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Thursday, September 15, 2011

CAUTION IS WARRANTED

I realize that most people that come to this blog are bullish on gold. I myself am definitely bullish long-term. That being said warning signs are starting to build.

Since gold is down this morning there's a good chance that the mining stocks are going to break the intermediate trend line today. The complete failure to follow through on the move above 600 is also concerning. Usually after an asset has tested an area three times the breakout  occurs with strong follow-through.

Gold is also in jeopardy of breaking the  intermediate trend line. 


A move below $1705 would confirm a failed daily cycle and a left translated intermediate cycle. That would almost certainly lead to a D-wave decline. 

Every D wave so far has retraced 50-62% of the preceding C-wave advance. If it turns out that $1923 was the top of the C-wave then we can expect a move back to the $1400 to $1500 level. 

Moreover as this would be a left translated intermediate cycle it should move below the prior intermediate low. Taking that into consideration it would be more likely that gold would decline to test the consolidation zone around $1400 before putting in a final D-wave bottom.

I've mentioned before that C-wave tops tend to occur slightly above a big round psychological number. We currently have a 2b reversal at $1925.

For those people holding gold or mining stocks your position size needs to be small enough that you don't do serious damage to your account if gold takes out $1705 as that would confirm that a D-wave decline has begun and probably still has another $300 to go before a final bottom.

329 comments:

  1. Again,
    where's my hammer dammit!?
    Fingers need a good whackin'.

    ReplyDelete
  2. timely post, gold just broke 1794.

    i don't know how low gold is going to go, but i do know that the "can't lose" mentality is so deeply ingrained that is going to worsen the decline considerably. i assume everyone is looking at the 200 day. hmm.

    food for thought: where is all that GLD money going to go? will be watching for a divergence in the miners.

    ReplyDelete
  3. The big boys just read your post. Gold dropped 15 more dollars.

    ReplyDelete
  4. SF Giants fan,
    I bet the big boys' HFT algos are programmed to scan G-man's headlines and act accordingly.

    ReplyDelete
  5. SF,

    ah ah, I was exactly thinking that!!

    ReplyDelete
  6. St Deluise,

    you must be making tons! well done!!

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  7. also can anyone interpret the price action on the hourly /dx? pretty orderly stairstep down.

    it looks like people keep trying to pick a bottom but it keeps failing.

    i think as soon as they're successful in breaking the previous high (now at 77.6) it may resume blasting off. will double my longs at that point.

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  8. sophia, it's been an above average week :)

    http://cdn.thenextweb.com/wp-content/uploads/2009/01/hi.jpg

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  9. Oh the weak hands will be tried and tested today.

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  10. well if it is a double top the Gann death zone cycle called it perfectly !

    http://chartramblings.blogspot.com/2011/08/gold-death-zone-rally.html

    plus Gann360's cycles of 144

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  11. I was at an investment club meeting last night and took a lot of abuse for arguing against buying gold at these levels.

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  12. Watching the continued heavy sell offs in the gold futures overnight is what made me take off the miners ahead of time. This is what I was worried about when I said miners looked tired, gold looked tired.

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  13. Dubellito --

    Are you stuck with gold futures?

    I am loaded with miners up to the hilt.

    Hand weakness is gonna be tested.

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  14. Poly,

    Do you have a stop in place for the miners ?

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  15. Miners not as bad as gold is pre-market.

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  16. I've been patiently waiting for HUI to pullback, and expect to do some buying tomorrow if the weakness can hold until then.

    In the meantime, it's possible I begin to add late morning today, but really prefer to see HUI 590 get breached before dialing up risk.

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  17. DP,
    nah, just referenced to G-man's advice when one wants to short a bull market... :-)

    I haven't been in gold for some time now but I couldn't resist picking a small inverse ETF position now (nobody gave me that damn hammer so what could I do?). Let's see if I get stopped out and learn my lesson once and for all... :-)

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  18. Until 1704 is broken we are all guessing. This could be the puke before the run to break 2k. These last few months has been full of surprises, why not one more...

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  19. /dx system buy still looking for 81.5

    stop at 75.

    this market is going to give me an ulcer

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  20. WW,
    I have 76,1 as 200 DMA and 76,7 currently?

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  21. Anyone ... Canadians?
    Know of an ETF for trading US$ in Canada?

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  22. This comment has been removed by the author.

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  23. I have the dollar a 76.1 (Bloomberg) That should be 200dma

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  24. This comment has been removed by the author.

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  25. Damn graph freeze. Computer: do what I say! Good thing I don't micro-swing... :-)

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  26. The ECB has decided, in coordination with the Federal Reserve, Bank of England, Bank of Japan and the SNB, the implementation of three U.S. dollars of liquidity operations with a maturity of approximately three months until the end of the year, "wrote the ECB in a statement.

