Posts filed under “Technical Analysis”
Back in my days as a trader, I would peruse the lists of 52 week lows looking for reversal candidates. The key was finding an intelligent entry that had a very tight stop, so it presented a good risk reward. I am happy to risk one dollar to make three. Slowly build the position over that line in the sand, so any losses were manageable.
If you are a trader — and I no longer consider myself one — then you have to be wondering when Gold is going to bounce. It has plummeted on little inflation, a strong dollar and an improving economy. When the breathless narrative of hyper-inflation, collapsing fiat currency and end of the world failed to come about, Gold’s spectacular rise ended.
Now, it has free-fallen so far that a counter-trend rally is over due.
How do the typical counter-trend rallies work? Well, the forced selling by margin clerks and futures traders becomes exhausted. A distraction may capture the investing community’s collective attention, allowing some stabilization to occur. As prices stop falling, the fear falling asset holders have been living with dissipates. A little bit of good news, a small reversal in price, and the prior (now discredited) narrative reasserts itself.
Note this scenario is non specific — we see it in stocks, bonds, commodities, real estate and yes, Gold. Apple will run this one day, AIG is already enjoying its turnaround, as all former high flyers do. And if the underlying business model improves, the turnaround could be for real, and the bounce morphs into a new sustainable uptrend.
Here comes the bad news: The bounce in a commodity like Gold — or its primary trading vehicle, GLD — is less likely to achieve that sort of happy ending. The bull market is broken, the prior narrative has utterly failed, and is no longer taken seriously, except by yellow metal jihadists and other assorted suckers.
I was constructive on Gold last decade, but this decade (2011 – ) has not seen the circumstances that are supportive of Gold’s ongoing rise. Despite what some goldbugs have laughably said about me, I am agnostic about the metal, except when it is losing people lots of money. I do detest the narrative driven sales pitch that has caught so many suckers at prices appreciably higher than this.
So what about that bounce?
The charts below show two different ranges where gold can find a footing and rally. That is likely to present your next and perhaps last best exit. Barring some new developments — like all the gold in Fort Knox becoming irradiated — I do not expect to see a resumption of the 2001-11 uptrend.
I don’t have a crystal ball, so I do not make predictions as to where Gold will or will not go. But the weekly and monthly charts lay out two possibly scenarios below.
What Are Gold’s Fundamentals ? (April 15th, 2013)
12 Rules of Goldbuggery (April 16th, 2013)
Sell Out: “The Other Side” (April 22nd, 2013)
Are You an Investor or a Story Teller? (April 25th, 2013)
Click to enlarge Yesterday, in response to our post on how wrong the public was back in this 2011 Gallup poll, the following suggestion was made: Which asset performed best is dependent on your definition of “long term”. 2011-2013 is at best medium term. Long term to most people means decades, 20 years or…Read More
Click to enlarge Major U.S. indices such as the S&P 500 and the NASDAQ Composite have both recently stabilized and bounced for the second time off their respective 50 day moving averages. Though historically June tends to be a negative month for stocks, with only 9 trading days left in the quarter we wonder aloud…Read More
Click to enlarge I do not ever recall seeing all these in one place in one chart: S&P 500, DJIA, Gold, Silver, West Texas Intermediate, Total Debt as a % of GDP and the US 10yr to 1850. Many of these are at or close to all time highs. (Note the exception is the…Read More
Click to enlarge I have to admit: I have never seen this ratio before. Standard & Poor’s 500 Index to profits at all U.S. companies. Its a price to earnings ratio of the main US stock market against ALL US earnings. According to this little used, odd ratio, Stocks are much cheaper after…Read More
Source: Stockcharts Definition: Hindenburg Omen is triggered when: (1) more than 2.2% of stocks on the NYSE are at 52-week highs AND more than 2.2% are at 52-week lows, (2) the 50-day moving average is trending higher, (3) the McClellan Oscillator is negative, and (4) new 52-week highs don’t exceed new lows by…Read More
Click to enlarge Source: WSJ Fun take on our uncharted territory via the WSJ
Category: Technical Analysis