Land Ho - a potential area of support lies ahead, but will it be quicksand?
Gold clearly is moving with a strong inverse correlation to the USD. The gold contract has gapped down and made a marginal new low against the April swing low.
As noted in our focus on the USD this morning, the greenback is
having another strong morning yet in several currencies, important
tests lie ahead. With both Gold and the Dollar Index at important tests, clearly both markets will be viewing all economic news with a particularly strong magnifying glass.
Gold bulls certainly have had the wind knocked out of them. Every day I am forwarded article after article showing various newsletter writers calling for Gold at 500 or some such number, in complete denial of the trend change which, until proven otherwise, is in progress.
From Jim Sinclair's MineSet: "Here is my pledge. If I am wrong and gold is not in the low territory and isn't preparing to take out $430.30 on the upside in a move toward $480, I will close this web site down."
One of the problems with carrying "fundamental" analysis too far is that one can lose a lot of money waiting for a thesis to be proven correct, or incorrect.
As unemotional investors and traders, we use price charts to tell us what is happening to investor sentiment now, not to judge what various players in the market may be doing nor ascribe sinister plots to price movement. Our individual actions can not move markets, but the moving market can certainly affect us in a positive or negative fashion.
After identyfing the failed 2B Test of Top on April 2, we've seen gold and and fail to hold the range bottom - this failure at both the range high and low is by definition a change in trend. The trend is your friend, until it ends or bends, we always say.
Last summer we identified the triangle on the weekly chart of the gold contract, and sure enough, after resolving upwards, Gold headed almost straight to the target of the measured move over the following 16 weeks.
Price has unwound almost all of that rise in only 6 weeks.
So here is the bottom line: the uppermost range has failed to hold; price is falling much faster than it rose. Both of these alone are indication of a change of trend in play.
Can the price trend change again and head up? Absolutely it may. Will it? Who knows. Will we detect that shift if it occurs? Yes.
Our job is not to guess where a market as sentiment driven as gold may or may not go - to profit from this market its enough to know what direction the trend is in now.
04.05.10 09:03 #