Gold is in the middle of a multi-month, symmetrical triangle consolidation.
Financial comprise about 13% of the SPYs. Notice the financial sector is in very bad technical shape. They are in a clear downward trend. While they tried to rally at the end of October, the hit resistance at the 200 day EMA.
2 comments:
Gold is consolidating - one wonders if this suggests it will take off again soon or is leveling off.
Bonddad - love your site - curious about many technical analysis points, such as this:
How is it possible to identify a "Gold Bubble" if one exists? From a long-term technical perspective, gold is incredibly over-bought, considering that it has tripled in the past 10-15 years. Think: one tiny ounce of gold - is it really worth $1,700?
If there is a bubble today, it must be gold and precious metal commodities.
Jim Rogers is on internet today saying that he is "long" precious metals. Whatever he means by that, it may be that gold is about to drop like a brick, and he may be trying to prop it up just long enough to get out of his "long" positions. It makes hardly any sense to be long precious metals at this moment when the whole world economy is slowing down. One could be long on gold over a 5-10 year period perhaps, but not over the next year or so...not if the world econ is slowing.
Of course, for a day-trader "long" might mean a week.
I digress... The point is that the technical analyst identifying trends needs to look very long-term now and then, rather than focusing merely on day to day blips or surges in activity. Otherwise, how to identify the bubble before it pops?
How can we explain why "smart" money is in precious metals when there is no whiff of inflation in most of the world?
Are we at a stage when people put $$ into gold when there is inflation and also when there is deflation or any hint of a downturn? In other words, no matter what happens, gold is the only way to make money?
Yes - looking backwards, gold was the way to make money, but isn't this almost a sure sign that it has already had its heyday?
Can we perhaps take a few steps back, look at the picture in perspective, and note that there are bubbles in various sectors (.com bubble, housing bubble, and now perhaps a gold and treasury bubble?).
The world economic system has bogged down due to not investing in economic activity (equities), but playing it "safe" for year upon year (gold, treasuries). Is this strategy itself not terribly risky over the long term?
Would love to see a multi-decade asset-allocation chart including data on equities, bonds, real estate, commodities - where does the money go over decades. I am inclined to think that Warren Buffet is ahead of the pack yet again, being not the Rogers (Minas) type or the penurious type but one who believes in investing in human capital - in jobs and economic activity.
Love to hear your response, and those of others on this kind of macroeconomic point.
another thought about Rogers - if he is long precious metals and if financials are about to take a dive, is the well-known short seller like Rogers perhaps trying to push financials over the cliff so he can rake it in with his precious metals positions? Short sellers would have few compunctions about creating an economic armaggedon for the rest of mankind if it would put a few trillion in a Swiss bank account for themselves.
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