 year period is gone and we are now in sideways consolidation (I am pretty sure, I have no idea what the above means!).The last time Gold had a lengthy sideways move is from Apr-06 to Aug-07, and then the world started collapsing and printing presses worked non-stop and gold hit the peak.Is gold now tied to QEIII? If there is no QEIII are we looking at Gold breaking down 1500 mark? It bounced off of that low multiple times in May and then recently at 1555.There is no catalyst to buy gold unless we are assured of another round of easing by FED.Interested in your thoughts. CM,Actually, pretty good read there for having no idea what it means.... :) although by my definition the secular bull starts in 2001, not 3 or 5 years ago and is still ongoing until proven otherwise. Right now, we are only 16% off the 1924 peak achieved in Sep 2011. How many times did the S&P 500 drop 15%+ during the secular bull of 1982-2000?At present, I am in neutral wait and see mode with gold to see which way this sideways consolidation resolves itself. I currently have no positions in gold at all, no long-term investment position, and no short-term trading position. I do have a short position in silver that is at a moderate loss as I shorted at 26.89 expecting an imminent breakdown below the $26 support level, but it looks like I am going to get stopped out this week. Fundamentally, I'm surprised to see silver hold up this well given that it is an industrial metal as well, but depending on what happens the rest of this week, it may break above the downtrend line off the $50 top of April 2011. Probably a mistake on my part to trade along with mass sentiment. I can't find the chart now, but it basically showed that bearish sentiment on silver was at the same level as October 2008.I haven't been able to get the gold sentiment numbers recently, but I'd guess they are probably close to the silver numbers so sentiment is likely very bearish which is contrarian bullish. I think it is also bullish that the 1525-1535 support level has held and that over the last 3-4 months price has slowly been working higher putting in a sequence of higher lows. Also, on the bull side is the fact that the signal line crossed above on the weekly MACD. In my experience, quite often, after you've had an extended sell-off, correction, or sideways movement where the weekly MACD was negative for many months, once the signal line flips positive, it very often means the bottom has been put in. That said, for me it would have to go above the ZERO line to be in official bull mode.Now for the bearish/neutral indications. There is still a ton of overhead resistance to get past. I like Mebane Faber's 10-month moving average rule as an indicator whether or not to be in or out of an asset class although I'll often use the 40-week moving average instead because it will be quicker to give a buy or sell signal. I don't like the 200-day moving average because I've noticed WAY TOO MANY situations where you get false signals of either 1-2 days above or below that would trigger action, but turn out to be false signals that don't trigger on the weekly or monthly moving average. The S&P 500 from June1-June 5 is a good example of this difference. So currently gold is at 1619 and the 10-month moving average is at 1649 and it has been trading below for 6 months. I'd want to see a monthly close above that 10-month moving average or 1-2 weekly closes above the 40-week moving average. More importantly in my view, is the downtrend line that connects the Sep-11 1924 top and the Feb-12 1793 top. I am a huge believer in the message trendline breaks send. This trendline currently intersects around 1660. I'd want to see that decisively taken out and then holding that for several days to a few weeks.Closing above the 10-month moving average and a trendline break to the upside would be enough for me to reestablish my long-term position. I would be buying back in higher then I sold, but that is OK. I don't care about 5-10 points one way or the other on GLD...I want to be on the right side of the next 30-100 point move.I think you are right that the next catalyst will be QE3 or whatever they call it or whatever extraordinary policy measure central banks decide to put in action. We've been on hold here a long time. The Fed hasn't done anything for awhile, and the ECB has pretty much been talking nonstop for several months with zero action. The way I see it at the end of the day the only answer to the debt problem is either repudiation of the debt or monetization of the debt. I believe the latter will be the choice, but it will be done in the least transparent, most obscure way possible. It is important to keep most people in the dark that their savings are being devalued. Financial repression will continue and both short-term and long-term interest rates will stay low I think. In my view the evidence clearly indicates the Fed can keep long-term rates low as well if they want, the idea of "bond vigilantes" driving U.S. long-term interest rates higher I think is a myth. All of those factors are bullish for gold in the very long-term.I've learned though to generally wait for the charts to confirm and affirm my interpretation of the fundamentals. It is a small price to pay to generally avoid being horribly wrong. A good example of that is the experience of ATPG the last 12-18 months.
