In the earlier days of my trading career, I relied on them rather heavily. However, the longer I ply my profession it seems to me that their value has decreased considerably. I chalk this up to the changing nature of computerized trading. That is another lesson in and of itself but suffice it to say for now that the vast majority of hedge funds do not "think" when issuing buy or sell orders - they REACT, more specifically, their computers react. This buying or selling comes en masse - there is not the least bit of finesse or skill involved with it. It is more akin to a wall of money slamming into a market and brutally shoving it higher or dropping it lower.
In the past, there tended to be more discretion with trading orders - now we have gone over to the systems trader which means the impact on price tends to get exaggerated at times because nearly all of the computers are reacting to the same thing at the same time. This tends to create imbalances in the demand/supply equilibrium in the market which take some time to sort out.
The result of this is an increase in the number of what myself and other technicians refer to as "false breakouts". A wave of buying or a wave of selling hits a market all at once, picks off a huge number of buy or sell stops and price is severely impacted. However, if the fundamentals do not support the technical price action, eventually - and this is always the tricky part - the balance between supply/demand will resolve or correct itself and the underlying trend takes hold once more.
"What in the world is he talking about?" is probably the question that is now popping up in the reader's mind.
Let me give you an example - here is the Weekly Gold Chart. Notice that I have included a sloping downtrend line. I also ran it right to the edge of the paper for a reason... Based on this chart, gold had been in a downtrend for well over a year when this downtrend line was broken to the upside. I remember this well to be honest but that is a different matter. Immediately the cries came forth - "Look out ABOVE - gold is getting ready to blow". We were going to take out $1900 and soar to $2500 for starters based SOLELY on the fact that this sloping trendline had been broken.
Here is the chart after a few more weeks passed.
As you can see, "whoops" is too mild of a word to describe what happened next. After many proclaimed that merely because a downsloping trendline was broken, gold was resuming its upward march, the market proceeded to plummet from near the breakout point of $1,700 all the way down to $1,200 over the next year's time!
Note something important here which I will talk about farther down in this post - the HORIZONTAL LEVEL of $1,530-$1,525 was violated.
Here is the next downward sloping trendline breach... it occurred in August 2013.
The market had pushed past $1,400 and managed to change its handle, a friendly development. In the process it broke that sloping trendline. Everyone "just knew" that it was back to the moon once more.
OH-OH! It failed to maintain the "14" handle for more than one week and down it went - all the way back down to $1,180 again!
After this week's price action, once again those who dismissed technical analysis when it comes to gold, are pointing out the upside breakout above the down-sloping trendline.
Based on what you have seen above, would you feel completely comfortable with the statement that, "gold has broken out and is about to embark on a major rally"? Personally, I would not.
While these sloping trendlines still should be noted and monitored, I prefer to use HORIZONTAL resistance and support levels as I have come to believe from my own personal experience that they are much more reliable. Even at that we still do get some head fakes from time to time with horizontal levels but they seem to have more predictability when it comes to future price action. If some are inclined to differ about this and want to argue, that is fine just do not expect me to come around to that line of analysis. Getting burned a few times while trading is the best antidote for putting ones fingers into the flame with reckless abandon.
Seriously, if trading was as easy as buying breakouts of sloping trendlines, do you not think that we would have hordes of wildly successful traders infesting the nation?
Please keep in mind that being successful as a trader means employing a wide arsenal of tools. It also means learning to not be too dogmatic to the point of obtuseness. Stay flexible - stay nimble and never get MARRIED to a viewpoint. Divorce is usually a costly affair!
No reason to be so hard on the "Gold Bugs" (whoever they are) Dan...
ReplyDeleteWith so much negative disinformation in the financial media, can't see how you can blame some of them for fighting back... even if your (comments) are based on honest analysis!
Most thinking "metals" investors understand technical analysis is a powerful component of investing decisions of the vast majority of market participants (even though there is clearly manipulation in these markets on a grand scale)... and often, those "technical targets" are in the cross-hairs of the manipulation moves.
