Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold Gets Sold

Commodities / Gold & Silver Mar 19, 2008 - 11:41 PM GMT

By: Joe_Nicholson

Commodities TTC members were told Thursday morning we could be “hours or days” from a top in gold. The top actually printed two trading days later on Monday, when front month gold futures moved briefly above 1030 and sold off, producing a bearish reversal candle on the daily chart below.


It took until the nasty selloff Wednesday for most the rest of the world to see the situation for what it was. Silver had a silver setup, closing below $19 Wednesday afternoon. These sharp downward corrections in metals are exactly why this update never simply assumes the most bullish possible count and exercised due caution earlier in the year when bearish charts presented themselves.

The key to understanding the selloff is knowing the market, what moved gold so high in the first place. Certainly it was not natural buyers of physical metal – these tend to curb their buying as prices enter parabolic phases. Earlier in March it was reported that in India , where much of the world's retail demand for gold originates, owners were rushing to sell their gold to take advantage of the record prices.

No, it was hot money taking shelter against the sinking dollar, which was getting bashed by the Fed's bailout of the housing and credit markets. Sentiment had become overly bullish as gold approached and penetrated $1000/oz. Ironically the reversal comes on a .75 bps cut in the overnight rate, but such are market tops, and TTC members anticipated this as well. With the Street expecting as high as a 1.25% cut the actual cut with heightened anti-inflation rhetoric was actually a bit of a return to sanity from the Federal Reserve. This boosted the dollar and forced the liquidation of a whole lot of dollar hedges in precious metals.

Of course spotting a top can be very lucrative, but should only be done with extreme caution and confirmation from several different methods. One useful indicator in catching this reversal in gold was the proprietary TTC trend cycle charts. Notice the 60-min chart above on the left finally rolled on the Tuesday, catching a fair majority of the decline to date. The faster moving 15-min chart on the right completed a low to high cycle during the choppy trading, providing a temporary short-covering or long scalping opportunity for the fastest traders.

From Monday to Wednesday a single futures contract sold short netted $11,890. That's $118,900 for ten contracts! It's little wonder TTC members find it easy to make back the $129 monthly fee.

But just in case you were buying gold last week or on Monday, all is not necessarily lost. Those who bought the top in May 2006, if they had held on, would have been up over 35% on Monday. The question becomes whether this is the end of the bull market, or could another similar recovery happen again?

Answer the question for yourself. When the Fed announced last week it would accept mortgage-back paper as collateral, it essentially threw down the gauntlet and made a commitment to engage the credit crisis. This game changer alone was enough to have me limit my target in gold to roughly the $1000 range. Should the European economy falter relative to the U.S. economy, and especially if the ECB is compelled to cut interest rates, the intermediate term prospects of dollar-denominated gold will diminish. But, recent history tells us that last time the Fed funds rate was this low gold didn't start rising rapidly until after signs of recession were gone and the waves of inflation started by the low interest rates began to wash up in global markets. It's unlikely the ECB will begin anything like the dramatic rate slashing regime of the Fed, or that the rest of the world will decouple from the U.S. market.

Make no mistake, the current trend now is clearly down as confirmed by violation of the 5-week sma on Tuesday and it should be expected that rallies will be used as an opportunity to further liquidate long positions. And because gold has moved so far so fast a substantial decline will likely ensue. But it would take a move below $750, that's over 25% from Monday's high, before there's serious damage to the bull market. It may not look pretty between now and then, but until conditions change, the 50-week moving average serves as support for the bull market. If that level holds again, it's quite likely we'll be looking at this week's top in the same way we recently saw the May 2006 highs.

If you feel the resources at TTC could help make you a better trader, don't forget that TTC will be closing its doors to new retail members this year. Institutional traders have become a major part of our membership and we're looking forward to making them our focus.

TTC is not like other forums, and if you're a retail trader/investor looking to improve your trading, you've never seen anything like our proprietary targets, indicators, real-time chat, and open educational discussions. But the only way to get in is to join before the lockout starts – once the doors close to retail members, we'll use a waiting list to accept new members from time to time, perhaps as often as quarterly, but only as often as we're able to accommodate them. Don't get locked out later, join now.


Have a profitable and safe week trading, and remember:
"Unbiased Elliott Wave works!"

by Joe Nicholson (oroborean)

www.tradingthecharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts,, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual.  Check with your licensed financial advisor or broker prior to taking any action.

Joe Nicholson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules