Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Brutal Correction Brewing, Time to Take Profits and Go Short

Commodities / Gold and Silver 2012 Oct 02, 2012 - 11:16 AM GMT

By: Clive_Maund


Best Financial Markets Analysis ArticleAction in the Precious Metals markets yesterday was VERY bearish and confirms our suspicion that an intermediate top may be forming that could lead to a brutal correction. Yes, yes, we know how bullish open-ended QE is for gold and silver and how the dollar is doomed etc, but so does everyone else – and the latest COTs show that both Large and Small Specs have thrown everything they have got at this uptrend, as we observed at the weekend. The trade is now dangerously overloaded on one side of the scales and a larger dollar rally, which looks likely on technical grounds, could trigger a sudden rout in the PMs.

Gold made new highs intraday yesterday, as we can see its 3-month chart below, but couldn’t hold the gains and fell back into the potential intermediate top pattern, leaving behind a candlestick on its chart that approximates to a bearish “Shooting Star”, the second such bearish candlestick in just over a week. Volume has remained high as the price has tracked sideways, another warning that a top may be forming, and of course, these warnings follow failure of the uptrend shown. Tactics for traders here are clear cut and simple - TAKE PROFITS AND GO SHORT, but reverse position immediately following a close above yesterday’s intraday high, should this occur. This of course will sound pure lunacy to many of you reading this, which is exactly why it could work out well, and anyway, with the stop out point so close by above and well defined, where’s the risk??

The gold COT chart required rescaling because the Commercial short and Large Spec long positions “flew off the scale”. Although these positions can of course get even more extreme if gold makes another upleg, they indicate a high probability that an intermediate top is forming, especially given yesterday’s action in the gold market.

What about the broad market? – although its shorter-term uptrend has not (yet) failed, unlike gold and silver, as we can see on its 3-month chart below, action in the recent past has been negative, with a bearish “Gravestone Doji” appearing on the S&P500 index chart on the highest volume for many months, which we took as a warning at the time, and yesterday a large, bearish “Shooting Star” candlestick appeared on the chart that portends imminent failure of the uptrend that could lead to a steep drop.

Now we come to the all-important outlook for the dollar. While we are amongst the first to admit that the outlook for the dollar is not exactly rosy, what with its enemies at the Fed ganging up to destroy it, short-term it is quite heavily oversold, as we observed at the weekend, and could be due a larger rally as projected on the chart below to complete its potential Head-and-Shoulders top. Such a rally would be the perfect excuse for a sharp correction in the Precious Metals.

In the light of the above observations it is thus most interesting to examine the latest Euro FX COT. This chart shows that Large and Small Specs have collapsed their short positions in the euro back almost to the zero line, which means that they have ceased to be bearish on the euro, which also means that they have ceased to be bullish on the dollar. Back in the Summer the Large and Small Specs, force fed with a diet of misleading news by the mainstream financial media, were encouraged to go heavily short the euro, and they were subsequently fleeced when it staged a big rally, while the Commercials were laughing all the way to the bank, as usual. This chart suggests that a larger dollar rally is in the works. Of course the dollar’s fundamentals are awful, but at this point that could all be priced in.

By Clive Maund

For billing & subscription questions:

© 2012 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in