SRV, but there is a reason to counter-attack people who mercilessly attack you just because of your honest opinion. I own gold, I'd like it to provide me with the safety net sometime in the future. I own PM miners and I'd like their price to rise in order for me to book in some profits. However, I do not attack, insult and ridicule people who don't see safety in gold and who do not see price of the miners rising to the stratosphere. Those who do, commit enormous damage and disservice to the rest of us who want unbiased and informed opinion from people who know more than us.
DeleteAbraxas;
DeleteI could not have said it better myself. It is exactly how I feel.
SRV;
You do not have to read the emails that I get my friend. I remain friends with some of the "gold bugs" but these are people I respect even though we might have honest differences of opinions from time to time. What I detest is the cultists among the gold bug group. If they had the reins of power, I suspect many of them would be no different towards those who deviate from their orthodoxy than did those running the Spanish Inquisition....
One thing further - I would disagree with your premise that there is manipulation on " a grand scale". If you are talking about hedge funds taking advantage of thin trading conditions and jamming prices in the direction that they are positioned, I would agree with that. If however you are referring to manipulation in the gold market which some claim happens nearly every single time the price of the metal takes a sharp fall, then we are definitely in disagreement over that.
I have said it here so many times that I have worn out my welcome no doubt but those who keep blaming every move lower in gold on "evil manipulators" simply have no experience in trading the commodity futures market. If they did, they would realize how utterly stupid that idea is.
The Fed is interested in the price of gold when it is signaling a loss of confidence in the Dollar. Until just recently, the Dollar has been a relatively strong currency. It was the go to currency during the European sovereign debt crisis and normally is part of the safe haven trade along with the Yen.
The idea that gold has been attacked by nefarious agents of the federal government over the last year or so is vapid. As stated clearly - the entire commodity complex has been weak and the Dollar has been firm - why the hell should gold be soaring higher in that sort of atmosphere when DEFLATION concerns were in the ascendancy? Answer - it did what it should have done and that is move lower.
Interestingly, Jim Rickards had said the Fed may specifically devalue against gold, because its the only currency that cannot fight back. In other words, deflation remains the Fed's number one concern, and their overall mentality remains that they can handle inflation. In regards to "manipulation", to further your point of hedge funds... Have you noticed how trendy their picks have been? Nikkei/USDJPY bulls in 2013. Commodity bears in 2013. King dollar until recently. PIIGS debt bulls in 2012-2013. It's as if hedgies move in lockstep and overwhelm contrarians no matter the overall fundamental picture. With this low artificial environment and limitless leverage, some interesting and counter-intuitive dynamics have occurred. Thanks for you insights, Dan.
DeleteDan is right to be hard with people who pretend to have an authority and expertise about T.A, when in fact they have none and are luring people into MORE financial losses.
ReplyDeleteI don't see why one would criticize his post, as he is sharing an experience of a trader and warns about the newsletters about "so called" traders.
I'm no PM lover or gold bug particularly.
I happened to buy a lot of phyz gold because of the fundamentals of the situation, and I don't regret it, so of course, I'm monitoring those markets now, gold and silver.
But IF there are "traders" on the gold community who claimed (twice?) and keep claiming that the break of a downtrend is enough to start a rally, they do induce more financial losses to their readers, and have no clue about the most basic rules of trading. If it's a fact, it's a fact, and it's not a question to be hard on the "gold bugs", it's a question of explaining what's going on, especially because so many people in the gold community are vulnerable to BS from "so called" technical analysts, and might suffer more losses.
It is very frequent indeed, that after a breakup of a resistance going down, prices will eventually make a pullback towards the resistance which became a support. Not to say they will go through it and even more down. But quite often, if this pullback happens, as the ex-resistance keeps going down with time, prices will meet this new support at a lower price than the price where they went through.
For gold, for example, simply said, that means that it is still possible that price change direction and retrace back down towards the ex-resistance, and meet it at a lower level that 1270.
What if newbie gold bulls are not warned about that?