    So Bruce Krasting was right. And gold will selloff here short term because this takes down a lot off risk. The banks in Europe can borrow money now from the Fed. I dont think the market will go lower at this point short term.

    If we pass 1200 in SPX I think we will go to 1250-1280 easy!

    The risk is gone short term for Europe..This is some kind of QE3 actually.

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  27. Will be interesting to see what the dollar does at this point because this means moneyprinting..

    And then lend or "give" it to European countries..

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  28. HUI....the Cup runneth over.....

    Well the miners are doing their best to convince us they want to go down.

    HUI chart

    .

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  29. Silverhound,

    Yep, but we knew this would take some time, at least likely through Sept at the soonest.

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  30. WW

    next time you talk Gold futures I'm going to listen :-)

    .

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  31. Huh,
    who woulda thunkit?

    I now see that my otherwise dandy graphs from Netdania (free and no flashing red lights from my dear IT watchdogs at work) have different time stamps? Gold is realtime but DX is delayed by 30 minutes? Well, there you go.

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  32. This comment has been removed by the author.

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  33. SB

    Yep, watching the MACD on the chart the miners were lookin a tad heated but there was a chance they could have consolidated the break.

    The break of this pattern doesn't mean the rally is over, it just means looking for another settup for entry.

    Were you rubbing your hands together and smiling just then ;-)

    .

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  34. Moneyman,

    good post--i give it about 48 hours before reality sets back in before the next European crisis--all the economic news today was horrible and the markets are up --just crazy

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  35. "Were you rubbing your hands together and smiling just then ;-)"-Silverhound


    Not quite yet, but getting there. I expect to get tested all along the way.

    I do prefer to see a mini-panic today or tomorrow.

    ReplyDelete
  36. At least the HUI broke lower than the low 2 days ago. Should portend more weakness in the immediate future.

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  37. @ MS C, I don't have a stop on the miners, I like their long prospects and will only dump them on a cycle failure. I also kept my 2nd lot purchased (@ $1,795) on last weeks flush that I intended to dump at $1,790, but will monitor.

    Gary's post needs to be respected, there is a decent probability that a move towards a DCL failure has begun. We're certainly at the crossroads of this IT cycle, as this is a perfect point where they could fail from, being the daily cycle is currently ELT and the IT is left of center too.

    We're at the "show me the money" point of this entire IT cycle. Fortunately we can plan for that, the stops are well defined at the DCL.

    So as the downside has been identified, what about the upside? We must also honor it's potential, as we honor the DCL stop. What if gold blows by $2,000, what is the plan for that?

    We have a solid risk/reward trade opportunity here. I'm feeling that the weak longs sitting on the trend lines (myself included) were raided this morning. So as the stop (DCL) is sitting not far below here, I took new positions using UGL (@$106.75) this morning, my stop will be the DCL. Risk is about 2%, so not a huge addition.

    Good luck, it's not easy, keep it small.

    ReplyDelete
  38. Poly,

    Thank you for sharing your thoughts.

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  39. Poly --

    What's your take on USD?

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  40. have decent postion in broads qld-drys--ddd---

    will be concentrating more on DDM today

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  41. My pivot/momentum system that I use for confirmation of trend just sold at 1793.It has been long since 8/31 at 1563.

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  42. Dialed up another .5% total risk to accounts a few minutes ago.

    Looking to add another .5 to 1.5% total risk before the week is out.

    ReplyDelete
  43. Polly!

    Agree! Seems that we only have a plan for a D-wave at this point.

    But maybe stocks will rally now for 4-5 weeks and gold goes down hard.

    And then when stocks falls back we will see the A-wave in gold..Who knows!

    Take Care!

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  44. Traders should now have confirmation of a failed breakout it HUI, if that is what they're focused on, and feel forced to sell.

    Could even go down to 575 or lower, but I'm ok with picking up some shares this morning. Still expect the next several weeks to test me.

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  45. anyone buying uup? it hit 76.07 a few minutes ago...

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  46. for anyone Bruce Krasing's blog is a must read--he is right on when it comes to the economy-like moneyman said he predicted weeks ago how this would play out.From today
    Thursday, September 15, 2011
    On the swap
    I had this to say on August 20th regarding a big central bank swap deal:


    I maintain the next move by the Fed is to massively open up the dollar swap lines with European central banks. I don’t think Bernanke wants to announce this significant step at Jackson Hole. It is an EU issue and the Fed can’t take the lead on this. Opening the swap lines will prove to be very unpopular in the US. Politicians will jump on it as a bailout of Europe while America is struggling.


