Monday, August 13, 2012
Gold: Just What I Was Hoping For
Gold has been stuck in a really impossible situation, at least as far as my understanding of the True Strength Index (TSI) indicator is concerned. It has been marching higher, nearly reaching $1630 yesterday, with no hope of getting but pennies further. The problem has been that on this rally the TSI had no where near the momentum of the previous rally, yet price was flirting with making a higher high. In technical jargon, gold was just dimes from sounding a negative divergence SELL signal.
The only workaround to this unfortunate technical situation was for gold to face the inevitable.......and that is, of course, trade lower. With this afternoon's late sell-off, the TSI has mercifully dropped creating the set-up I have not only been expecting but anticipating with delight.
As of an hour ago, gold has a new TSI high sitting right under last Friday's candle. This gives us, along with the TSI high of July 30, the ideal buying setup - namely a trend line break BUY signal. The trend line break signal effectively trumps (eliminates) any divergence signal otherwise in place.
What should happen now is when gold gets to feeling peppy again it will shoot back up and drive the TSI reading up through the newly created trend line (green). It's like getting a reset on the shot clock and I plan to be a buyer when I see it happen.
School starts in a week. Don't even think about asking me how I feel about that.
OK gold, do your little sell-off thing and scare the mice back into their holes so I can buy something at a really good price later this week. Please!