Has gold topped?
On Saturday, I explained why I was nervously eyeing the exit for my remaining long gold position. The big decline yesterday did stop me out of that trade for a superb overall campaign. My original entries were in the $1220 and $1320 levels.
But has this signaled the end of the relief rally off the December $1180 low?
Latest DSI reading shows 84% bulls – matching the bullish extreme shown at a previous high. Although sentiment readings are only indications that a turn is near, they are not usually very accurate indicators for timing entries.
I have seen bullish readings reach a peak and then fall, while the market continues in its trend for weeks thereafter. Entering short trades at the sentiment peak would have been very expensive indeed.
But I have a hunch that we have seen the short-term top at the $1388 level yesterday morning, since it fits in with my theory that the much-trumpeted $1400 target would be missed. When all and sundry expect a certain outcome, it rarely materializes. And if it does, there is normally a heavy pull-back first to clean out the johnny-come-latelies. Was yesterday’s $20 dip the first sign of this effect?
All of my EWs are in place for such a scenario. I therefore expect rallies to be fairly sharp, but when the tide turns, the declines will be dramatic. I want to be short in good time for this spectacular show!
Bull market crimes are being uncovered
One of my themes this year (and next) is the uncovering of crimes (in all areas) committed during the bull market when such proceedings were waved through and permitted. We have already seen LIBOR manipulations uncovered and charges laid. But it is not just in the financial arena that this is occurring. And the mis-selling fiasco by the UK banks is continuing to be punished.
The world of sport also offers some stark evidence that the bear mood is upon us.
Today, a FIFA official is being accused of corruption in awarding the football (soccer) World Cup to Qatar. How anyone believed that a hot-as -hell country like Qatar should host a football event in their summer is well beyond my comprehension. Of course, to find out why – just follow the money! And someone has done just that.
And in the book world, it seems the relentlessly positive themes of self-help books during the bull market is giving way to the negative. A recent best-seller is called Why Failing is the Key to Success. There are several more along this line. This is a subtle switch from the “You can do it – you are fabulous” message of recent years.
DOW
Has yesterday’s rally run its course? It made it to the Fibonacci 50% retrace of w1 down. The Fed is due to issue its monthly deliberations later and Yellen is due to speak later this week. Should be fun!
