BEARISH GOLD

Gold did a double top failure last Friday at $1068.50
Today gold broke the hourly 50 SMA.
And at 10 AM did a failure of the hourly 50 SMA on a rally retest of the average, that took it to new week lows.
The daily charts broke the 20 SMA.

I am bearish gold now.

Gold broke the MOBO bands to the down side on the daily, four hour, and hourly charts Monday.
Tuesday should/could see a bounce.
Opportunities to short gold, or exit any longs in the physical metal, or in the equities will be in this bounce.
ABX, NEM, GG, and others broke their daily 50 SMA.

Rally resistance levels are now at $1046 and $1054 for the metal and back to the 50 SMA for the stocks.
My new low targets are now in the $1007 to $1010 area. A break of that target would send us to the $975 target.

All this downside projection will only happen with a continued rally in the US$ that started mid-day today. Too many are on the short side of the US$ canoe… it is likely to flip the shorts out before going lower.

After this next major pullback in gold I see new market highs for gold, and the US$ dropping to the 72 -70 range.
Printing money has not stopped and will not stop. Hence my longer term outlook after our gold flush out of the late entry longs on gold, and the weak hands give up.


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A PREDICTION OF HOTTO

I've discussed the 2003 Bull market Leg several times since May, 2009. It's helped with some Timing and Direction. Most recent was the "Slam Down" decline in late Sept - just before start of Earnings Season. In 2003, the corresponding Slam down decline - ended on 9/30/03 - a Tuesday. The rally after that - went up to a Gap -Up Open on Wed, 10/15/03 - during Options Expiration Week in Oct. 2003. The big Averages ended down that day - and the next 2 days -- into Options Expiration day on 10/17/03 . Then came a bounce on Monday - after Options Expiration Friday-- then down for the rest of the week - to Friday, 10/24/03. Then came another bounce - from about sma50 -- back to UBB early November, 2003-- Then one more decline -- to Just before Thanksgiving Week, 2003. From Thanksgiving Week, 2003 to January 2004 was another Monster runup-- just as the Bears were all sure we had seen "The Final Top" in Oct / Nov. We were there. : ) I remember some urgent Sell signals came out that weekend before Thanksgiving Week in 2003. It was really sweet - to be among very few who got that one right : ) May we be so lucky again in 2009 : )

FROM OD

OptionDragonGuru | October 13, 2009 1:56 PM -->

Raymond James' chief investment strategist Jeffrey Saut is back with his weekly Investment Strategy. Last week, his piece 'Octobered?!' looked at returns during some of the market's historically worst months. This week's piece definitely caught our eye because Saut calls the passage below "two of the most important paragraphs I have ever encountered in more than 40 years studying markets."

Taken from Stock Profits Without Forecasting by Edgar S. Genstein, here are the two paragraphs he is referring to, started with the following quotation: "The absolute price of a stock is unimportant. It is the direction of price movement which counts.”

“During major sustained advances in stock prices, which usually occupy from five to seven years of each decade, the investor can complacently hold a list of stocks which are currently unpredictable. He doesn’t worry about the top because he knows he is never going to sell at the top. He knows that the chances are overwhelming in favor of the assumption that he will get far better prices by waiting until after the top is passed and a probable reversal in trend can be identified than he will ever get by attempting to anticipate the top, and get out on the nose. In my own experience the largest profits we have ever taken have come from stocks purchased while they were making a new high in a market which was also momentarily expecting the top.

As I have already pointed out the absolute price of a stock is unimportant. It is the direction of the price movement that counts. It is always probable, but never certain, that the direction of the price movement will continue. Soon after it reverses is time enough to sell. You should sell when you wish you had sold sooner, never when you think the top has arrived. That way you will never get the very best price – by hindsight your individual transactions will never look daring. But some of your profits will be large; and your losses should be quite small. That is all that is necessary for a satisfactory, enriching investment performance.”

Definitely food for thought and especially relevant given the massive rally we've seen from this year's March lows. Embedded below is Saut's market commentary for this week, "Direction Dictates": www.marketfolly.com i love this blog, you should have it sent to your email.