Thanks for the detailed response. I am waiting for the QEIII to initiate a position on GLD. If it is announced probably I will go as much as 10% of my portfolio and then scale it down to a long-term position of 3%.
I do have a short position in silver that is at a moderate loss as I shorted at 26.89 expecting an imminent breakdown below the $26 support level, but it looks like I am going to get stopped out this week. Fundamentally, I'm surprised to see silver hold up this well given that it is an industrial metal as well, but depending on what happens the rest of this week, it may break above the downtrend line off the $50 top of April 2011. Silver moved up by another 10% and now it is trading above 200 DMA. I assume you have closed your short. I think it will move sideways or trade down a bit to consolidate such a strong move in a weeks' time. Will you go long now?
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 out, you might also have 2 weekly closes above the 40 WMA, and also a monthly close above the 10-month moving average so any way you slice it, the trend following indicators would tell you get back in here. Like the 2008 drop, if you've followed them, you are getting back in at a slightly higher price then you got out.I may take a half position at the end of the week with another half position when the weekly MACD goes to a buy. If and when it happens, I think breaking above the double top at 1800 would indicate the next major upleg is in full force. One could always pyramid up there with a stop on that additional allocation right at 1800. And then the same thing at the high of 1924.
FWIWBarron's Alan abelson is bullish on gold, I couldn't resist he was once bullish on ATPG also :)http://online.barrons.com/article/SB500014240531119046285045...
I may take a half position at the end of the week with another half position when the weekly MACD goes to a buyDid you get to initiate your position before the Friday jump?What is the best asymmetrical way to get exposure to Gold, of course no futures. :)
I've been looking a lot at silver technicals recently and decided that the moving average is practically useless as an indicator when your underlying has that much volatility. I found that MACD crossovers significantly lagged actual trend changes - to the point that they were not predictive. I can't say the same for weekly MACD as that would point more to longer term trends.IMO, RSI and CMF Oscillator generate better signals.
Did you get to initiate your position before the Friday jump?Nope. Tricky call here. Chase it or wait for a pullback? When gold retook the 200 day moving average back in early 2009, if you were patient it did pull back exactly to the 200 DMA in April 2009. Sentiment has actually gotten really bullish quickly which would argue for a pullback or some sideways action to maybe bring it back neutral.But if gold is ultimately headed to 2300-3000 (a couple of the technical price targets) one could ask does it really matter if you buy at 1645 (the current 200 DMA) or 1698.What is the best asymmetrical way to get exposure to Gold, of course no futures. :)The longest dated LEAP calls on GLD. Depending on how much time premium you want to pay, you could go really deep ITM to basically get a leveraged play that will move 1 for 1 with GLD.
I've been looking a lot at silver technicals recently and decided that the moving average is practically useless as an indicator when your underlying has that much volatility.Which moving average over what time frame?
Just the 50/200 dailies.
http://blog.kimblechartingsolutions.com/2012/10/joe-friday-w...Both gold and silver sitting at resistance with excessively bullish sentiment. Also, historically October is a down month for PMs.On a trading basis, good short entry here on both with a stop just above resistance. I am currently short silver on a trading basis.On a longer-term basis, both look to have reversed the downtrend of the last 12+months. I'd look to get long on a pullback to either the 50 or 200 day moving averages. QEinfinity should provide a very long bullish tailwind for the PMs.
I'd look to get long on a pullback to either the 50 or 200 day moving averages.We are at 50DMA, supposing if GLD & SLV didn't bounce off of this, where do you see the next support? 200 DMA?
