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Monday, June 28, 2010
Here we are again in an eerily similar situation to where we were in November of last year. We have had another leg up driven completely by small speculators with the big boys once again selling with both hands. I know there is a tremendous marketing and media push to put your money into GOLD, but I urge caution. The last decline admittedly although very sharp held support and we rallied again. Mark my words, one of these times that is not going to happen, and this is going to waterfall. There are so many reasons not to go long right here anecdotally, but I will stick just to the numbers. I still don't hink Mad Max is going to give you much in barter for Gold, maybe for water, but that's just me.
We have as per the above graph, once again a record long position by the small individual investors. This is accompanied by the same with the Large Specs. Large Specs can expand through the use of pyramiding which is how they trade anyway, their buying capacity. As open profits rise, it gives them more margin available to buy more. This is why at peaks we often see them at their max positions. As a result, they can creep along for a bit once they reach this level. This is what we saw in November, they reached their peak in late September and nothing really happened for a month and a half. I think this could happen again due to the dollars strength. Since it has rallied alongside of GOLD, the valuation of GOLD vs the DOLLAR has not
gotten to the same extreme it did back in November yet.
What you can see is that we are again also at a similar level to where we were in late September. This will not be the perfect storm until valuation gets up there. HOWEVER!!!!!!!!!!!!! It may not get there. Markets can turn for a variety of reasons, and we rarely always get the perfect setup. We are close enough now to begin to look for sell signals. In the following chart you can see that today we might hit the 13 count in the Demark Sequential, still the best top and bottom timing tool I have ever come across. Notice how we topped one day after the 13 count last time.
Even though we do not have the valuation, we have the Demark Sequential staring us in the face. I know for GOLD bugs whether the Dodgers win with a walk off home run, or your dog pees on your couch, anything is a reason to buy gold with both hands. My posts are never going to influence them one way or another and I could care less. Those people are the ones that at some point are going to be trapped and wish they had not been so greedy. I do not know when that will happen, only that it will. I simply am pointing out a near term shorting opportunity. Whether or not it turns into a major top or not there is no way of knowing. It provides an opportunity to make money and that is all I care about.
I will post the short trades in do in this market when I do them or within a day or two depending on whether I get sidetracked or not at the time.