Interestingly, as I reviewed my new stance on the gold market tonight, I found some troubling things for the bulls. First, as you can seen from the GLD, it has not broke cleanly above the previous double tops that exist from earlier trade in June and July. It has a candle close above those levels but not by much. In the past when I have seen such candle formations, especially if they occur early in the week using a weekly chart, the sellers emerge and all of a sudden you have a momentum reversal!
The other factor, not shown on this chart, is the divergence in my PF Model for gold. For the most part the chart is bullish and has been since roughly 2002. The power never really turned down and buyers have been constant. Sure there have been corrections along the way but nothing to really get excited about. Anyhow, there are two momentum indicators in the PF Model and as of the close tonight, one is breaking to the upside while the other is lagging badly. Given that gold has not broke cleanly past the previous highs, this market is very ripe for shorts to emerge and hammer it downward. Am I one of those shorts? Not at this point but I will be watching closely.
One more thing: On CNBC's fast money, one of the "fast money traders" made a very good point. One could make both a deflation case and an inflation case for gold. That would mean that something else is driving the metal higher and if the dollar is relatively stable and inflation is basically benign (depending on what you are buying these days), then gold is moving up on what? Perhaps the answer does not matter but if the fundamentalists cannot find an answer to own gold, the sellers might emerge sooner than later.
Call me neutral at this juncture with a close over the 1270 level by the end of the week changing my neutral to bullish and setting up a date with the 1400 level.
No comments:
Post a Comment