We are at 50DMA, supposing if GLD & SLV didn't bounce off of this, where do you see the next support? 200 DMA?Yeah, that would be a reasonable price level, I would also look at the 38.2 and 50% Fib retracement which is 1694 and 1662. The 50% retracement is actually right at the 200 DMA.In the short-term, I am neutral here. Actually, when the futures opened today I covered my silver short at 31.89 after having shorted at 34 basically because it is sitting at the 38.2% retracement and the previous breakout level on 8/31. I've noticed over the years that breakouts often retrace to the breakout price and then halt there. That isn't to say it can't go lower, but continuing to hold a short-term short is no longer a compelling risk/reward. In contrast, as I pointed out earlier there were clear signs the short-term uptrend was running out of steam at 34-35 and that was a reasonable price to expect that to happen.If you look at gold, the recent upmove failed exactly where you would have expected it to which was the previous double top at 1800 as the high of this move was 1798.1. I chose to short silver instead, but again that was a textbook entry price to short since there was existing resistance in place. So now you have a triple top at 1800 in place. That is actually informative. The more times something holds as resistance, when it finally breaks you know the move is for real. So if and when we finally break over 1800, that would be a great entry signal as that probably would be the beginning of the next big upleg.But yeah, the 200 DMA would be a good entry point IMO. The script in 2009 was gold rallied all the way up to the previous resistance at 100 before pulling back to the 200 DMA at around 880-890 off the top of my head. So if you were looking to enter a long-term position, maybe you enter 1/2 at the 38.2% retracement and the other half at the 200 DMA.If you recall earlier, I mentioned missing initial breakout, but maintaining that I would not chase it and simply wait. With patience, the short-term corrections almost always come.
http://blogs.decisionpoint.com/chart_spotlight/2012/10/20121...Conclusion: While gold feels as if it is falling apart at the moment, the breakout looks convincing, and there is still good reason to expect that the decline will be halted by the support lines.One thing I'll add is I think it is futile to try and time entries and exits around specific fundamental data points. There really seems to be no rhyme or reason. If you look at this entire secular bull starting at 250 in 2001 and look at the various major uplegs versus the lengthy consolidations, there is really no way to say why when one occured versus another. So I think it makes more sense to understand the long-term secular fundamentals are still positive and use the technical and chart indictors to trigger entries and exits.The lowest risk entry now for a really long-term position is wait for the pullback to the 200 DMA/10 month moving average. That way if it doesn't hold, you exit for a small loss rather then a bigger loss if you jump the gun and enter too early.
The lowest risk entry now for a really long-term position is wait for the pullback to the 200 DMA/10 month moving average. Looks like Gold had bounced off the 200 DMA as expected. I was too busy following election and getting diverted with political posts and completely missed this.Given the fiscal cliff and all other uncertainties I am hoping Gold will not crash. I am thinking about credit spread.I can buy $145 put Jan expiration and sell $155 put for 3% return on capital at risk or $155/$160 for 17.5% return.The $145/150 gives me 10% downward protection for 70 days to expiration with 200DMA in between for support looks interesting bet even though 3% simple return and 15% annualized return is is not so great but okay.Any thoughts, suggestions?
http://peterlbrandt.com/gold-is-in-a-new-bull-market-see-imp...Looks like Gold had bounced off the 200 DMA as expected. I was too busy following election and getting diverted with political posts and completely missed this.Yeah, I missed it as well. It didn't quite kiss it with the daily low hitting 1672.50 while the 200 DMA was a 1664 that day. For me, that is always the tough call...when do you enter. It is a balance between the lowest risk entry point possible versus missing the entry point. I'm just guessing but I think another pullback and sideways consolidation is likely.Given the fiscal cliff and all other uncertainties I am hoping Gold will not crash. I am thinking about credit spread.I can buy $145 put Jan expiration and sell $155 put for 3% return on capital at risk or $155/$160 for 17.5% return.The $145/150 gives me 10% downward protection for 70 days to expiration with 200DMA in between for support looks interesting bet even though 3% simple return and 15% annualized return is is not so great but okay.Any thoughts, suggestions?Generally speaking, I like credit spreads. I was actually doing very well trading credit spreads before I decided to move to futures for the increased leverage which hasn't worked out too well so far so I'm probably going to move back to credit spreads. They are more forgiving in that even when you are wrong, you can often get out with a scratch trade or small loss. With futures, if you stop out 1-2 points below your stop out point, you've already taken a pretty big hit. With credit spreads, you usually have already burned through some time value, and the short option may not have a high enough delta to really gain much value for only 1-2 points below the short strike.When I do trade credit spreads, I usually like to choose the short strike based on some key technical level. That way if you know it is violated, you exit immediately. The math of credit spreads doesn't work well for overall positive expectancy if you take the full loss on too many. You could have 12 out of 15 winners, and if you take the full loss on 2 that might wipe out all your profits.
