Gold Signal Still Short
Model Gold Portfolio: Short Position, (signal= Oct 1)
Technical Read: Gold climbed recovered about 2/3s of Friday’s loss (based on GLD trading) on Monday, reacting to a drop in the dollar (see catalyst 1) and possibly a story circulating that part of the previous week’s damage came due to a large errant trade. There was limited follow-through buying the next day. Tuesday’s close was roughly in line with the previous channel (lower) resistance, a dubious position for further advances this week. My readings are still negative and I would not be surprised if we have seen the highs of the week.
- Catalyst 1 – The US dollar index had a bad day on Monday and limited follow-through selling the next day (roughly mirror imaging gold). The the dollar is now resting on near-term chart support (85.50). If dollar picks up a bid going into the weekend, this will be bearish for gold.
- Catalyst 2 – The S&P 500 sustained considerable selling today. Stocks are nervous about global slowing that appears to be centered in Europe. A sustained whiff of deflation could really shake the ground. However, I am not sure stocks have much more to fall in the near-term. The S&P bears face significant support just 25 points lower. The Mummy is not signaling much more to the downside either. Severe equity selling would be supportive for gold, but if it has a deflationary theme, both could end up going down together.
- Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com