    Bernanke is going to take some heat, when this happens (I think this is now a certainty, just not sure of the timing).

    The folks at Zero Hedge and FTAlphaville (and others) were of a similar mind.

    I would love to convince you that we were just smart. Actually the evidence was everywhere you looked that something like what was announced this A.M. was in the works.

    My point. People who actually move money around (versus writing about it) were also aware that this was pending.

    Even more to the point:


    This could not have happened without substantial discussion amongst all of the CB’s involved. Dozen of folks knew that this was coming a week ago. That means that dozens more got the tip.

    The market action (buy Euro sell gold) the past few days smelled of something. I think this was it.

    My conclusion:


    Sell on the news. I don’t think the positive reaction will be long lived. There is a flip side to the swap announcement.

    This is a profound acknowledgment of weakness in the funding markets in Europe.

    The swaps may mask the problem for a few months. But it's going to come back with a vengeance. How could it not?

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  47. Robert!

    Thanks!

    Wonder what Ben will say to us next week. I think that we will rally a bit higher here in stocks..

    Gold is taking a hit here, but Im open minded..! Lets see what happens..:-)





    But

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  48. Robert!

    Agree with you..!

    Bruce Krasting maybe have a crystal ball?

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  49. Moneyman,
    i agree he is the best when it comes to the economy--he sure seems he has a crystal ball.

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  50. buying coming in here at 1184 /es but it's getting a little tired immediate-term.

    looking to diminish positions at /es 1202 and /gc 1765

    dollar still doesn't know what it wants

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  51. Anyone have an idea re impact of ECB US dollar loans to euro banks to the USdx? Are these borrowed dollars on the balance sheet already or is the ink still wet?

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  52. Gary is that the HUI intermediate trend line or would it start in July?

    http://screencast.com/t/IXwenKzAefFd

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  53. I hate watching charts intraday,but studying tick charts on GLD the returns the past month have been spectacular.A system based on 50k tick candlesticks has returned well over 100%.

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  54. LONG 2x gold futures.

    I said 1775 roughly was my next buy point target. We are here and it looks worthy of an attempt. Stop set for a ~1% loss.

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  55. If this gold buy doesn't hold, I have one more at a lower level (before 1705) and then will simply admit we are more likely in a D than a congestion and play it that way from there.

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  56. Note this drop has broken the daily gold cycle uptrend line (as gary and doc us). So we could start another upleg at anytime (at least by that measure).

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  57. The only way I see the dollar staging an 08 type rally is if the market breaks down from here and puts in a new low.

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  58. We now have a weekly swing high on the gold chart.

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  59. while it is true that most breakouts fail, a breakout that has been tested three times should show strong follow-through.

    Gold has now broken the intermediate trend line. Miners have completely failed to hold the breakout above $600.

    The odds are starting to escalate that a D-wave decline has begun.

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  60. Have a good day guys, I'm turning my screen's off.
    Volatility like this can easily have you 2nd guessing and changing your strategy during market hours. Fewer trades more often equals greater profits.

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  61. But I see your point, and agree this trade will take patience. I don't see an immediate catalyst to kick miners into high gear on the upside.

    I expect to get tested several times over the next several weeks. Silverhound also pointed out the MACD which looks somewhat ugly in the near term, and though I don't use it that much, seems to suggest lower prices.

    Sizing is everything.

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  62. Well said, Poly. I'm stepping away myself, will check back near the close to see if I can add again, and if not, I'll likely get a chance tomorrow morning the way things look right now.

    Good luck everybody. :)

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  63. I would think gold is going to retrace to atleast the 150sma.

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  64. Veronica, can you explain the 50k tick candlestick comment?

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  65. good idea poly and i hope to join you soon.

    i'm over invested right now. really would like to trim here so i can just take it easy.

    trying to micromanage /es, /gc, aaaand /dx is way too hard for a dum dum like me. especially while this mess unfolds.

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  66. Increased gold futures to 3x. Stop near low of the day.

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  67. TZ

    I remember your buy point. Do you have any target? You dont expect a
    D-wave scenario here or?

    Im out of gold at this point with a small loss. Will w8 and see what happens..

    D-wave or not..Im ready to buy back later on here..



    Good luck!

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  68. Short term, when gold bounces out of a daily bottom (which may be 1775 today) it almost always pushes back up to the 150sma on a 5min chart before rolling over again... when in a down trend as it has been.

