August 31st, 2014
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Time for Katie to Bar the Door in Gold?

by Rick Ackerman on February 22, 2013 12:01 am GMT · 20 comments

[Update: Comex April Gold bounced $30 on Thursday after making a marginal new low at 1554.30.  Bulls are not yet out of the woods, but they should take encouragement from this bear-trap price action. If the short-squeeze does persist for a second day, generating a weekly close above 1594.50, bulls will be back in business if not yet back in the driver's seat. RA]

Is it Katie-bar-the-door-time in gold?  We seriously doubt it, although we wouldn’t blame bulls for feeling despondent after yesterday’s sharp decline, the second in a week. The April Comex contract plummeted to an intraday low of 1558 on Wednesday before reflexive buying provided a modest bounce in after-hours trading.  The good news is that the low was pretty close to a trendline that just about every gold trader on earth must have been watching. With such a devoted following, it’s hardly surprising that this technical support was breached marginally, presumably to put the fear of the lord in wanton speculators.

But there are some troubling facts as well. For one, considering how many bulls probably got stopped out when the trendline was penetrated, the futures should have shown more pluck on the rebound. This is just simple physics, since, once gold’s fair-weather friends and perhaps more than a few true believers had been shaken loose, profit-taking on the subsequent rally should have been greatly reduced, lightening the ascent. Oh well. Perhaps spirited bargain-hunting will commence on Thursday, driving gold back above $1600 and out of the danger zone.

Reason for Caution

Even if that were to occur, however, there would still be reason for caution. That’s because at $1558 the futures were trading $12 beneath a Hidden Pivot correction target we disseminated to subscribers a while back. It kept us on the right side of the trend, even when gold feinted higher on Tuesday to 1619. We called that rally “gratuitous” in an intraday update, and so it was. But the relapse to below the 1569.90 target we’d drum-rolled is problematical, since these proprietary supports tend to work very precisely. The fact that this one did not work doesn’t mean we miscalculated or that Hidden Pivots are valueless, however; rather, it suggests that the selling was strong enough to muscle past the support and that it is not yet spent.  The picture would turn still uglier with the creation of a bearish “impulse leg” on the long-term charts. That would happen if the lows labeled #1 and #2 are exceeded in the days ahead.

We won’t presume to know the future, since that can only distract from keeping an open mind. For what it’s worth, though, our proprietary forecast for certain mining stocks suggests the bloodbath is not yet over. Specifically, we still have an outstanding target at 13.15 for GDXJ, the Junior Gold Miner ETF.  That would represent a 16% drop from yesterday’s fearful low and, probably, corresponding weakness in gold itself.  Click here for a free trial subscription to Rick’s Picks, You’ll also gain access to a 24/7 chat room that draws veteran traders from around the world, and to all of our current forecasts and archives.

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{ 20 comments }

RickJ February 21, 2013 at 4:54 pm

This consolidation period in gold is getting long in the tooth. Stocks in XAU touching previous lows. Valuations on majors at or near lows for previous 10 years.
But what has changed? What has been solved? Does anyone believe that a discussion to take place in March about a possible change in Fed policy to tightening is honestly going to be seriously pursued? What could they possibly do to change anything?
The persistent seller(s) of gold do so in such a way as to get the least price, to wreck the chart, to prevent the fat lady canary from singing. Check out Mondays on the premarket activity. Always a need to start the week reinforcing gold as a bad place to be, yet 17% up yearly over 12 years on average.
Is this the last chance to get on the train like in 1079?
Which entities will own the most gold when the blowoff top REALLY occurs?
Meanwhile, the fun and games of the gold market seems to coincide too regularly with the options expiry in stocks here in Canada.

Cam Fitzgerald February 21, 2013 at 8:21 pm

This looks more worrisome to me though, RickJ. A decline like we just saw coming off a long period of consolidation does not give many confidence to stay invested or buy even more. Sometimes it is just better to get out of the way when markets move like that and wait for the Dust to settle.

Robert February 21, 2013 at 5:31 pm

The bull shakes as many weak cowboys off his back as he can before running away…

The short term technicals are ALL pointing toward continuing price weakness…

I’m suspicious of a head fake; and I’m averaging down.

Cam Fitzgerald February 22, 2013 at 7:29 pm

Love that bull analogy. Robert. You might be a farmer.

Hank February 21, 2013 at 6:10 pm

For those of us who have been in the gold market since 2000, ever wonder why you still feel also bad after gains of 13-$1400 per oz? The shorts are good. They will own your shares and ounces after it is all over if you sell ..just like the 70’s.
A time is coming when they will manipulate to the upside. Be right sand at tight.

C.C. February 21, 2013 at 6:31 pm

Deflationary scares, M.O.P.E., Fed jawboning, ‘communication’, ‘the-bull-market-in-gold-is-over’, etc… I’m buying this morning – 5 ea. 1 oz. fresh 2013 Buffalo’s to be precise. And if it breaks $1525, I’ll be there again for another 5 or 10 pieces. Why? Like the doting wife who comes home to find her husband banging the babysitter – ‘Are you going to believe your eyes, or me’…?

Gawd-damned gold bugs – crazy lot, aren’t they…?

gary leibowitz February 21, 2013 at 8:13 pm

I agree with Rick. Gold doesn’t look like it bottomed yet. In fact if it doesn’t establish a support soon it can go a lot lower in a short time span. I do agree that it would be a buying opportunity if it does fall from these levels. I just don’t see a really big impluse leg up soon.