The math of credit spreads doesn't work well for overall positive expectancy if you take the full loss on too many. You could have 12 out of 15 winners, and if you take the full loss on 2 that might wipe out all your profits. For me, the 200DMA is the line, if that is breached, I will close the position and take the loss. The main reason for the credit spread is reducing the amount of capital locked up.
For me, the 200DMA is the line, if that is breached, I will close the position and take the loss. The main reason for the credit spread is reducing the amount of capital locked up.Still in the credit spread?Here are my current thoughts. The price action since the 2011 peak and particularly the May low at 1527 is looking very closely like the price action in 2006-2007 after the 2006 peak at 732. In that case, you had a sharp drop to 550 (25% drop). 550ish was tested a few times and then it gradually started working higher with the band of the sideways range getting smaller and smaller until the upside breakout in September 2007 (16 months in duration).In this case, you had the September 2011 peak at 1924 with the bottom range being 1525-1535 (21% drop). With the recent upside break of the downtrend line off the peak and 1800, the last two pullbacks have been fairly restrained which to me looks like the sideways consolidation range is shrinking towards the upside of the box from 1525 to 1800. And the consolidation is now 16 months in duration.I'll note that all my chart interpretation is viewed in the context of bullish fundamentals. ZIRP is still official policy for a long time along with the negative real interest rates it brings, and it appears to me that cumulative debt is back on track to start increasing. I'm not a political pundit, but it won't surprise me to see several trillion more in debt accumulation the next 4 years.I'd note that during the entire secular bull in gold starting in 2001, there hasn't been a single instance of a false breakout after a multi-month consolidation. That isn't a guarantee of anything but it tells me a break and close over 1800 would most likely be very high probability for the beginning of the next upleg to new all-time highs. I've seen some technicians with price targets of 2300-2400 but I'm not sure how they are derived. The tool I am aware of is to use the width of the previous box, so the range of 1500-1800 is 300 points giving you an upside target of 2100.As I've said for years, and still believe, the final parabolic blast-off still lies ahead. I have no idea on the timing, but I suspect the catalyst event might be some sort of total debt monetization once we reach the acceptance phase that the overall sovereign debt levels are not payable.
Still in the credit spread?I didn't enter that trade. :) Of late, I am looking at lot of things but hardly do anything. The current drama in DC is not giving me any confidence to enter into any position. Hence sitting on sidelines with cash.I still think I should have 3 to 5% exposure to gold/ silver and perhaps I should just go long and not worry about anything because most of these stuff I don't understand anyways. :)I have no idea on the timing, but I suspect the catalyst event might be some sort of total debt monetization once we reach the acceptance phase that the overall sovereign debt levels are not payable.I am a novice on this subject, but I thought "debt monetization" happens whenever treasury issues debt right? The acceptance happens whenever the congress raises "debt ceiling" or passes spending bills right?I think the notion that soverign debt should be paid in full is a fancy and unrealistic. I think soverign debt unlike individual or corportations, should be tied to GDP and thus revenue receipts aka taxes. In democracy, the incentives are tilted towards taking more debt to please the voters rather than paying down the debt.
I still think I should have 3 to 5% exposure to gold/ silver and perhaps I should just go long and not worry about anything because most of these stuff I don't understand anyways.Here is a Morningstar note that comes up with a 5% allocation based on your standard historical mean-variance analysis:http://seekingalpha.com/article/1047441-smart-portfolio-cons...Because the price of gold is sensitive to changes in inflation or the prospects of a disaster, a little bit goes a long way. For those who have decided to own some gold in their portfolios, we feel that 5% is an appropriate weight. This study from Campbell Harvey and Claude Erb suggests a 2% weight of gold in the market portfolio while an Ibbotson study suggests at least a 7% weight.Again, I'm a big fan of simply using a simple 1 factor trendfollowing model like the 10 month moving average to determine whether to be in or out, so right now you would be long based on that.Just my opinion, but I think it is a mistake to allow investing decisions to be driven by political outcomes. One, you are not going to have any success predicting the outcome, and even if you did, I'm not sure it is obvious what the market reaction will be to political outcomes.
