An important update on the position in markets in just a second, but I also want to draw your attention to a developing story that I wrote about here the Monday before last regarding gold.
First, the stock market developments since Monday. Should you sell or buy? Or maybe both…?
On Monday I explained that the market would likely head further down and that it must hold at around the 1770 area for the S+P 500. Looks like the market has taken that seriously:
As you can see above from the blue horizontal line I drew at the 1770 area, the market is hesitating there and holding. It needs to. What happens next will be important because if it can’t at least hold at this level, it’s a long fall downwards.
But this is also a great opportunity for traders. If you take a long position here with a tight stop loss around 1760, you have very little downside and a lot of upside. And if it goes down next, that’s a great shorting opportunity if the 1770 area is breached.
Traders know that opportunity lies at the price-points where buyers and sellers are in equilibrium, when the tug of war seems even. Times like now.
Right now this market sits at the intersection of two important support lines- the support line I drew above and the diagonal uptrend I’ve been commentating on for weeks:
What happens next should be extremely telling, and very profitable, one way or the other, but ‘double-support’ like this can be hard to break down through. One way or another, it should be a strong move up or down next.
Meanwhile, gold is being rather sneaky. The Monday before last in this column I explained that gold may have formed a classic and large double bottom pattern, a very reliable indicator that the bottom was in.
And, while the world stares at the stock markets sink, gold has been quietly climbing, hoping you won’t notice, like any good bull tries to do. Look at this nice uptrend forming for GDX, the gold miners’ fund:
The downtrend has been broken, a double bottom pattern could be underway, and unlike GDX’s previous whipsaws upwards, this uptrend seems persistent and sustainable, and just at the time when The Fed talks about printing LESS money! Yes, markets truly are perverse. And that’s why they always do what they’re supposed to, but never WHEN.
We watch, we wait, and we keep you posted…
Best,
Jim.
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