What if they bought the breakout at 1280 strongly and sell again at 1260 in 2 weeks?
Dan is perfectly right to say "Guys, for your own good, CAREFUL!", i.e don't become a careless greedy bull once again.
Hubert;
DeleteThanks for the comments as always....
Most welcome, and my thanks for your blog.
DeleteIf you plan to come to Paris someday, don't forget to let me know.
I'll get you drunk with an excellent french wine and make you tell all your secrets about french curves :)
Same invitation to Eph, Mark, Sparks, and active contributors to this site :)
Bon dimanche,
Major characteristic of a bear market is the constant "This Is It!" bottom calling and ferocious bear market countertrend rallies, everyone screaming and claiming that new highs are coming.
ReplyDeleteThis is precisely the attitude the gold bugs have had the last two years. Virtually every micro bounce or rally sent the GATA rockets soaring with Carnival Barkers everywhere claiming the bottom is in, with outlandish price targets projected in the future.
The exact same thing happened after March 2000 in tech stocks, every dip, every sharp correction was viewed as a buying opportunity. That is why it took many months from early March 2000 to Labor Day before the market finally rolled over decisively, because everybody and their brother was claiming that the bottom was in.
Not only that, it continued during the decline, where once the Nasdaq become so oversold, there would be vicious short covering rallies. This occurred until the July 2002 lows. By the March 2003 lows, everyone had pretty much given up on the bull market thesis in stocks, therefore we began that huge rally into 2007.
Today, every 5% correction in the S & P 500 brings the bears out in droves, predicting 1929 crashes, collapses worse than 2008, or at least a major 20% correction. Nobody wants to believe the bull market in stocks right now, even after 5 years and 170% gain off the 2009 lows.
So in my book, the gold market is still exhibiting bear market behavior because the gold bulls are still hanging on, still going to Q & A sessions, still reading the same gloom and doom websites, still F12 punching the Kitco site, etc. All waiting for gold to hit $5,000 while the rest of the financial markets go into some type of major meltdown.
All one has to do is to pull up a chart of EEM, and you can see how long it has been basically going nowhere, as everyone has pretty much given up the bull case on emerging market growth. That's a 5 year consolidation, including the vicious bear market rally in 2009 - 2010.
Gold could be headed for the same result, after 10 up years in a row, we could see a 5 - 6 year consolidation.
Which means excellent trading opportunities for both shorts and longs
Mark;
DeleteYou bring up a good point - many people think that merely because a market has stopped going lower, that it will now immediately reverse and begin moving sharply higher. Generally speaking, it is rare that such things happen with the exception of certain commodities because of the nature of the fundamental market that they represent.
More often than not, a period of price consolidation follows in which the market will gyrate within a broadly defined range as it has effectively reached a sort of equilibrium between supply and demand. I can see gold doing exactly that for a while as it waits to see how things develop on the interest rate front and on the currency market front.
Have a good weekend.
Interestingly, "EVERYONE" is relative. I hear people say that, but who is "everyone"??? If you are a liberal, "everyone" is the MSNBC crowd. If you are conservative, "everyone" is the Fox News crowd. If you are a gamer, "everyone" is the video-game crowd you play with.
Delete"Everyone" I read (Yra Harris, Dan Norcini, Jim Sinclair) is different than the "everyone" my friends listen to, yet different from the MSM or the KWN crew. It is hard to see where the "MASSES" are heading since we have all the alternative news organizations.
There are many on all sides of the arguments, but who you surround yourself with determines who "everyone" is... choose wisely.
Exactly right Mark, but we both know that the last thing the gold promoters would ever say or suggest is that a 5 or 10 or 20 year sideways operation may indeed be unfolding. Easier to say the bull is back and headed to 5000 the oz. sparks of course
DeleteDan: Amen: One of the best ( informative ) blogs you have penned !
ReplyDeleteHave a great weekend. With HFT and the casino atmospher one cannot trust these 20/50/200 day mov avg breakouts anymore. One has to examine various other indicators in parallel looking for non-confirmations ( until the Thu/Fri breakout Silver action was pathetic.