Reestablished my LT investment position on today's dip down which brings gold fairly close to its 10 month/200 day moving average. Gold was 1696 and bought the GLD at 164.Assuming upward appreciation from here with no subsequent sell, this will actually be a loss of 14 points compared to buy and hold since my last sale was triggered at 150 (so I lost out on the 14 points of appreciation by just holding).Reviewing my notes from the sale, every technical indicator was negative EXCEPT for the fact that the major support level at 1525-1535 had not been broken as of the sale. Hindsight is 20/20 and all that, but given how many technical levels had already been breached and the fact that 1525-1535 wasn't too far below, maybe it would have made more sense to just hold down to that level and see if it holds. But no big deal either way. If GLD is in fact going to 210 or 240 sometime in the next 12-18 months, then those 14 points won't make much of a difference.Same exit plan here which is a break of the 10 month/40 week/200 day moving averages. There is a very large amount of price congestion/support levels in the 1660-1680 which is basically where all those key moving averages sit plus it is the breakout day of 8/31/12 and the reaction low days of 11/2/12 and 11/5/12. My working assumption is that if that price zone didn't hold as support, then it means probably another retest of that 1525-1535 zone.Buying at 1695 and selling at 1650 is a small loss so that is fine for the potential upside I see developing after the multi-month sideways range. I would likely double the position size on a weekly close over 1800 which would increase my conviction the move is for real.
If the fundamental factors which lead you to believe gold is ultimately going much higher remain intact, why wouldn't you just hold your position regardless of short-term technicals? It's way easier and you won't end up doing stuff that is overly clever which you regret later.
If the fundamental factors which lead you to believe gold is ultimately going much higher remain intact, why wouldn't you just hold your position regardless of short-term technicals? It's way easier and you won't end up doing stuff that is overly clever which you regret later. Risk management/minimize drawdowns....I've been doing this long enough now to realize I get the fundamentals wrong from time to time. Of course, everyone does. Bill Miller wouldn't have had an ignoble end to his investing career if he had been more cognizant that maybe his fundamental analysis was wrong.So to me taking protective action based on chart patterns/technical indicators is simply a way to protect myself if I turn out very wrong on my fundamental assessment. I sold ATPG at $15 a share while I know many presumably smart people who rode it down to single digits or bankrupcty because they were convinced of their fundamental analysis.It is philosophical thing. The asymmetry and math of gains and losses (100% gain to make up for 50% loss) led me to the conclusion that in investing/trading avoiding big losses is much more important than big gains. The gains will take care of themself if you just avoid the positions that drop 50%, 70%, 80% from your entry point.
FWIW, right here, you've got about the lowest risk entry you can get. It is sitting right at the 10 month/200 day moving average. So you buy here and then you stop out if it doesn't hold for a small loss. To my eye, there is no meaningful support in between here at the 200 DMA and the 1525-1535 level so I would assume breaking down here assumes a full retest of that level once again.I always remember Louise Yamada's the wider the base, the higher in space, the wider the top, the steeper the drop. The longer this 1525 to 1800 range persists, the move either way should be explosive.
so I would assume breaking down here assumes a full retest of that level once again.Did you see Jim Rogers interview with cnbc? He is cautious and talking caution, saying GOLD had not had a meaningful correction (except 2008) in its 12 year bull run. He is thinking a 20 to 30% correction is due.I didn't had a chance to catch the interview fully, which I will do in later in the evening, but if his prediction is to come true then we are looking at breaching $1500 mark.You have Tepper, Ben and no inflation money printing on one side and Jim talking caution on other side.Interesting. Fortunately, I can sit back and wait for this to play out.
Did you see Jim Rogers interview with cnbc? He is cautious and talking caution, saying GOLD had not had a meaningful correction (except 2008) in its 12 year bull run. He is thinking a 20 to 30% correction is due.I haven't seen the interview yet. I think Jim is an astute trader, and he may be right about an upcoming 20-30% correction, but he is factually incorrect about no meaningful correction in 12-year bull run except for 2008 unless he is drawing his line right around 30% which seems pretty arbitrary. The drop in 2008 was from 1034 to 681 peak to trough which is a 34% decline. Seems to me that both the 2006 and 2011 corrections were meaningful. The 2006 drop was 732 to 546 peak to trough which is a 25% drop which isn't too far from the size of the 2008 drop. The 2011 drop was 1924 to 1524 peak to trough which is a 21% dropI didn't had a chance to catch the interview fully, which I will do in later in the evening, but if his prediction is to come true then we are looking at breaching $1500 mark.FWIW, during this multi-year run, gold has often put in corrective cycle lows in the Dec to Feb time frame so let's watch the next 2 months. I'd also note that gold has already been correcting and consolidating off the 1924 peak for 16 months. Anything is possible, but if we get too March and we are still churning sideways in between a rising 200 DMA and 1800, I'll be pretty sure the next big move isn't another 20-30% down.
