I'm a LT gold bull, but this move looks like it might be done
for a while. I know that if you draw the top of the wedge TL using
the wicks it has a little more room, but on a weekly chart I prefer
to just use the bodies of the candles. We've hit the top of the
wedge, and we're printing a pretty nasty engulfing candle which
will actually look worse at EOD with today's action (barring some
last minute turn). This candle isn't quite as nasty as the one
circled about a year ago, but that one lead to a large pullback, so
I take this one seriously and it's at the apex of the wedge. And
the potential for a Neg D MACD cross is obvious. So all in all I
think caution is in order on all things gold. If somehow it can
reverse here, and invalidate the wedge by blowing through the top
and turning the wedge into a channel, well then that would change
things.
My problem with this current BPGDM short is that the BPGDM is
slow to react and it has fallen so quickly, therefore
I would not be
surprisedif this GDX trade ends up being a
losing trade by the time
the BPGDM crosses back above the 8 day MA. See the
statistics, it has losing trades, this could end up being one of
them with and then maybe the next Long trade is the winner etc,
we'll see. The average time in trades is 24 days with the shortest
time of 6 days, so I doubt the BPGDM will cross back up over the 8
day MA any time soon.
But you guys have to understand system trading, this trade will
either be a winner or it won't and even if it's a losing trade,
that doesn't mean there is anything wrong with the system.
For system trading you have to do each trade in order to get the
returns of the system in the long run.
Here's a copy of some of text from the
Premium Content pageabout systems and psychology
The Psychology of system
trading:
Regarding the systems; please use a
scientific mindset when
analyzing them: First off, the systems are not 100%
profitable and so losing traders are a normal part of the systems
or any system for that matter. For example, if a system is
70% profitable, this means that 3 out of every 7 trades will be
losers! So by chance or bad luck, it could be that your first
3 traders are losing trades! On this note, I've had folks who
traded the systems once or twice and said 'they don't work'!
Use your brain, you have to trade them long enough in order for the
statistics to play out, 1 or 2 data points is not enough to judge
the systems! In order for the system statistics to play out, you
need to play every one of the trades, or at least most of them, for
a certain period of time, otherwise you skew the statistics.
Of course also remember that the statistics are based on back
tested data and thus the systems effectiveness and results can
change any time
excellent chart, puma. As you pointed out, it's at the end
of the wedge and dropping, all the indicators have negative
divergence, have moved lower as the price moved higher, and the
RSI, MACD, and both long and short term slow stochastics seem to be
rolling over with price and heading down.
Posted by biketastic on 21st of May 2010 at 02:17 pm
Thanks for the post Puma. It has reaffirmed a decision I
made this week. Had 30% of my pension (401K) in gold
and sold it on Wednesday for a nice 30% return.
TNX for the post, Puma. Although technicals show a berasih
picture on GOLD, my ideas towards a deeper correction tend to make
me look @ gold and USD, both "risk" averse positions. How would you
deal with this scenario?
Posted by dallassteve on 21st of May 2010 at 03:33 pm
Thanks for the nice gold chart, Puma.
I'm serious about this, too. I am not holding any gold
stocks at this time. That being said, I am not selling any of
my physical gold, and looking to buy more (if there is any to be
had) after a healthy pullback.
dpack asked about how gold would do during a deeper correction
in the markets. I am a gold bug, but I am going to wait until
this correction has played out to take any longer-term positions in
gold stocks.
If you're still there, can you share before the close?
After that big gap down and rally up this AM, gold and silver
have pulled back most of the way from today's top, could even leave
an inverted hammer on the daily chart. Matt or Steve, do you
think the pullback is a wave 2 pullback, or rolling over and going
lower?
