Thursday, 13 December 2012

Gold.. 2000$ A dead cert! No quite the opposite this could be one of the biggest bull traps I have seen for years!

My previous post 

Please peruse these simple charts with reaction and median lines then proceed /scroll lower:

 another historical fork below
 add 50% RL's below
 another view below

OK thats the YOU may think the following chart look a mess but I can see price in action  and if you drop down to a lower TF..."the scales shall fall from thine eyes"!
First draw these two forks and their warning lines
 I add some more structure including a FNL fork see the 28th warning line at 1749.50?
 An even more structure below
 Look at the stochs in the weekly chart below...long term stochs are trending down and the ribbons ( short term) are about to fall in what i call a 'waterfall' pattern
and the monthly below
and indeed the daily doesnt look too healthy either but this is more ambigious...the W & M are not.

Lastly..........I want to tell you a story about when I worked in London in  the 1990s for a well known US based company that was absorbed into B of A during the recent 07/08 crisis.

One of the daily rituals was to put together a market precis/ assessment for clients which included all major futures markets such as FX, fixed income ie US Tbonds ( and then US T Bills, ie 90 day) precious metals, grains etc etc. We were expected to have our own opinion but also talk to in house analysts and also our own trade connections, floor traders/locals plus we all followed individual/independent analysts who in those days before the Internet produced endless dailyr/intra day reports and charts which were faxed over to the trading desk. One of these people( who I believe to still be alive) was very famous in London and the US and had a fair amount of coverage in the UK financial press at that time and was a type of market Guru.

This particular guru was so consistently wrong about every market and always Gold , that he became something of a legend in the City. This developed into such a pitch that people would make bets and take positions in the opposite direction to his market call ie a contrary position every morning after his fax or telex  came( yes, we still had telexes with the golf ball printer heads and made of metal weighing tons and constantly tapping away like wind up joke chattering teeth).
Anyway the current situation with Gold reminds me very much of this situation. After this joke about XX had gone on for a few years he started to improve his forecasts and people using him as a contrary indicator all started to loose money and follow his advice and reverse their positions. In the end their seems to be a tipping point where opinion crosses the Rubicon and such a large proportion of market sentiment is in one direction that price ( for some unknown reason) takes an opposite view and turns.

Gold is being hyped by many at this moment and it seems to me that this is a perfect time for price to do what it does best......a completely irrational move lower. I have heard all the fundamentals about the cost of mining per oz and Central bank reserves and how the supply doesn't match increasing demand etc and we seem to be all 'singing from the same hymsheet'...which is a worry in itself as markets do not work like this and are not rational. This of course is no reason to call Gold lower but its recent behaviour IS. It simply is not the behaviour of a market that is about to pop. We should be coiling along sideways making a pattern and then the break out but price is being ground lower. Also is it not wishful thinking to believe a market that has risen like a star/meteor over the last 10 years is going to continue to rise? What really worries me is that the investment banking industry all are calling for higher prices....Time to sell?

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