Gold – 4 Jan

Well it appears that the end of world and gold as we know it was a tad bit overdone. What a shock! Jim Sinclair is pulling his hair out with people who he says should know better. When I was a newbie to gold I use to stress because I did not fully understand the fundamental case and actual mechanism of gold pricing. Ignorance is stressful. The cure is to get educated. When you attain true understanding you will laugh at the punditry of last couple of weeks. Nothing has changed. Strike that, the situation has worsened! Gold is nowhere close to a top, so relax. Sell some paper and go buy some physical gold.

The gold chart is under repair. Technically price is still firmly entrenched in an intermediate term downtrend. A break above 1640 or so will nullify the trend. The hammer candle 4 days ago has proven to be a reversal candle and the short term divergence shown on the technical studies has been validated. Price has rallied up to resistance and has achieved the first target, the 18 day moving average. This MA became the target when stochastic first crossed the 20 level. Further resistance is coming from the 2oo day moving average at 1626. Then chart resistance from the previous swing high comes in at 1643. Support comes in at 1562 and then at the swing panic low of 1523. The very short term downtrend has been neutralized by virtue of price making a higher high than the swing high around 1615. Price closed right at the 18 day moving average and until price closes above that average AND a higher low is confirmed, I would avoid new trading positions. My criteria is simple, enter long trades when price is above the 18 day moving average and an uptrend (defined as a higher high and a higher low) is in place.

RSI is approaching neutral and MACD has put in a bullish cross. Volume is climbing as the price continues higher, a bullish sign. I think the chart is suggesting a test of 1643 and a successful breach of that swing high will be constructive to the idea that the intermediate downtrend is complete. If we get a higher low on the next pullback, a buying opportunity will present itself where measured risk can be managed with a logical stop. Patience paper traders, if you must buy then buy some physical. Any price that delivers gold into hand is a bargain. The day is coming when you will not be able to purchase physical gold because everyone else in this world is going to want it, all at the same time.

The expanded chart shows the longer term trends on RSI, MACD, and stochastic. Stochastic is always a leading indicator and has crossed its trend line. In itself this meaningless, but it suggests that the downtrend MAY be about to end. It looks to me like price may meet the trend line around 1675. Until we get a couple closes above the trend line, all rallies are simply lower swing highs under construction. The first step must be a higher high than the 1643 swing high. A higher high there in conjunction with a move back above the 200 day moving average will really get the hedge funds and money managers back into the game.

Practice your TA for the day when the markets will once again be honest. But, do not expect TA to save you or to make you money in these perverse, rigged, and maniacal markets. If you must trade, buy the waterfalls and sell the rhino horns. Buy the panic liquidation and sell when RSI is forming a mountain range above 80 on the daily chart, or a breach of 80 on the weekly chart. The buying opportunities will come more often, as the waterfalls are far more prevalent, where price gaps down over a period of 3 or more days. Better yet, use TA for long entries and then buy physical. Use TA to simulate liquidation of long positions. Use TA to simulate short trades and covers.

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