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Thursday, December 17, 2009
AS LUCK WOULD HAVE IT
Well I guess the luck of the irish is needed now, and they have not been too lucky in recent years. As we look at the Gold chart above, one achillees heel of short term trading comes up quickly. When we have a market in potential free fall territory we often get these very small bounces which setup possible continuation entries in the direction of the most recent leg. Typically when they occur it is also a potential large time frame trend change. In these instances I find myself always waiting and hoping for a larger bounce as a rection to the first impulse down, to enter another trade.
Often as we can see here it does not always happen. Ironically Gold has now on a short term basis become weaker than Silver and took out yesterdays low here overnight. Since you have to be a night owl nowadays, I was here at the computer when this happened. Since we took out the prior bars high first, and a takeout of the low afterwards would represent an outside bar to the down side, it triggerred a potential continuation trade downwards. When I saw this and the momentum oscillators were still showing it as a pullback against a down trend, I entered a short position. It is very likely in my view this could be a fake, but if this is to be a larger move like I have been harping at constantly in here, sometimes they do not pullback much more than this.
Since again I view this as a potential for several hundred dollars an ounce, I have to take a shot at this even though I do not think the odds are great on this one. The dollar short squeeze I have talked about in here is on now, so it is really hard to say how far anything can go now. If the dollar move which appears to be picking up steam, accelerates to the upside, most commodities are going to drop. It is very difficult for me to believe that the PPT is going to allow a big move down here at the end of what has been a great year for equities, but you just never know. A sell signal in the SP 500 has also been triggerred here overnight as you can see next.
Here you can see the momentum oscillators lagging the price during this sideways to up move, and we broke down overnight. I do not view this as a large trade due to the PPT being likely to stop any large downward move. However, I have to take these when they come up in case one gets away from them. You just never know in this whacky world we live in now where the government is controlling everything we do. Maybe their eye will be off the ball for a moment. I do not think anything major happens unless we can get to a 20 day low, which could generate some fund selling. That price is 1062.25 which is still a long ways away from where we are now. As long as we stay above that, I think any dip will be easily contained by the bulls whether they be the government or the large institutions.
The dollar strength is potentially the fly in the oinment that they did not want. They want a weak dollar, and the dollar may be getting away from them here. A weak dollar is certainly the governements way out of what they are doing right now, so with it soaring like this, they have some potential trouble with the scenario they have been manipulating. This should be fun to watch what they do here.