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  69. MM,

    My target is continuation of the gold bull to 2000+. I intend to hold this position unless stopped out. If stopped out I will lose 1% and just keep playing. If not stopped out I will probably make 50%+ on my net worth which is a pretty good risk/reward ratio to me. (As/If we climb I will raise stop as well, so even the 1% loss is only temporary if I'm wrong.)

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  70. I do not believe this is a D decline yet. I think we are in a congestion with gold and the peak is still ahead of us.

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  71. If the dollar goes up, markets go down, will gold gold down as well?

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  72. while mkt may look tired a close above es 1192 would be a positive.

    the more the the better.

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  73. Small gap down in the HUI this AM.

    Gaps are nearly non-existent on the HUI chart and we've had three in the last two weeks.

    This last one will get filled, but how long will we have to wait?

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  74. oh i'm definitely still bullish on stocks.. but the bears need to be fed again if this thing is going to keep advancing.

    maybe a little plunge into the close would do it. something back down to 1170.

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  75. If we can close the week on the HUI above 606, that would be extremely bullish.

    I've noticed on the *weekly* chart, that once long term resistance is significantly breached to the upside, it just doesn't close back below that former resistance.

    It was certainly true for the 490-500 level.

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  76. The dollar index entering the aggressive stage of the rally out of the three year cycle low is the wild card.

    It should put in a daily cycle low any day now. Once the dollar starts to rally again we should know pretty quickly whether gold is consolidating or topping.

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  77. Sure glad I sold my QLD monday. (grrr)

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  78. Gary,
    Turd says it's an attack, don't you know that?

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  79. hey all, Just an update -fwiw

    just got caught up on this blog (takes forever these days :)

    I respect Garys caution and if we do drop below $1705, yes it looks bad, but right here and now...I do NOT see a D-Wave.I see at least 1 more explosive move setting up.

    Chart of GLD (to represent Gold), looks the same as 'MAY' to me...retest the last HIGH VOLUME sell off at the 50sma just like in May...drop sentiment and weak hands out "Shake out" .

    http://www.screencast.com/t/zMCQB7D3

    as for GDX..It DID break the channel today and if it doesnt recover ( it MAY recover by days end??), I imagine that its going to the 50sma. I will post here when it does if it looks Healthy to me or not ( I"M BETTING YES).
    I know GDX broke the 20sma, but EXK and RIC and some other Miners still look good, so I havent sold my Miners - (I bought in mid June and so I do not mind some draw back, maybe I would to 'wait n see ' if I bought recently)

    Disclaimer: I DID lighten up on some Miners earlier this week to go long the markets ( bought CY, VE, CEDC, but will sell soon to re-enter Miners at lower prices). That SPY/DIA channel just keeps looking good 4 trading)

    http://www.screencast.com/t/Ckk9HsuB

    BUT, I would expect we break down and retest that high volume low area too some day (and gold will take off).

    good day all!

    ReplyDelete
  80. In 08 the Nasdaq didn't test the 50sma or previous resistance until it was in bear market rally mode, at this point im looking to take off the SQQQ in a pullback to the 10sma instead of holding out for new lows.

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  81. This comment has been removed by the author.

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  82. ALEX, thank you for that post, much appreciated :o)

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  83. Looks like the weak hands got flushed out of the miners and the institutions are snapping them up...

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  84. Hack, How many more flushings can we take in miners?

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  85. Alex, thanks for the post, it is hard holding (tentative D wave still.... approaching).

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  86. I side with Alex. No big volume in ZSL or DZZ. Plus GLD is #1 on BoW list. Not a big money flow # though.

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  87. ALEX, Thanks for posting. I, too have been away and trying to catch up. I was close to e-mailing you:)

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  88. ok. cut my SPY longs, halfed my GLD shorts, and holding steady on UUP calls.

    dollar too ambiguous and my position sizing too large. deluise out.

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  89. Lets take a consensus...

    New lows in the market before we rally in earnest, or not?

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  90. Do you guys have any recommendations for good books to read on trading? I've read both of Sperandeo's books, Soros' Alchemy of Finance, and just bought Reminiscenses of a Stock Operator.

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  91. Defiantely a turning point, I don`t ever remember seeing this blog so slit on which way things are going to go. Nerve wracking. Long dollar, gold, short spy.

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  92. I chickened out and sold GDX and most of everything else. Gary's right; it's not worth the risk.

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  93. 86,

    Definitely...its like being in battle trading these markets right now. Many wounded out there.

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  94. Kevin,
    I'm reading Stock operator now, freaking loving it! It is crazy educational and entertaining at the same time. Plus it really puts things in perspective when trading is basically the same today as over a century ago...

    Everyone, read it. Like today.

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  95. Gold drops because it is a safe haven, and not needed now that the euro is saved and it's "risk on." But this morning created huge, unknown additional liquidity...and gold drops???

