Tuesday, May 8, 2012

8 May 2012

One would think that with the sell-off today we would have become oversold.  One would be wrong.

The persistent strong closes have prevented any kind of panic from clearing out the market.  The top two time frames have already bounced off lows and are back near middle ground.  

It seems that the US investors want to believe Europe will all be okay and they can just buy the dip.  I don't think they understand what is happening.  The persistent weakness in my medium term indicator (bottom) since early February still hasn't reached a "shake-out" point.  It is possible it will not, but either way the downtrend is not encouraging considering the monetary tailwinds we've had.

Gold and silver are definitely buying the "inflation" risk on trade lately, and I consider them some of the best leading indicators for it.

Gold has broken through its long term support line from 2008.  This should encourage some panic selling as we saw today.  At times price can bounce back up to challenge support as a way to lure in buyers.

Target is a possible 1250 as evidenced by my yellow line.  It is also the 50% retracement line unless I messed up.  Yes, I know GLD is not gold.  This is a normal phenomena during bull markets.  A given line of ascension will be broken, and the next line trendline that emerges will be more steep and so on until you basically go vertical.  Not saying this will happen, but its what happens in a lot of stocks that go parabolic.  They generally have 3 to 5 phases.  Phase 1 would be 02 to 07, Phase 2 08 to now, Phase 3 12? to 16?

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