I think the equties will go lock-step with gold for now.
The last-minute deal that everyone expects from the Republicans will not come this time around. They lost face the last time, as I expected they would. The only give will be by the Democrats on spending cuts. Place your bets. I give it an 80 percent chance of happening in the next 2 weeks. I am going to short equities most liklely near end of session on Friday. I hope we see a nice rebound late today and tomorrow. I also see a 6 to 8 percent drop from these levels before we can stabilize.

Cam Fitzgerald February 21, 2013 at 8:16 pm

Yes, I kind of recall when you first disseminated that number of 13.15 for GDXJ although I cannot recall how far back it was you first said it, Rick. Last October perhaps? What I remember thinking was it was so preposterously low that some subscribers might prefer a hanging rather than anyone even whisper such heresy. It is looking more and more likely every day though. Are we so far off now? With some of the serious money coming out of GLD and fresh pressure on Hedges to find more profitable investments I think this puppy could yet take that mythical swan dive. It might be closer than we think. The psychological terror that would evoke amongst the devoted would make a case study in sentiment and emotion versus reason and technical analysis.

Oregon February 21, 2013 at 8:33 pm

Rick,
I seem to remember you saying that you didn’t know what to think of Martin Armstrong. I have read his stuff with similar trepidation for a few years and have to say that he has been right on. His forecasts have been quite accurate in the past, and he called the long sideways action as well as this current downturn. He calls for 2015 as the next big move up.

I have read Sinclair for longer and thank him for his tireless efforts. He has given comfort on a couple of occasions over the years, but I get tired of his constant, “Gold will start heading to 3500 tomorrow, after we break the backs of the manipulators…’ routine.

Gold longterm… I agree with the above comment. Nothing much has changed. The worldwide debt crisis and associated currency devaluations still loom large. I see this as a healthy and necessary pullback in the gold market as well as an opportunity to acquire gold at lower, albeit difficult to stomach prices.

gary leibowitz February 21, 2013 at 8:54 pm

I just read a report by Armstrong dating back to October of 2012. He didn’t think the indices would break out (new highs) till after the summer of 2013. Looks like they already did. Wonder if his time line is still intact, expecting the summer to be the top.

Tech-trac February 21, 2013 at 11:03 pm

If the S&P can end its 45% bear mkt in 17 months who’s to say that Miners can’t end their 17 month 45% bear mkt likewise?

If the S&P can discount Armageddon what haven’t the miners discounted?
Must the Bullish % figures drop to 0% (2008) or will May’s 8% be enough again to signal an oversold condition worthy of an important rally?

Pat February 22, 2013 at 2:59 pm

Who needs gold when equities are returning 15-20% / year. Forget that stuff, it’s way overvalued even at todays prices. The last 2 days have been great buying opportunities for stocks.

I had to laugh yesterday at all the bears who think the rally is now over because stocks were down for 2 days a whopping 1.3% !! LOL All the market has been doing for the last 2 weeks is digesting an overbought condition. Dow will probably be up 175 points today, and then new all-time highs soon afterward. Stay long, the Fed ain’t going anywhere.

gary leibowitz February 22, 2013 at 8:03 pm

With the technicals stretched, looming Republican decision whether to cave in yet again, fundamentals that have not yet seen a decisive breakout, and a 4 year doubling of the market, I wouldn’t be so sure it goes straight up from here. A 6 to 8 percetn correction, at the least, would seem prudent now.

I will be betting the SPXU before the day is out.

casey-mudville February 22, 2013 at 3:25 pm

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022953/golds-death-cross-is-a-buy-signal-for-china/
Gold’s Death Cross is a buy signal for China
By Ambrose Evans-Pritchard

mava February 22, 2013 at 4:38 pm

I am buying too, but then I am not exactly a weak hand. Ben Bernanke may spend entire treasury and then more on taking down the gold, and I still would be buying. What matters to me is that I know the truth, and the truth is that in the end gold wins.

However, what is interesting is can RA predict gold movement to the penny, as he does with stocks? And if he can, then does that mean that TA can predict not only market behavior but even a behavior of a completely manipulated price, or would that serve as a proof that gold is not manipulated?

Gold cycles February 22, 2013 at 8:14 pm

Anyone old enough to remember the 1975-1977 gold price action. Ten years into the 1970s bull, the London Gold Pool lost control in 1965…gold peaked at $190 and two years later bottomed at $110.

Ten years into this bull gold peaked at $1900…later this year it will bottom at $1300 (more money printing this time).

History doesn’t repeat…you know the rest.

martin schnell February 24, 2013 at 6:23 pm

Friday’s COT report implies there is a lot of potential for a short squeeze, but first there is the Monday futures expiry (standard fun and games time) and Tuesday gut check (the traditional sell off on the day following expiry) to get through.

gary leibowitz February 24, 2013 at 6:28 pm

FYI, bought 6,000 SPXU at 31.07. A big bet for me. Even though I see the market going higher till mid year the recent move is way over-stretched IMO. This week should tell me if there is going to be a correction or not.

I still have a small position in Gold, and have not done well. Should have listened to Rick when he said it had a while to go on the downside before any pickup.

I have stated months ago that I would post my betting position for 3 consecutive bets (combined open and close positions). This is my second bet.

Jason February 25, 2013 at 10:57 pm

So far, Gary, nice call.

Rich February 24, 2013 at 6:54 pm

USD cleared 50 and 200 DMAs to six month highs and 103 intermediate target despite Big4 LT short.
Cash in hand is king for now…

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