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  96. W2,
    It seems like every plan I come up with just vaporizes. I figured I could load up my platform with about a hundred buy orders of all types and all things, hit buy.............and they would all instantly be wrong. Whatever. I`m going away for a while. Best to everybody.

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  97. Farm Girl, remember that gold is far above it's moving averages, indicating that it's short-term over-valued/bought. The big boys, as Gary often notes, play the reversion-to-the-mean game. So they dump their best performers that have gotten too stretched and pile into 'undervalued' over 'oversold' assets. There is also the issue of short squeezing - short interest in the stock market is at all-time highs. Those will be punished for their greed and it will force the market up. All the more reason for the big boys to pile in, at least for a while...

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  98. Risk is back on in the market - if we hold above 1200. Fund managers are being forced back into the market because they have to perform better than the market. This means that they are buying beat up stocks, in this case the miners...

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  99. Nice QLD move -- up 3%, still expecting 4 day before the top.

    Miners made a hummer and are due to at least small rebound tomorrow.

    Still holding QLD and NUGT.

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  100. Staying old turkey gold....this move looks orchestrated by central banks...news out of us and Europe all bad...real moves will happen after hours where you have no opportunity to trade. Waiting to see if we hit 1705, then I'll go to cash...or if Europe explodes

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  101. what is the consensus if gold closes below 1800? still the same as when Gary suggested (last week)?

    any new thoughts regarding a close below 1800

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  102. Not making any changes into the close, and expect to get tested a time or two into next week, where I'll add rather than get shaken out.

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  103. fwiw, new trade triggers today

    /es target 1245 stop 1157
    /gc target 1733 stop 1839
    /dx close to a sell, will trigger with an hourly close beneath 76.585

    these are based on effective volume & 89 hourly ATRs

    leaving the /es trade on the table for now.

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  104. St. Deluise --

    How do you calculate stops based on ATR's, if you don't mind?

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  105. This comment has been removed by the author.

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  106. St.Deluise --

    Where does "89 true range" comes from?

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  107. Update:

    I hate to say it, but this is one tricky bull!! It just keeps trying to shake everyone off...here's how I see it currently.

    http://www.screencast.com/t/tF3yJ7CJYm

    GDX and NUGT look quite the same today-

    So I bought 1/2 a position in RIC after selling a couple of "long the market' equities that I purchased 3 days ago ( CY, PCX, VE). Tomorrow will be interesting in Gold and Miners .

    TRADERLADY-- You didnt need to hesitate to write for an update , If I was around, I would try and help :)

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  108. Alex --

    That's exactly what I am thinking about -- scare bulls to death, break trendlines, supports, and rebound back.

    That's what current market is about.

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  109. Alex,
    You say it will be interesting in miners? What do you anticipate? I trimmed back my exposure as I will be on plane all day, no trading until Monday. So sold my NUGT and cut back exposure to GDX options today. Hit my loss peg meter.

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  110. This comment has been removed by the author.

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  111. 89 is a fibonacci prime number that fits well into my preferred timescale. but it could be anything you want. i also like 233 and 1597.

    the true range is the highest price in the last X bars - the lowest.

    the average true range is the average of this scalar over the last 89 bars. i feel it incorporates volatility a little better than the TR by its lonesome.

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  112. St.Deluise --

    Thank you, very tutoring.

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  113. AT EASE

    If you're going to be on a plane- you're playing it safe and nothing wrong with that.

    I just think that this trend may stay within this channel now since we had a reversal candle today ( it somewhat shows a sell off, and that low was rejected when Buyers came in...BUT it can trade at these levels for another day or two ( to shake some more out :)

    Monday will be a clearer picture for you, even if it starts back up.

    (oh, and sometimes when I say the Miners, I may mean individual ones like EXK, RIC, etc . for ex:

    Big gold sell day, but look at CGR, KGC, Baa etc and GDX is actually back up near that 20sma

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  114. Man, I don't understand you guys here. Everyday, (it seems) watching worrying about every little wiggle. In, out, QQQ's, Miners, D wave, weekly bottom, Buy, Sell . . . . . You want to make money without all the stress and wasted time trying to figure out something you have no control of? Buy BRD, shut off your computer and come back next year. Simple as that. If you can get it in the high 1.40's or low 1.50's, you've got a deal. (Cheaper and you've got a steal).

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  115. Farmgirl-

    Can you drop me or Poly an email? (click my profile)

    It does not have to do with raising chickens, but that may come in the future. :)

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  116. SRDs=QE IV

    more and more will be saying as we travel down bumpy road.

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  117. This comment has been removed by the author.