Have a great weekend ( and by the way if there was one indicator/weapon I added to my bag as a result of starting to follow your blog a few months ago,it is ^hui )
Wolf - thanks much - I am really appreciative of that - glad it helped some...
DeleteI totally agree. Prices and price levels have memories, especially in well followed homogeneous and fungible assets like gold and individual stocks. I gave up on those trend lines a while ago after I was burned many times.
DeleteWhen one trades an asset enough one begins to feel the momentum and flow at different price levels. I think many use trend lines as a crutch, because they often do not have enough "experience" feeling the price action.
I think trendlines are interesting, because
Delete1) many times when they are broken, you have an acceleration during one or two candles after the breakout, and I'm trying to make the most of it. Last one in my memory : the one day crach on the SP500.
2) It also helps me find a target to get some of my money out from my positions.
3) if you keep following them after prices went through, as mentioned before, many times their polarity will reverse (support / resistance) and prices will hit them once more.
4) Non horizontal trend lines allow me to short under a downwards resistance or to go long on an upwards support, which I feel is more comfortable for my stop losses sometimes.
It's an interesting discussion.
Best is I'll try to illustrate it with examples in the future.
But as I was showing a chart yesterday to a friend of mine, let me search no more to illustrate the 3).
I haven't watched Apple for 1 year.
I used to monitor it because one of the trendlines I put allowed me to short Apple at 690, lol I'm not kidding, with a stop loss at 710, a bit like my long in silver at 19.10 last week.
But what I liked yesterday was to show my friend that those 2 parallel lines I traced in the middle of year 2011 still work in 2014.
Cf chart below.
- I traced the bottom line first by joining the bottoms before mid 2011. Apple was just above 450 at that time, but well in its crazy rallye already.
- I thought, ok, where the hell is this train going? And I traced the parallel to the first line, using a top...ah, in fact 2 and even 3 tops near to each other. It pointed at 640+ and I thought, ok, we're never going there...but we did. I shorted a first time near 650, but prices wouldn't capitulate yet, I was stopped just below, then I tried again at the second contact of the top line, and that was the right one. OK, I left the train at the first Fibo level, I think it was around 580, so, not much of a trade because way too early, but a good risk reward ratio.
But look at the bottom line now. It was a trendline, support.
We broke it.
Think prices forgot about it 2 years later?
Nope.
We went right to touch it before reversing back down.
It's funny to see those two mere lines can sometimes still be active 3 years after I traced them.
Here is the chart AAPL
http://i60.tinypic.com/312zpr4.jpg
Dan thanks for this post, especially this part.
ReplyDelete"Seriously, if trading was as easy as buying breakouts of sloping trendlines, do you not think that we would have hordes of wildly successful traders infesting the nation?
Please keep in mind that being successful as a trader means employing a wide arsenal of tools. It also means learning to not be too dogmatic to the point of obtuseness. Stay flexible"
I really messed up gold. I am back to some paper trading after being in the physical side for a long time. I thought maybe I can use what I learned long ago.
Royally messed up and sold gold at 1302 near the end of day. I have thought for hours how does that mistake happen? I even told my wife next stop, after 1280 and the trend line fell, was 1320. It is Saturday and I still can't believe I sold it all there, thinking it would retest 1280. Took a 2k profit, would have been, should have been 7k. Thanks for the reminder it is not easy. I feel sick about it, but your post was nice, and the ending I needed to hear. Thanks. I know mistakes will happen and I am new. I just can't believe I did that. Like with ancient Israel, he places our boundary stones.
Thanks again for a great blog and the perspective post.
"Royally messed up and sold gold at 1302 near the end of day".
DeleteDon't be too hard with yourself.
The game is not about to pick bottoms and tops.
If you try that game, you'll end up losing even more money.
On this trade, you made a profit. 2k. Means you took 2k from a poor guy who was short and had to tell his own wife he lost some money :)
The majority of actors in trading lose money.
