Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold, Hoping for a Break

Commodities / Gold and Silver 2010 Jul 27, 2010 - 12:53 PM GMT

By: Toby_Connor

Commodities Best Financial Markets Analysis ArticleI want to discuss something that came up on the blog Friday.  An anonymous poster hinted that we were going to see more gold weakness in the days ahead because big money had to sell their positions.  Folks, big smart money traders don’t sell into weakness.  These kinds of investors don’t think like the typical retail investor who is forever trying to avoid draw downs.  Big money investors take positions based on fundamentals and then they continually buy dips until the fundamentals reverse.  The fundamentals haven’t reversed for gold so I’m confident in saying that smart money isn’t selling its gold, it is using this dip to accumulate.


With that being said, there are times when big money will sell into the market and it is why so often technical analysis, as it’s used by retail traders, doesn’t work.  They sell into the market in order to accumulate positions.  Let me explain.

When a large fund wants to buy, it can’t just simply start buying stock like you or I would.  Doing so would run the market up causing them to fill at higher and higher prices.  Unlike the average retail trader, smart money attempts to buy into weakness and sell into strength.  (Buy low, sell high).  In order to buy in the kind of size they need without moving the market against themselves, a large trader needs very liquid conditions.  Ask yourself, when do those kind of conditions exist?  They happen when markets break technical levels.

If big money is selling it is because it is trying to push the market below a significant technical level so all the technicians will puke up their shares to him.  By running an important technical level it can cause a ton of sell stops to activate, allowing it to accumulate a large position without moving the market against itself in the process.  We saw this very thing happen in the oil market recently and also in February as gold bottomed. 


Technical traders wrongly assume these breaks are continuation patterns but the reality is that very often they are just smart money “playing” the technical crowd so they can enter large positions.  The key to watch for is an immediate reversal of a technical break.  When that happens you know there was someone in the market buying when everyone else was selling.  9 times out of 10 it was smart money.

At the moment everyone is jumping on the bear side for gold.  Remember we saw this exact same sentiment in the stock market 3 weeks ago.  I knew the bears were going to be wrong simply because the market was way too late in the intermediate cycle for there to be enough time left for a significant decline.

The gold bears are going to be wrong also and for the exact same reason.  It is just too late in the intermediate cycle for there to be enough time left for anything other than a minor decline.

I'm now waiting and hoping for a break of the May pivot.  I want to play that break, if it comes, like a smart money trader.  That means I want to buy into the break instead of panic sell like most dumb money retail traders will invariably do.

The reason, of course, is that gold is still in a secular bull market.  In bull markets you buy dips.

Also, the dollar, with the break below 82 this morning, is starting to show signs that it is now in the clutches of the 3 year cycle decline.  Every Gold C-wave so far in this 10 year bull market has corresponded to a major leg down in the dollar.  I'm confident this C-wave will inversely track the dollar’s move into that major cycle low due early next year.

Sentiment wise, gold has now reached levels more bearish than at the February bottom.  That means gold is at risk of running out of sellers.

And finally, and most importantly it's just simply too late in the intermediate cycle for gold to have enough time for a significant drop.  This is the 25th week of the cycle and the intermediate cycle rarely lasts more than 25 weeks.  That puts the odds heavily in favor of a major bottom either sometime this week or next.  And don't forget, gold is about to move into the strong demand season.  Like clockwork, gold invariably puts in a major bottom in July or August before the run up into the strong fall season.

The bears are going to be wrong again.

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.

© 2010 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.


© 2005-2022 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