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  118. Nice to see NFLX get taken to the wood shed again. Raise prices by 60% and then state their customers base is falling by a million...

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  119. Gold futures have pushed back up off it's daily low to the 150sma on a 5 min chart as I mentioned it would earlier today, anyone can put on contracts long at the lows and take profits at the 150sma for a $10 dollar move atleast, I do this almost off of every daily bottom. Do it for ten days (or more) and it's an easy $150 move or better, it's a sure shot whether gold is going up or down it always retraces back to the 150sma on a 5 min chart off the highs and off the lows, the lows are much easier to catch. This trade is much more certain than trying to catch a single $150 move.

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  120. Does anyone know if UUPT is a decent ETF to ride the dollar up?

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  121. This comment has been removed by the author.

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  122. SF Giants,
    Thanks... EUO has more volume?

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  123. BTW gold low at 1775, tagged the 150sma on a 5 min at 1792, take profits on a $17 move...if profits weren't taken at the 150sma tag gold crawls the 150 and profits crawl down the 150 also. Gold usually rolls over off the 150sma when trending lower and makes a new low.

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  124. At ease

    EUO is euro short.

    Hope everyone knows that UUP and EUO issues a k-1 rather than a 1099 just like AGQ.

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  125. Elaine, a tick chart forms each candlestick based on volume and not time such as daily,60 min,etc.It's a different way of looking at the market because on a high volume day you would get multiple candles.FWIW, my main gold trading system is still on a buy with the sell staying stubbornly low.I sure wish it would fire off a loss soon to allow it to reset a bit.

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  126. SF Giants,
    Can you tell me why you would not want to use funds with K1 statements for IRAs?

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  127. Veronica,

    What is the stop on your main gold system? Is it using the December contract?

    Thanks.

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  128. At ease

    Tax deferred accounts not a problem.

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  129. That is good to know on K1. Thanks SF Giants!

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  130. Stopped out my gold futures position; about 1% loss.

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  131. Gold tagged and crawled the 150sma on a 5 min and rolled over into a new daily low as expected.

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  132. Question for you all:

    I am with optionsXpress. I feel like there's better stuff out there. Ideas? Interactive Brokers? TD Ameritrade? Pros? Cons? Want to be prepared for the A wave. Gracias!

    Kevin

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  133. TZ,

    Your entry was 1775 or close, gold pushed up after the 1775 low to 1792 before rolling over, why don't you move up your stop to atleast a break even after you are in the green? I see no reason to take numerous 1% losses on multiple contract positions.

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  134. William.... which website do you use to watch gold futures?

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  135. Fund managers have 1660 to 1680 dialed in as the buy zone..

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  136. WW been following your futures trading off 150sma. does this work on night trading. Been playing the bounces off big moves down at night but not having as big of moves last few nights. Will try this tommorrow but wondering when you dicide the daily low is in to play the move to 150sma?

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  137. Hack:

    Always appreciate your commentary. I've got to ask, how do you come up with your calls, in this case about fund managers targeting 1660-1680 as a buy zone? You seem to make a variety of calls of this nature and many seem quite well tuned in to what's going on, so just curious more than anything else.

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  138. Trend is not broken.
    Gold miners are only in their infancy in this next great bubble.
    World problems have not been addressed. Still too much debt and poor BANK balance sheets everywhere.
    USD is temporarily the safe haven until EU sorts itself out...albeit ST.
    We also cannot discount the Bernank factor ....QEIII will set the markets on fire again...as well as PM's and anyone long the $$$ is going to be cleaned out.
    Just my 2 AU cents worth.
    Gary, your call might just be too premature again. We forget that we are not in normal market gyrations here. Every rule book is thrown out the window.
    Cycles may be cycles....but this is the last great bull market the financial markets are going to see for very long time...and it aint doing what everyone expects it to do (GOLD).
    Left translated is a big call if AU goes sub 1705 (still about 8 or so weeks to go).
    Still in on phy AU/AG and serious miners too. Ready to add more.
    Brave call...and yes you have been calling it for some time.

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  139. Anyone who can't see that gold will not enter a D-wave decline is blind. Just ask your self this: is gold more likely to breach 1700 (huge support) or 1840 first?

    Whichever happens will dictate the direction for a very long time.

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  140. And gold has completely decoupled from the dollar, which means the old gold trading rule book should be thrown out the window.

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  141. Folks a D-wave has nothing to do with fundamentals. It is a profit taking event and is driven by human emotions.

    Unless you think human emotions have some how changed in the last three years then you can't rule out a D-wave triggered by the extreme stretch above the 200 DMA last month.

