The first sign of trouble popped up last week when the miners generated a key reversal on huge volume, and on a day when gold was actually positive. Something about that day smells very fishy to me. It looks like big-money traders had advance notice that a false breakout to new highs was going to be manufactured to give insiders an exit after a two-month 40% rally. The high volume follow through the following day confirms that something is not right.

Looking at the weekly chart only confirms my suspicion. The last week of August was the highest volume week in GDX's history. When that kind of volume appears at the top of a two-month rally, after a 40% gain, there's a good chance its signaling smart money just snuck out the back door. We should only see this kind of volume at the bottom of a serious decline, not the top of a two-month rally unless something is wrong.

Another warning sign is the potential topping candle on the weekly charts of $GOLD followed by an indecision candlestick this week.

I'm starting to get quite nervous that this intermediate cycle topped on week nine and the bear raid is about to continue.

As most of you know I'm not a big conspiracy buff. Other than short-term stuff around options expiration, pretty much all of the pullbacks in this bull market can be explained away as normal corrective moves that happen in all bull markets. Unfortunately, this has not been the case since last December. Nothing about the decline after the QE 4 announcement has been natural.

First off, the intermediate cycle length was stretched ridiculously far, which would never occur during a down trend. During down trends intermediate cycles shrink, not stretch.

Secondly, sentiment extremes which would normally generate bear market rallies had no affect during this decline. The lack of any significant counter trend moves to relieve selling pressure during this bear market are another sign in my opinion that this was not a natural move.

And finally, the repeated massive volume take downs in the overnight and pre-market hours to push gold below significant technical levels thereby triggering stop loss orders would never occur if traders were trying to maximize profits. That 400 ton dump in the pre-market on April 12th to run the stops below $1523 was so far from a natural market event it's not even questionable that it constituted blatant manipulation.

There's no doubt in my mind that big-money knows gold is going to enter the bubble stage of this bull market sometime soon. What started out probably as an attempt to create a selling panic so Germany could get their physical bullion back, has now turned into a high-stakes game of let's see how far we can lower the starting point before the bubble phase begins.

I have noted before the difference in profit potential if the starting point of the bubble phase could be artificially lowered. I'm convinced that if allowed to trade freely the next leg up in the gold bull market began last summer as all assets started to respond to QE 3& 4. That rally had a starting point at about $1550. Assuming a minimum secular bull market top of at least $5000, the profit potential from that move beginning at $1550 is about 200%. However, if the starting point could be artificially lowered to $1000, the profit potential jumps to 400%.

Considering the warning signs from the mining stocks last week and this week, I'm starting to get extremely concerned that the bear raid is about to resume. The first goal will be to take gold back down to test this summer's $1179 bottom. If that bottom can be broken (and if gold gets anywhere near that level I think we can automatically assume we're going to see another massive contract dump in the overnight market to make sure it does get broken), gold will collapse in another waterfall decline that drops it all the way back to the prior C-wave top at $1030.

The next week or two are going to be dangerous in my opinion. If the bears can get some downside traction, traders need to get out of the way, get back to cash, and prepare to jump on board the bull at $1000 which I believe is probably the ultimate goal of this manipulation event that has been going on all year.

I advised subscribers to exit on Tuesday morning into strength based on these warning signals. We are now in wait and see mode in case the manipulation resumes. If it does, then we want to stay on the sidelines until the big-money is finished jerking the sector around, and we want to re-board the train at the bottom along with the insiders who have manufactured this whole criminal process.

I invite you to consider a $10 trial one month subscription to my daily and weekend reports. The topics covered (with charts) include analysis of the precious metals, miners, stock market, currencies, bonds, the Fed, sentiment and cycles.

Toby Connor

Gold Scents

GoldScents is a financial blog focused on the analysis of the stock market and the secular gold bull market. Subscriptions to the premium service includes a daily and weekend market update emailed to subscribers. If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions,email Toby.

© 2013 Copyright Toby Connor - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Toby Connor Archive

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

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.