Thursday, July 8, 2010

Yellow Flag of Caution

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This will not be my funnest post because I dislike the idea of possibly upsetting people.  But here goes.....
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On reflection, I am not impressed, particularly with the dollar dropping and the stock market rallying (both should have helped GOLD), to see it unable to reclaim the 50 dma these past 4 days.  
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So, I am obliged to consider what I hope will not happen.  And that thought is that GOLD is only half way to its final destination on the pavement of the 200 dma.
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It is possible that we are now at a midpoint consolidation of a correction that is not yet finished.  If this happens, GOLD could end up at $1140, the 200 dma pretty quick.
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Click on the chart to ENLARGE
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It turns out that the uptrend line of the the entire 12+ month C wave is now almost exactly where the 200 dma is as well.  About $1,140.  This C wave has, once before, touched down briefly on the 200 dma and there is no reason why it could not do it again and soon.
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I have been doing these day trades using the 60 minute chart because minute charts are more accurate for short term timing.  What I have NOT payed much attention to is the daily chart of GLD, which is shown here, until this evening.
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Another disturbing thing is the daily chart TSI is below ZERO and falling.  That means only one thing:  price is falling.  And indeed, price is falling.  And until the daily TSI stops falling, price will not stop falling.  It is that simple.
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If the 200 dma is reached ($1,140) that should be the end of the correction and then a powerful advance will occur.  The thing I think each person that owns miners should ask themselves is how will they react if gold breaks down from the current consolidation level and begins to plummet.  If you have a plan, you will get through it just fine.  If you do not have a plan you could very well sell at the bottom - and that would be a gigantic mistake!
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Click on the chart to ENLARGE

1 comment:

  1. That sort of gibes with the negative divergences on the RSI and MACD, as well as the ominous chart patterns in play for GLD.

    There are a series of nested rising wedges, the smallest of which (anchored by the May high and subsequent low) has already broken down.

    The next is anchored by the Dec. high and Feb. low.

    There's also a truly ominous and enormous rising wedge anchored by the '08 high and low.

    Something to watch, anyway.

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