    And I think we all know Bernanke has no chance of QE3 at this time. He already has three dissenters on the FOMC and if you listen to the recent interview with Fisher on Yahoo finance it's glaringly apparent he would never get approval for QE3 anytime in the near future.

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  142. Gary,

    how is the Fed (the biggest holder of USA debt)going to buy treasuries without QE3?
    It looks like posturing to me.

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  143. The USA is facing a damned if you do, damned if you don't scenario.

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  144. A couple of people asked me to report back on the status of my silver hedge.

    Was:
    200 AGQ @ 239 $47,800
    25 SLV Sept 32 puts (paid $950)
    15 SLV Oct 39 puts (paid $4,500)
    Note: Oct 39 puts were 20 Sept 39 puts that I rolled into Oct as time ticked away.

    Sold options hedge:*
    25 SLV Sept 32 puts (expired)
    15 SLV Oct 39 puts (sold $3,200)

    Now:
    200 AGQ @ 205.72 $41,144
    600 ZSL @ 12.54 $7,524

    *Price was not falling fast enough for a hedge made of put options to make headway. Time was also ticking away. After careful examination of AGQ (double long silver) vs ZSL (double short silver) charts I was surprised to discover that if I owned enough shares of ZSL it would replace my put options hedge and perform nearly as well, with the added benefit that the ZSL shares would not expires. So I made the switch. I sold my put options hedge and bought ZSL as a hedge.

    If AGQ skyrockets higher from here that's fine. My ZSL will evaporate in value but that's okay. I may just keep the ZSL shares indefinitely.

    If AGQ plummets my ZSL should kick in and should reach break even right about AGQ 120 (although reaching 'break even' is not really necessary). In the event of such a fall, I would hopefully have the courage to sell my ZSL at some point and use most of that money to buy more AGQ, for the ride back up to AGQ $400 and beyond.

    Although I have a net loss on this position if you add up the figures above, that loss is muted by the fact that I have made a few thousand dollars selling covered calls on my AGQ shares (albeit only when I felt AGQ would be flat or down).

    Anyway, good luck. This is about as close to a worry free hedge as I could construct.

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  145. Marginal cost of gold production for the average company in GDX is almost $1600 and rising. Most companies in the GDXJ aren't even making any money.

    Kinross probably won't make any money in the next 5 years because they paid too much for Red Back.

    I would be long GLD at this point, not GDX.

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  146. Just watch and learn as gold breaches 1840 next week.

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  147. SLV 2011 chart vs SLV 2008 chart is still moving nearly tick for tick with 2008. IF this continues a sharp sell off in silver would begin aprox. Sept 26th. Who knows. Just interesting to watch the comparison.

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  148. If we had a crystal ball none of us would ever make a timing mistake. Unfortunately we don't and we have to trade in real time.

    In real time there are warning signs. One can ignore them if they want or if they don't mind riding out a D-wave.

    The vast majority of my subscribers can't weather a D-wave, so I do my best to avoid them. If that means missing some upside, so be it.

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  149. But Gary,

    Don't you expect the final parabolic top to be extremely choppy as it is now? If you are too cautious, won't you miss the big final 2/3 month run?

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  150. I don't think we are even close to the bubble phase yet. The fundamental driver for this C-wave has now been removed (QE1 & QE2).

    Now would be the most likely time for a severe D-wave correction as the deflationary forces drain liquidity from the system.

    Then when Bernanke panics during the dark days of 2012 and cranks up the printing presses again, we will have our fundamental driver for the bubble phase gold.

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  151. Danno,

    Too many people will be betting on a repeat of that chart pattern. Remember the Hindenburg Omen last summer?

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  152. Gary,

    but one could say that since gold is money, it could benefit from a deflationary bout. :)

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  153. Joseph,

    I agree. But we can't really know what will happen either way. The market will do what the market wants to do and smash the plans of mice and men. If you are totally banking on a near term rise in gold that's fine. But if your guess does not pan out, what is your fallback plan?

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  154. "Just watch and learn as gold breaches 1840 next week."

    Guess Joseph is the self proclaimed teacher around here now?

    Weren't you saying your back to school this week btw?

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  155. Yup at school right now.

    Too many people are bearish on gold right now. If gold was going to go through a D-wave correction the miners would be acting weak here.

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  156. Gold will hold its purchasing power during a deflation but the price of gold is not going to skyrocket during a period when deflation is draining liquidity from the Globe.

    If you want to see how gold reacts during a deflation just look at 2008.

    At the beginning of the deflationary period 1 ounce of gold would buy six barrels of oil. By the end of the deflationary period 1 ounce of gold bought 24 barrels of oil. Gold held its value and actually increased purchasing power during the deflation, but the nominal price of gold went from a little over $1000 to $680.