They are the fish who feed the sharks at the top of the chain.
The name of the game is to earn some money on the long run, no more.
To do so, you must be able to get into the market with a good risk reward ratio.
That's what you should focus on first and foremost.
It means, entry point, stop loss, and first reasonable target, say, at at least 3 times the distance of the stop loss (if you risk to lose 10, you must have a target of winning at least 30), and this without compromising your stop loss (don't put it too close, it depends on the recent volatility, technical supports / resistances, etc...).
Example : as I mentioned it above, I'll re-use it. I shorted Apple at 690. Yeehaah....that I was quite happy about....not. Not for a week, the week after, when bloody Apple shot up above 700 $ and flirted with my stop loss :( Then things got better and I bought back at around 580, thinking I was the hero of the day! I just made 110 $ on Apple, with an initial risk of around 20 $. So the winning ratio was 110/20 = 5,5. You know what happened next. Apple went down 200 more! Maybe I should have kept 1/3 or 1/4 of my trade for the long run. But come to think of it, at that time I secured a nice profit, with a 5,5/1 risk reward ratio. You need to secure such trades often enough to compensate the times when you are wrong, secure profits regularly and make money regularly.
You left gold a bit too early, but you were on the right side of the trade.
You will have plenty of other occasions.
It's not because you are out now, that you will never be in again.
There will be plenty of other occasions, plenty of future opportunities.
So stay focus, and celebrate your hard earned 2K with your wife!
Have a nice sunday,
wow - this is one of the best comment boards that i've seen on this site...good job ya'all!
DeleteTdfxman - dont worry too much about it and try to learn from you 'mistake'. I'm using the sarcastic quote because you made money - you're up so that is the most important thing. I bought the HUI at 200p then sold at 210p because l thought it was going back down to 180p and below. That is painful, but i've been scaling back in and trying to remember my mistake. You make money when you buy not when you sell, so it is imperative that you buy at a good price! I suggest you play up the "i earned 2k this week" to the wife"...always best to stay positive :)
tdfxman, I used to 'what if' myself, now not so much. you never go broke booking a profit. in fact it doesn't exist 'till you grab it.
ReplyDeletethanks. it was embarrasing to tell me wife my wife how I blew it. bad plan, bad trade. Thanks
DeleteIs your wife trading? Is she able to earn money on a regular basis by trading? If not, how could you be embarassed in front of her? Let her try and see if she does a better job. Trading ain't easy.
DeleteI just feel bad that I can't do better for her. She is a pharmacist, not a trader lol. Yes, it ain't easy. I love your comments as well hubert.
DeleteWell, tech analysis aside, I just doubled my money on DGC (detour gold)
ReplyDeleteYou don't need to read a chart when something so hated and brutalized goes into the stupid zone.
I like to buy things that are on sale. One of the CNBC geniuses in December stated "I wouldn't buy gold with my worst enemies money"
That folks…is the stupid zone. It is crap like that that allowed me to buy DGC at an average price of $3.50 a share…maybe the seller used the money to load up on Disney or something.
Excellent comments this weekend Dan. Regarding Gold Bug Cults and Manipulation (or the lack of it), you are spot on, as always.
ReplyDeleteHere we have a piddly little move in the gold market, and the Stopped Clock Brigade is already out in force, trumpeting their clairvoyance and shilling for new subscribers. It's appalling.
Eric
ReplyDeleteSell all of your gold holdings..immediately !!
Do not listen to anyone who is bullish any commodity of any kind.
When the markets open on Tuesday…SELL.
Teach those shills a lesson they will never forget.
Better yet short gold and silver too on a nice futures contract. Why not use all the tools available?
DeleteI'm not sure I want to go short on anything right now.
Delete'You're traveling to another dimension, a dimension not only of sight and sound, but also of mind; a journey into a wondrous land whose bounderies are that of the imagination. At the sign post up ahead, your next stop, the STUPID zone.'
