Early this morning with the move below $1291 it became official: that big surge on September 18 (the bombshell “No Tapering” day) marked a day one top for gold’s current daily cycle. Day one tops, are to put it mildly, very bearish in cycles analysis.
I was in cash so I didn’t see fit to send out an update. I would urge anyone still long metals or miners to step aside. Don’t try to be a bottom-caller here.
Gold could not hold its 10 DMA and it looks like the US Dollar is either already early in a new daily cycle or late in its current daily cycle.
Gold has once again been weak concurrently with weakness in the dollar. And with the dollar due for a sustained spurt of strength, I am not comfortable holding gold long here.
I sold my 25% position in SLV right here. Gold has lost its 10 DMA already. Bad sign. I am not going to risk riding silver down anymore.
Well, the action today cannot be ignored.
For now I am going to take a 25% position in GLD and a 25% position in SLV.
My stops will be at $1290 gold–just below the early morning low today.
I will update the portfolio page later.
As it turned out, I am buying in below where I stopped out recently.
Just a quick note to let everyone know that yes, my stop on the GLD position was in fact hit on Thursday morning, so I exited that trade at break-even (minus commissions).
No regrets though. That trade had nice profit potential and I only lost the cost of a mediocre lunch.
I’m back in cash until we have some clarity that there has been a daily cycle low in gold. When I think we have a swing low, I will take another “starter” position, probably in GLD. Let me emphasize: It won’t be a full position. Probably 1/2 or less.
In an August 4 post I said that gold put in an obvious intermediate cycle low on June 28th that probably also represents its yearly cycle low.
Now we are entering the 10th week of that intermediate cycle. At this point the intermediate cycle trend line is well established.
However, the primary trend in gold since September 2011 is still down. Therefore, if the intermediate cycle’s trend line is broken this week, I think anyone long gold right now needs to reduce exposure or go completely to cash. Gold has not yet given traders any reason to be cavalier with their positions.
The MBT Portfolio took a half position in GLD at $132.50 on August 16. Even after the three day decline to end the week, we are still up slightly. I have no intention of letting this trade slip into the red. Stopping out at break even would translate to about a $20 drop from where the gold futures closed Friday. That’s where I have placed my stop on the trade: $132.50 on GLD.
Gold will not return to $1800 or $1900 without us making a tidy sum along the way. Safety first!
For the first time in a long time, I took a gold position in the MBT Portfolio. It’s only a half position. I would like to add some silver, but it was ridiculously overbought at the end of the week. With plenty of cash to deploy, I can take advantage of a correction in silver and add some.
The more important reason I only took a half position is that I think gold may make a quick descent to around $1325. It can do so and not violate either the 50 DMA or the trend line shown below . At minimum I expect a return to $1350.
Gold is coming into week 8 of its intermediate cycle and day 8 of its daily cycle. Recall that gold’s intermediate and daily cycles tend to span 18-22 weeks and 20-28 days, respectively. So unless something really goes awry here price should move generally up for at least 4-5 more weeks.
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