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  157. Dan, lol. My experience over the years has been that the ones who come along proclaiming "watch and learn" ultimately turn out to be the ones most in need of an education.

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  158. Joseph,
    What do you call a complete failure to hold the breakout above 600?

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  159. Gary, what if rhe HUI closes above 600 today?

    I'm not long GDX because I think it's overvalued.

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  160. Gary's caution is obviously warranted. However, there are a couple of things that are bothering me a bit.

    First, doesn't the last month of consolidation in $gold argue against an imminent D-wave? In other words, aren't D-waves typically moves straight down after hitting new all time highs? I know Gary has mentioned a grinding type D-wave, but is there any precedence for that?

    Second, the miners haven't really participated in the euphoria. Gary has mentioned several times in the past that no C-wave has ever ended with the miners so close to their 200 dma. Has that suddenly changed or is there a first time for everything?

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  161. D WAVE CAMP?I'm also not in a big D wave camp as there is a ton of cash out there looking for a home and I feel it will buy a Gold dip thus not letting Gold enter a true D wave.I do feel Gold will yo-yo around till the 200dma catches up as yes we got to far above it.If all that cash wasn't around looking for a home Gold would likely enter a true D wave but not this time.jmho.Good Luck

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  162. Joseph

    It's great to see you posting your idea's but I would offer that a few more people might pay heed when you say "watch and learn" if you had the conviction to back your calls rather than make 300 trades a week because your trades go against you.

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  163. Silverhound,

    "watch and learn" was a tongue in cheek comment. I'm so confused as to the direction of gold right now my neck hurts just from following the charts.

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  164. And another hammer in gold today...


    This looks interesting, if somewhat far-fetched:

    http://www.gold-eagle.com/editorials_08/weytjens091311.html

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  165. IMHO gold won't crash until we have a leadership change and or EuroTrash resolution.

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  166. stocks just relentless. i said "1220 by opex" last week just to be hyperbolic but that actually looks likely now.

    i could and have talked about the tepid buy volume in gold, or politics, constant support breaking, etc. but really all one needs to do is ask themselves why it is dropping while stocks are rallying like this-- yesterday alongside a red dollar, even.

    have a nice opex, not trading. holding gold puts and dollar calls.

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  167. All the specs that had gold stops at 1793 are feeling pretty stupid right now.

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  168. gold up over $10--reminds me of a fighter who keeps getting knocked down but keeps getting back up for more-

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  169. Be wary of the miners testing the underside of broken support before dropping away again.......I'd need to see them reclaim broken support and hold above before I was convinced of the rally continuing from here.

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  170. If gold reclaims 1800, 1840 should come quickly.

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  171. Not a bad opening, but no reason to add more here. Looks like I get another day off. :)

    I'll check back after lunch to see if any action is warranted, but for now I'm going outside and cut more firewood.

    Good luck.

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  172. is scottrade down? Can someone please confirm?

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  173. The top in SPY is in. Way too many spec longs trapped in now, but no fast money. This could get ugly.

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  174. i lied, added to dollar longs.

    GStroll, i just checked and can't get scotttrade.com either. hopefully you're not trapped!

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  175. Eur/usd has been screaming sell sell sell all morning.

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  176. Hi all - just curious, what are your thoughts on shorting the VXX? It seems to be a value destroying ETF. Either short it or sell naked calls (some brokers don't have shares available to short).

    I know shorting is tough, but the VXX is no earnings surprises, no buy out rumor...etc, once the fear of a recession subside, I imagine investors will get complacent again and the VXX will drop?

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  177. Blogger Joseph Lemma said...

    Marginal cost of gold production for the average company in GDX is almost $1600 and rising.

    no offense, but I couldnt find that to be true-below are quotes from some of the top 10 listings (all claim costs are dropping quarterly with lower oil prices too)

    EGO = ""During the second quarter, the Company achieved record earnings from its gold mining operations on sales of 162,164 ounces of gold at an average realized gold price of $1,510 and average cash operating costs of $397 per ounce. "

    AUY = 'Cash costs were $399 per ounce in the quarter ended June 30, 2011, compared with $427 per ounce in the second quarter of 2010'

    gg = 'Total cash costs were $185 per ounce of gold on a by-product basis. On a co-product basis, cash costs were $553 per ounce.'

    NEM = "The Company is maintaining its previously announced 2011 outlook for attributable gold production of 5.1 to 5.3 million ounces at CAS of between $560 and $590 per ounce "

    etc etc etc -record profits being declared.

    Quotes directly from earnings reports

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  178. This comment has been removed by the author.

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