ReplyDeletelol :)
Delete$50,000 Gold ( LOL )
ReplyDeleteThe Bulls at KWN have come out swinging this week !!
There may be a major conspiracy to drive Gold up ? !
Who knows Wolf…no one blinks an eye at $30k Dow.
ReplyDeleteDon't forget that Eric King is a personal friend of Dan's…who should you believe?
Both of them.
DeleteDan
ReplyDeleteMy last comment was not meant as a insult to you or Eric.
Hi Dan, another very rational post.
ReplyDeleteI'm neither a goldbug nor anti-goldbug. Just a pensioner/retiree in Aust trying to work out what is going on in the world.
As a result I read a lot of columns/blogs and KWN is one of them.
IF you disregard the socalled analysts promoting huge increases in the price of gold overnight, the thing I get from most of the articles there on KWN (and some other places) is that there MUST be a 'trigger' event to cause any significant rise. They keep banging on about QE and unsustainable debt levels causing a default as one trigger, or a major sovereign collapse say in Europe as another.
The problem I have is trying to work out the probability of any such event from all this chatter and if such an event takes place, will gold or silver even benefit (and when such an event could possibly take place in the short term.
Should I be buying some gold now as a protection against some possible/maybe/hypothetical about to happen occurrance.
But in the mean time Dan still provides one of the most level headed reports on the current position.
Sinclair was asked the question three times by a fellow during thel ondon agm how big tge risk of bailin is. Jim talked like a politician around the issue. This guy really wanted a response was persistent but didnt get an answer. Its a low probabiliyy event. Meanwhile sell the second car take the tax hit on tgr pension fund and gots ann d buy gold and "good gold shares" Sure.
DeleteThe krach of the soviet ruble happened in one night, and people lost everything. During the years after that, they learnt the lesson and raced to the exchange shops to convert their salary / pension in rubles into USDollars as soon as possible, while inflation was arount 100% a year.
DeleteUS Dollar has been the safe haven for decades when currencies from the periphery went into trouble. It was the easy way to protect oneself from hyperinflation on the local currency.
Now, many peripheric countries are undergoing such inflation problems. In fact, more and more every month : Venezuela, Argentina, Turkey, etc... at some extent, I'm pretty sure much of their population are buying US Dollars in order to protect against inflation of their currency once more.
The problem is the US Dollar is also a paper currency, and this time, the problem may reach the core of the system.
The USDollar is like the wave of a tsunami getting close to the shores. First it's sucking the peripheric waves and everyone on the beach fells they are dry and safe. lol. Then the real disaster strikes and they have no time to protect themselves.
You may be watching the tsunami getting closer right now.
The noice of the wave coming is the local currencies of other countries crumbling around you, looking for a safe haven such as the dollar.
Keep your dollars and pray. If USD crumbles in the end of this process, the only safe haven left will be tangible assets, i.e Gold as a part of them.
Jim is not Spock. He is not going to tell you that the probability of this event to happen is 34.6%.
He will tell you that if you see rainy clouds coming at the horizon, it is wise to buy an umbrella. I support this point of view.
JohnOz - Hey - IMHO l disagree that there needs to be a trigger event. I think this is going to be tightening of the rack event which will finish in a flash, but by then you'll either be with the in-crowd or not. The US dollar is the world's reserve currency and that isnt going to change over night. I would suggest watching the dollar index...if it falls below 79p it is a bad bad sign, but l have a sneaking suspicion that the dollar will be the last to crack (it may dip below 79p, but l forecast that it will strengthen one last time before its ultimate demise). Look at the basket case that is Japan. The yen remains a 'safe' asset. What a joke! This tells me that we are still some time away from a meltdown. I'd like to point out that gold isnt the only medium that will protect your again a dollar collapse...stocks, art, real estate and any tangible asset will survive such a collapse as people will always want to own them. As you are a pensioner, i'd be focusing more on high yielding quality stocks and put in a small percentage (maybe 10%) into gold/silver as insurance. Stay away from government bonds (at all levels).
