Sunday, January 24, 2010

By User: Gold - Head and Shoulders

Posted By : Akshay Chinchalkar

Hey guys, after a long time, a conventional pattern that has never looked better. On the 240 min chart of gold, a superlative head and shoulders, which often appears in a market that ppl think should head higher, i.e. the culmination of euphoria, or should we say, greed! Nice looking neckline, which has now been broken decisively. A measuring target gives us 933, while 1.618
times wave 1 gives us 922; 20 day (short term) MA has cut 50 day MA and has moved lower, and both are turning down, which is even more bearish. However, for the bulls to be completely trapped, a retest of the neckline or a slight throwover up is very much possible. It is not rare to see a head and shoulders at the end of wave 5 in a bull market, and given that, there is all the evidence to suggest that the trend has clearly turned down. WILL MAINTAIN THIS

6 reasons that convinces me to take a contrarian call on gold at current prices
(bearish, funnymentally):

(*** Gold is super bullish, but will not go into the stratosphere unless this decline decimates the last bull, i.e. surge begins when no 1 wants to look at gold)

1) Bulls still think this is a god sent opportunity to buy gold.
2) US is headed into a hyperinflation because of all the liquidity. (yes, hyperinflation possibly later, but deflation first)
3) Labor market is deteriorating rather rapidly (deflationary)
4) Most, if not all experts, talking about $5000 to $10000 almost immediately.
5) Bearish extreme on the USD (contrarian bullish)
6) Central banks buying gold like the world ends tomorrow. Conventionally, central banks make extremely poor judgements about trading. Remember, they are banks, not traders. The BOE sold tonnes of gold at $252, and we all know where gold currently is.

So, lets wrap this.

The EUR has declined 1000 pips from its highs. Although significantly more losses are expected for the EUR, a bottom is not too far away to complete 5 minor waves within wave (1) down. After the EUR bottoms out (USD tops), there will be a pullback to the upside in 3 waves to end (2), somewhere in the 1.4300-1.4500 area. Consequently, gold will also stage a pullback, which should provide excellent shorting opportunities. However, once the EUR tops out in wave (2), it will begin its journey south in a wave (3), which should be devasting (rewarding for the USD) for itself and the yellow metal.

Moral of the story:

I am an investor with a 10-15 year view, should i buy gold at current levels?
Ans: Absolutely yes, if you believe that the USD is in a supercycle bear market and that ultimately, inflation will be a bigger problem. The point is, bull/bear markets never pan out in a straight line. Also, if buying gold at $1000
and seeing prices drop below $700 would be considered a god sent opportunity, and not perceived as the worst decision of your life.

I am a trader with a 12m - 18m view, should i buy gold at current levels?
Ans: Absolutely not.

(please note, this is NOT a trading recommendation, its just a view, and its my
personal view)

Until next time



Carlos said...

Hi blue. Superb for you bro. Cheers!!
My 2 cents..

My 2 cents.

SPX - We're In A Secular Bear Market. 1040 Key Number
We're In A Secular Bear Market Like Japan.
Long term view - TOP 1150 -
If this is the Top and I believe it, when look this chart, we had last year a pullback of a BIG BEAR MARKET SECULAR. why??
Chart we have two indicators - EMA and RTS.
EMA if price close > EMA --> Bull Market
If price close < EMA --> Bearish
RTS give me confirmation Bull Market or Bear Mrket.
Beas until now neutral because price above EMA but RTS below yellow.
If price close montly below EMA change beas neutral long term to >> Bear Market.
If close this month below low of last month (1085.89) win momentum to test EMA 1040.
Chart here:

VIX - The End of the Beginning. Bears are back!

this is a 52% gain on the VIX (weekly). Wow! Bears are back!
Close this week above EMA200 (red) but below EMA55.
Need two consecutive closes above blue EMA (27.86)
will open door to visited 40 first target, possible extension to 45
Chart here:

DAX - Weekly - Top with two Bearish Signals

Dax have here a big problem. Bearish divergence with a new sell signal MACD. This is bad...very bad...
Can see last update Daily chart
weekly chart here:

Big trades for all.

Anonymous said...

I like your analysis. Keep updating.

Anonymous said...

Hi, what happened to your prediction. Gold is going north and u were predicting 922 etc ????? still believe u can predict gold rates in the next 30 days and 1 year ?? Let know. Ganeshkumar