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Gold Chart -- Wedge and Engulfing candles
Posted by puma on 21st of May 2010 at 02:09 pm
I'm a LT gold bull, but this move looks like it might be done for a while. I know that if you draw the top of the wedge TL using the wicks it has a little more room, but on a weekly chart I prefer to just use the bodies of the candles. We've hit the top of the wedge, and we're printing a pretty nasty engulfing candle which will actually look worse at EOD with today's action (barring some last minute turn). This candle isn't quite as nasty as the one circled about a year ago, but that one lead to a large pullback, so I take this one seriously and it's at the apex of the wedge. And the potential for a Neg D MACD cross is obvious. So all in all I think caution is in order on all things gold. If somehow it can reverse here, and invalidate the wedge by blowing through the top and turning the wedge into a channel, well then that would change things.
Thank you, Puma
Posted by sankaty on 21st of May 2010 at 04:40 pm
for your gold alerts. I hope we get a good re-entry point soon.
My problem with this current
Posted by matt on 21st of May 2010 at 04:46 pm
My problem with this current BPGDM short is that the BPGDM is slow to react and it has fallen so quickly, therefore I would not be surprisedif this GDX trade ends up being a losing trade by the time the BPGDM crosses back above the 8 day MA. See the statistics, it has losing trades, this could end up being one of them with and then maybe the next Long trade is the winner etc, we'll see. The average time in trades is 24 days with the shortest time of 6 days, so I doubt the BPGDM will cross back up over the 8 day MA any time soon.
But you guys have to understand system trading, this trade will either be a winner or it won't and even if it's a losing trade, that doesn't mean there is anything wrong with the system. For system trading you have to do each trade in order to get the returns of the system in the long run.
Here's a copy of some of text from the Premium Content page about systems and psychology
The Psychology of system trading:
Regarding the systems; please use a scientific mindset when analyzing them: First off, the systems are not 100% profitable and so losing traders are a normal part of the systems or any system for that matter. For example, if a system is 70% profitable, this means that 3 out of every 7 trades will be losers! So by chance or bad luck, it could be that your first 3 traders are losing trades! On this note, I've had folks who traded the systems once or twice and said 'they don't work'! Use your brain, you have to trade them long enough in order for the statistics to play out, 1 or 2 data points is not enough to judge the systems! In order for the system statistics to play out, you need to play every one of the trades, or at least most of them, for a certain period of time, otherwise you skew the statistics. Of course also remember that the statistics are based on back tested data and thus the systems effectiveness and results can change any time
It's all lining up...
Posted by sonia on 21st of May 2010 at 02:36 pm
excellent chart, puma. As you pointed out, it's at the end of the wedge and dropping, all the indicators have negative divergence, have moved lower as the price moved higher, and the RSI, MACD, and both long and short term slow stochastics seem to be rolling over with price and heading down.
Thanks for the post Puma.
Posted by biketastic on 21st of May 2010 at 02:17 pm
Thanks for the post Puma. It has reaffirmed a decision I made this week. Had 30% of my pension (401K) in gold and sold it on Wednesday for a nice 30% return.
TNX for the post, Puma.
Posted by dpack on 21st of May 2010 at 02:39 pm
TNX for the post, Puma. Although technicals show a berasih picture on GOLD, my ideas towards a deeper correction tend to make me look @ gold and USD, both "risk" averse positions. How would you deal with this scenario?
gold chart wedge
Posted by dallassteve on 21st of May 2010 at 03:33 pm
Thanks for the nice gold chart, Puma.
I'm serious about this, too. I am not holding any gold stocks at this time. That being said, I am not selling any of my physical gold, and looking to buy more (if there is any to be had) after a healthy pullback.
dpack asked about how gold would do during a deeper correction in the markets. I am a gold bug, but I am going to wait until this correction has played out to take any longer-term positions in gold stocks.
still holding the metals, rank10?
Posted by sonia on 21st of May 2010 at 02:50 pm
If you're still there, can you share before the close? After that big gap down and rally up this AM, gold and silver have pulled back most of the way from today's top, could even leave an inverted hammer on the daily chart. Matt or Steve, do you think the pullback is a wave 2 pullback, or rolling over and going lower?