For the record, on December 1, 2003, I wrote for subscribers:
GOLDBUGS INDEX: Note that this daily chart is showing the largest Average True Range reading this year. It tells us that the move up is now "leaping and bounding", meaning that it's in what we call the "parabolic phase" where people are literally diving in. I will be looking to exit my personal gold holdings somewhere on this move up and that includes all the bullion purchased in 2000 in advance of Y2K, and my long-term position in Kinross Gold.
Looking at this pair of charts, it's not hard to imagine that there is a major reversal setting up here on gold and the Dollar, as it hits the big downside target on the monthly chart.
From my perspective as someone who was a gold trader for a decade, that lower swing high and subsequent reversal of the index and stocks ahead of the metal was the big warning sign which we discussed on December 9:
If it feels like NEWMONT MINING is playing mind games on us, it's because the move up in gold and gold stocks is now registering ADX readings that are extreme for the symbols and timeframes on the weekly charts. The explanation for yesterday's scalp setup was complicated because the probabililty of "sudden death" is probably the highest it's been in a long time, and therefore we cannot expect buy setups to get to where they are "supposed" to go.
For example, NEM did not get to the upside target of the December 2 swing high and went down yesterday. This might be the first signal that the quick and dirty small bull flag just doesn't have enough power to get there, and that a deeper pullback in the form of a classic bull flag or an ABC Correction lies in wait. If there is a meltdown, I will play it intraday.
You can see that the weekly chart has an ADX of 50, while last week's candlestick, for all intents and purposes, was a small doji after a big expanded range tall white candle. Remember, when the ADX is extreme for the symbol and timeframe, we are mindful of "sudden death" spike top sort of reversals, which we wrote about a month or so ago when we surveyed the weekly charts of many of the top NASDAQ stocks.
We've watched a complete sentiment cycle play out on gold and the Dollar, starting in 2001. If it turns out that I was early in my exit, that's just fine. It's OK to leave some money on the table for those who need it more than me.
03.12.11 07:05 #