DeleteDan, as always your articles are a delight, both technical and otherwise. You're the best education out there, as seen from my out of the way Africa outpost down here in Cape Town. Like Hubert in Paris, let me know if you come here ever and I'll also ply you with our famous South African wines to loosen your innermost trading secrets!
ReplyDeleteJohn Andrew;
DeleteIf I can no longer say "Oligapoly" without slurring it, I have had too much beer or wine! At that point, any "trading secrets" I might divulge would be extremely dubious and probably hazardous to your overall financial health! But I do thank you for the kind offer.
Between you and Hubert - you two are going to turn me into a pile of incomprehensible mush with that fine French and now S. African wine! :o)
Maybe we should mix French, S.African and American wines and we'll probably sing this at the end of the meal :)
Deletehttp://www.youtube.com/watch?v=dEItWioX4ls
"Россия — любииимая наaaaaша странаaaaa".... :)
If anyone is confused about markets try this go to the beach near rocks where you can get a good perspective on the rise and fall of the waves. You will notice the bigger the waves the longer the wavelength the lower the trough the higher the wave following. It's all about equilibrium, this is particularly relevant in the case of Gold metal not so much gold stocks. The metal Gold earns minimal income but it is a store of value it has intrinsic value it's production is limited it is rare it is unique. If the price moves suddenly much lower as has been the case for the last three years at some point relative to other assets it will correct the lower move by moving higher. Of course other assets could fall to match Gold this is deflation however if we do not get a matching fall in most assets, wages, services Gold will need to correct the sudden fall of the last three years. Trying to follow hourly, daily, weekly moves is dangerous because of the amount of leverage in Gold as in most markets today. As long as we are living in a FIAT money world with no Gold backing your money will be debased it is the path of least resistance. Gold is not a stock or commodity in the normal sense it does not suffer bad management, poor accounting, corruption, drought, destruction, imitation, wear and tear or maintenance.
ReplyDeletegreat Dan!
ReplyDeleteexcellent experiences!
Rim,
ReplyDeleteExactly. I think gold is going to wobble back and forth for a long time, nimble traders will be able to trade long and short in that sector the next couple of years and make some huge money. I plan on watching the 11-day and 22 day EMA cross on GDX in order decide when to switch from long to short.
Here's the BigCharts 6-month chart I use:
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=gdx&x=42&y=17&time=7&startdate=1%2F4%2F1999&enddate=2%2F16%2F2014&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=11&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=10
I will probably use GDXJ as my trading vehicle, but after extended selloffs, an even better play to benefit from rising gold stock prices is to short DUST due to the erosion factor.
Hello Mr. Norcini
ReplyDeleteTrader Garrett's Pendulum Model just turned XAU positive for daily/weekly. This appears bullish, and is a change after several months. Does this model affect your opinion(s) on gold, or just another tool to consider?
39ca7d;
DeleteGarrett does excellent work and is most judicious and sound. I respect his analysis. I am not quite yet on board from an intermediate time frame as I am waiting to see how horizontal resistance levels hold ( or not) but it is evident that the downtrend has been halted.
For me it comes back to currency issues - gold is during well in terms of most of the major currencies. Emerging market fears are out there and as of yet the Dollar has not gotten a strong bid. I well remember what happened when the safe haven trade came on. the Dollar soared and gold tanked as deflationary concerns arose. This time around we are dealing with a huge sum of liquidity already having been provided by the Central banks. What would they do in the event that the emerging market thing spiraled out of control? I am unsure but I doubt that they would be in a hurry to taper at that point.
Lots of variables and thus I remain open to whatever the market tells me but I am leery...
I hope this isn't a bad question but Dan wasn't this broken trend line NOT only the down-sloping one you are showing but the horz one at 1280. That 1280 was a line, a flat horizontal line, in the sand I felt.
ReplyDeleteI have read the article twice but maybe I missed it. To me that was a connection for the 2 trends and I think there is a lot of upside ahead. And duh me I still sold lol. But 1280 connected a lot of stuff.