GOLD

America's favorite commodity recently. It is strange how knowone cared at all about gold until the last few years. This is what a big rally will bring, lot's of hype and discussion.

Notice the chart on the left. The 3 fundamentally related indicators, the commercials, the seasonal trend, and it's relative valuation to the dollar all have bullish setups. However, the price is in a bearish flag pattern. We also have calming inflation, which is related to the dollar, and is bearish for GOLD. This valuation indicator on the bottom which measures pure relative valuation of the dollar to gold is an oversold/overbought indicator. So you can see that we can have both a relative oversold reading here indicating a bullish stance, yet along with that declining inflation which is bearish. You can see from the chart that the declining inflation which from my research is the most important driving force for prices in this market, has won this battle so far. No surprise the favorites usually win in life.

From a pure trading perspective this would be a short sale setup just based on the pattern. With all of the fundamentals lined up on the bullish side, I will not short this flag. I am looking either for a breakout above the downtrend line to get long, or the commercials and other fundamentals to shift to the short side during any bounce for a short entry. Once these things line up either way I will be looking for a bar pattern entry to enter this market. The chart pattern here mirrors the fundamental picture here in that it has been indecisive over the last few months.