GOLD TRADE ALERT and BROAD STOCK MARKET UPDATE (2:30 pm EDST)
In Monday's blog on gold and silver I wrote:
"It is possible a strong rally could start from a low by Wednesday, but lower prices past Wednesday would probably negate that scenario. If gold breaks below $1161 and silver breaks below $13.95, this market's short and medium-term trend could turn very bearish."
Here we are on Wednesday, and so far prices have not dipped below those lows. Technically, there is about an 80% chance for a rally, but also a 20% chance of a plunge to lower prices. The current U.S. Dollar Index chart seems to suggest that the dollar is in the process of taking a significant correction off of last Wednesday's high (96.12) which was in the middle of a reversal zone specifically for currencies. This is supporting the idea of a rally in the precious metals now. What I am going to do here is go long in gold with a tight stop loss based on a break below $1180. If these metals do turn south, silver's losses would exceed those in gold so let's stay out of this metal for now. Entering a long position in gold today.
Our short position in the broad stock market is doing extremely well as equities continue plunging today. If the Trump administration has a "plunge protection team", they have not been able to stop this significant correction now unfolding. But the odds were against them, because it is late in the medium-term cycle of this market, and equities were technically "ripe" for some sort of correction. How far will the drop go? That is hard to say, but a normal target for a cycle bottom would be in the range of 25,100 - 25,800 in the DOW. We are already close to the upper part of that range; however, there are no significant reversal zones for the rest of this month so there is plenty of time for this market to go lower. Holding my short position in the broad stock market.
In Monday's blog on gold and silver I wrote:
"It is possible a strong rally could start from a low by Wednesday, but lower prices past Wednesday would probably negate that scenario. If gold breaks below $1161 and silver breaks below $13.95, this market's short and medium-term trend could turn very bearish."
Here we are on Wednesday, and so far prices have not dipped below those lows. Technically, there is about an 80% chance for a rally, but also a 20% chance of a plunge to lower prices. The current U.S. Dollar Index chart seems to suggest that the dollar is in the process of taking a significant correction off of last Wednesday's high (96.12) which was in the middle of a reversal zone specifically for currencies. This is supporting the idea of a rally in the precious metals now. What I am going to do here is go long in gold with a tight stop loss based on a break below $1180. If these metals do turn south, silver's losses would exceed those in gold so let's stay out of this metal for now. Entering a long position in gold today.
Our short position in the broad stock market is doing extremely well as equities continue plunging today. If the Trump administration has a "plunge protection team", they have not been able to stop this significant correction now unfolding. But the odds were against them, because it is late in the medium-term cycle of this market, and equities were technically "ripe" for some sort of correction. How far will the drop go? That is hard to say, but a normal target for a cycle bottom would be in the range of 25,100 - 25,800 in the DOW. We are already close to the upper part of that range; however, there are no significant reversal zones for the rest of this month so there is plenty of time for this market to go lower. Holding my short position in the broad stock market.
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