Wedge: FAILED... (badly)

Well, this is the problem with TA and chart formations. They help you see a picture that MAY develop but doesn't necessarily HAVE to. The wedge was in play till it wasn't. This is why you don't buy in anticipation of a chart break-out, you buy the break-out. Otherwise, you risk being long and seeing what just happened occur, and that stings. So lets go over the chart. First the daily. As you can see, we stopped at our all important 150 day MA a few days ago and held it for the close. This MA has marked EVERY MAJOR BOTTOM IN THE LAST 3 YEARS!!! Of course it's failure to hold is certainly not a good thing, the fact that it continued downward and pierced right through the 200 day MA as well is even worse.

OK so that is the daily picture.  Unfortunately, the weekly doesn't look much better.  We can see from this a similar picture on a different scale. Doesn't look pretty.

Finally I will give you the monthly to look at, which kinda puts things more in perspective for the "big picture".  Although the daily and weekly look bad the overall trend is still intact for the monthly.  The only thing that concerns me is the MACD which took a sharp turn down and looks like it could crossover.  Something to keep an eye on because it could spell out a 2008 style decline.

Anyway, putting everything in perspective, we come up with the following conclusions...

-Europe is screwed.  Any way you cut it, Greece gets kicked out, Germany leaves, the Euro splits into 2 different Euros, they suck it up and print money or they collectively default, it doesn't matter, the end result is the same=good for gold.

-We are next.  The term "cleanest shirt in the laundry basket" has become popular.  It's more like "least smelly public bathroom in Newark NJ."  Make no mistake, those that are attacking Italy sending 10 year yields to beyond 7% will do the same for us when our time comes.

-The thing about printing money is this: once one country does it, others have to follow to maintain competitiveness.  Britain has joined the party, Japan has been active in it as well.  The Swiss have stated they will and upon such news as everyone shifted attention to investing in Norway, the Norwegians said in very plain terms "don't even think about it."  Australia who is doing far better than any other western nation, has been lowering interest rates to preplan for a Europe disaster.  We, the USA I mean, are the most notorious for printing money, and Europe, Germany be damned, will have no choice but to join in or risk an overall Euro default.  It's a world wide race to see who can send our currencies to ZERO the fastest.  Try and argue a point for me that proves that is not insanely bullish for gold... seriously, just try, I'd love to see it, I haven't laughed in a while.

All of this leads to conclusions that are wildly bullish for gold, which I might add, is for whatever reason, very much on sale.  This is NOT the type of market you can try and chase momentum and price action in.  This is a very simple "buy the dips, sell the rallies" type game.  (and if I may add to that, "buy the dips, sell the rallies, and try to hold down your lunch in the mean time".)  you have to buy VALUE, plain and simple.  I will leave you with a quote from my grandfather when asked "how to make money in the market".  His reply, "Buy a $20 stock for $10."  That is value, and that is smart investing.  Buy a $2000 oz for $1550.  That is value and smart investing.

Till next time my friends,  stay strong, and be careful out there.  It's a Madhouse.

-J

Brief comments on today's action

Ok briefly here, today's action in gold was important even though not substantial.  A move lower was definitively rejected at both a support point as well as the 50 day MA.  The fact we did not quite get to the low range of our wedge, as well as hold lows at 1700 or below for long periods, screams of value buying coming in.  MACD was set for a nice bullish crossover.  If you pay attention, you've probably seen enough times with gold that that happens only to fail and roll right over... as if by magic...  the resilient move today will most likely foil those plans of the powers that be.  It looks from here as if we will definitely make a stab at 1750 again, provided we can maintain above 1720 area for a bit.  If we bust through that region, 1800 is a given, which should be propelled easily after the break of the wedge formation.

Just remember from a trading aspect, don't buy in an anticipation of a chart formation break out, it might not pan out.  Buy the break out and sell soon then wait for a pullback to buy again, if your looking for a trade.  Especially in the case of wedges, as a friend restated to me the other day, 90% of the time in my experience, a wedge formation that reaches its apex without a significant move one way or another, will most likely eventually break down.  Remember "what can't go up, must go down and vice versa".

Regardless, lets say this, I suspected we wouldn't see gold start making a move till late nov.  its now early dec and we are at least showing promise.  if we break out buy years end a rally could last on gold for 2-3 months, and show us an easy say, 2100.  HUI, that could be 650+.  Point is, my original gut, fundamentals, and technicals are coming together at the same time, and thats usually served me well... make you own assessment.  below is the chart. 

And remember, be careful out in that financial world, it's scary.

-J