Gold Correction
March 20th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I drew a Fibonacci fan on the weekly gold chart. The fan is defined from the low on 16 August 2007 to the high on 8 November 2007. Gold has now broken down to the 50 Fibonacci fan line, exactly.
Spot gold, weekly interval
There are a couple of ways to look at this:
Very aggressive traders would be making a case to go long right here in a classic “catch the falling knife” move. Daily stochastics and RSI are going extreme oversold and the 50 fan line support is intact at this time. The stop loss on the trade is a break below that 50 fan line.
Traders looking to preserve longer term profits, or traders with shorter time horizons, might consider using that 50 line as a stop loss target. A move below around $900 probably means that the unwinding weekly stochastics are in force and that a full oscilation down is likely. The resulting move down could easily reach $850 (major support), or below. Weekly MACD, while still positive, is threatening to turn negative for the first time since mid August 2007. A retest to around $850 would meet the historical price support at that level as well as the 61.8 fan line.
Market participants with time horizons of years or decades are probably yawning and wondering what all the fuss is about.
One last thing: Making the case for a near term top…
The weekly chart shows an obvious bearish engulfing candle formation, where a new high is reached during the period, but it closes down, engulfing previous positive candles. While that weekly candle isn’t closed out yet, you get the idea.
Also, weekly stochastics have crossed down from extremes. MACD is threatening to cross down, but hasn’t yet.
Actually dumped in the dumped in the rest of my 401k 2 days ago in to some mining, oil and commodity mutual funds. Got tired of averaging back in and trying to find the best time to buy.
Oh bother nothing like locking in a 10% loss. Ya know if you can’t devote serious hours per week or day to this stuff you just need to stay in. I made the mistake of pulling back on my position during the great August 2007 deflation scare.
With this Gold and Commodity thing you either believe or you don’t.
Cap’n Stevo
I one of the long time holders yawning. I like what Michael Rivero said today, – somebody dumped a lot of gold driving the price down to keep suckers in the stock market.
I’d be buying more gold right now, but I think instead I’m going to be looking on Realty Trac and talking to a personal friend in real estate to find me some land.
Might even borrow some money from Mom to do so!
Oh, my bankers would be my sisters. Hahaha