The past two trading weeks in the gold market has been rather dramatic: a sharp decline followed by a sharp rally and then a recent test of the lows. The end result - quite a bit of wailing and gnashing of teeth. And, we think the wailing shall become louder before gold finally bottoms and turns higher towards new all-time highs. Quite simply, gold is in the process of providing those longs accumulated over the past 2-years with losses, and a resultant "puke point" lies ahead.
Technically speaking, we are looking for a test of the rising 150-week moving average at $1539 - much in the same manner as was seen during late 2008. However, one need understand that this moving average is likely to be violated for a short period of time, and it is likely to test the rising 40-month moving average currently trading at $1494. So, we have a zone in which to consider buying gold for an initial position; and then we would use a breakout above the 30-week moving average to add to the trade and get very very aggressive. Until then, we can wait for the yellow dog to bark.
Good luck and good trading,
Richard Rhodes
