In a world where nothing is ever perfect, I found something here far from perfect that is troubling. The pace of new highs to new lows is not keeping up with the up trend in the NAZ as indicated by the red arrow on the right side of the chart. It was doing so nicely until recently. I have also marked off the last two times recently we saw this develop on the high side, and on the far left there is a bullish divergence. You can see in all these instances, moves in the indicated direction follow. When we see things like this what they tell us is that the underlying foundation of the move is weakening. It does not take a genius to look at this chart with it's angle of ascent, to conclude this is unusual. It does take a little smarts to determine when this means we should get short.
The next chart shows a few other divergences that did not result in price moving down much. However, in all of the instances, price did move down some or sideways. There is no way to know in advance, whether or not we will get a sideways move or something bigger to the down side. If I take a short position up here I will simply establish targets and stops and see where it leads me. One thing I hope many people have learned is the danger of shorting rallies where the market just creeps higher every day. These can just drain the life right out of you along with your money. The trend is the basis of all profits, and we all have seen that recently. I would suggest studying this on your own to see what you might be able to learn from this type of situation. I could write about it all day long if I felt inclined to. At the very least this is an early warning sign to tighten up stops on longs.
Here is the makings of try #2 for me in GOLD. For the Gold bugs who read here that constantly question why I want to short this market, a picture paints a thousand words. My COT indicator is in the sell zone, and we have a pretty clear up trend in place. If we break that up trend we will have price lining up with fundamentals, that is a trade for me. It really does not get any more complicated than that. I don't care at all about any of this other arcane nonsense about why it should never decline ever again for all eternity. I also don't care about the same crap from those who tell us why it should never rise. It is just a trade no different than any other. It is setup by my tools and I will take it if it breaks down from here.
I did go back through the archives and it was at the end of December that I mentioned I was looking more long than short, so again more evidence that I trade this market just like any other in both directions. I did wind up getting long early in the year and got a nice bump up as a result. Now it is time to look the other way. My commentary of why it is a bubble is based on all the reasons I have stated previously which I will not constantly keep restating. If you want to argue with them you are going to have to go back and find them. I don't recall what days I have detailed them, but I have done it a few times. My mission here is to tell readers what I do, not to try and convert people into my views. Traders should always trade by what their tools tell them to do, not what someone else says they are doing. I have reached a point where I have finally learned the hard way, the when the masses think something, you are an absolute pariah to run against that tide. I will always state what I think but beyond that what people do with that information is beyond my control.
If you are a perpetual bull, just buy it every time I sell it. I have losing trades every month, maybe this upcoming trade will be one of those. One piece of advice that should be worth something. When you are studying things that you think will have a cause and effect on the price of something, make sure those concepts have both a logical reason why they should work, and also a history you can study. This idea that a few people have mentioned about the percentages of people that own gold etc.., is an example that has no history at all to study. Statistics are not even available today that are accurate, much less over the last 50 years. For all we know if 3% own it now that is a 50 fold increase over how many people did 10 years ago ( my bet ). That would then be incredibly bearish. It is relative levels of things not absolutes that steer many people wrong. Many people made that mistake with the VIX. This is an example of an idea that could make sense, but has no data to study. I cannot tell readers how many "great" ideas I have had over the years that should have influenced price direction, that were complete busts once I studied past history. I never fall in love with an idea, but I do at times fall in love with things such as my COT indicator above, which has a history of telling me what is going to happen next.
I just had what I thought at the time was an incredible innovation with a technical indicator I use. It was a completely different way of using it. I looked at some recent examples and found it would have kept me out of a few bad trades. I got even more excited. However, once I went back through many more examples, I found the idea was worthless. This type of thing happens all the time with me, but occasionally I find an acorn ( blind sow etc.. ).