Just saw this article this morning....does look like Rogers has 30% as is line for meaningful correction:http://www.cnbc.com/id/100326475""Most things correct 30 percent every year or two, even in big bull markets – 30 percent corrections are normal and yet gold has only done that once in the past 12 years," Rogers said. "Gold on any kind of historic market basis is overdue for a nice correction."FWIW, I entered a long trading position last night at 1668 and stopped out of it this morning at 1647. I'll wait until the end of the month to act on the longer-term position and give it another week and a half to potentially retake the 10 month moving average.One thing I've been thinking about more generally is once technical levels are breached, and you really don't have any particular technical level to look at for support, I think the thing to do is look for a total sentiment washout. I think back to something like the S&P 500 at the March 2009 lows which had 2% bullish sentiment. I think at the silver top in April 2011 it was something like 98 or 99% bullish sentiment.So in terms of a potential gold bottom, I'd look now at bullish sentiment dropping below 5% or retesting that 1525-1535 level whichever comes first.
When technicals break down in one time frame it is useful (to me) to review them in another.Looking at the weekly, gold broke through the 50 week with some authority today. The oscillators that I follow all turned negative around 12/1. Finally, the 50 week was sitting at the bottom of the price envelope - which is now also broken.This is an outstanding opportunity to short gold with a clear shot to 1575 and below.disclosure: have been short silver for a few weeks
patchdodd, thanks for adding your thoughts, and nice trade on silver.Another one I added the just the other day was long the euro. Fundamentally, this one has me scratching my head, but the chart looks like major reversal. There is a one year head and shoulders bottom, and the right shoulder of that formation over the last 4 months is a head and shoulders bottom itself plus the downtrend line off the May 2011 top has been broken to the upside.What oscillator do you use, and out of curiousity what is it saying about the euro here?
For trading purposes I prefer silver for volatility. I use gold for direction. and sometimes - as happened this week - you will see short term divergences which make nice set ups for 1-2 day silver trades.I use RSI, Chaikan, and % price. I haven't validated them for anything other then silver/gold but to answer your question (looking now):there is no chaikan calculation for $XEU. RSI entering oversold territory which is often a nice time to enter a trade. $XEU well within the envelope - it appears to nearly always trade in the envelope. Most importantly perhaps, the fast oscillator is outrunning the slow oscillator with both with a positive slope. I don't have any interest in trading currency, but if I did the gap on 11/26 screams buy. It pushed through the 50 day which was already in golden territory while the RSI crossed 50 and the fast oscillator crossed over the slow, although still negative.Looking at the weekly there isn't much confirmation for this trade. The index just pushed through the upper bound of the envelope and is up against resistance. I would suggest that the likeliest technical outcome is either a downward retracement or a sidewise move into the envelope before possibly continuing upward. A move above 134 would be enough to convince me of a continuing uptrend.Above all though, this doesn't look like a trade that could net more than 10% over a year. Not worth the risk, IMO.~this is just me applying the tools I use to trades I don't make. I wouldn't call anything I just wrote actionable.
Interesting that Silver is now the "new Gold". My inbox is full of "Silver going to 40" etc., and I somehow seem to be on the other side of that trade. Took a nasty hit last Thursday (short at 32.860 in the March contract) on the 8am NY morning gap, but now flat as a pancake over the New Year.I think it was Conquest Capital, who wrote that what we have with the Fed, QE3/4/5, buybacks, and a whole load of other acronyms, are simply diluting the effect of such measures. So the effects on gold in particular, the safe haven metal, are, as we can see in pure price action, less and less tangible. If the world doesn't fall apart, and Greece somehow negotiates a happy divorce, call it a long term goodbye, then the call for 2000 will be ripped to shreds.As ever, I have no view. No prediction, no crystal ball is present :)
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