Posted by: stockscooter | May 6, 2012

The Golden Bear

On March 1st, I posted a comment on Gold. “…there is high risk for more significant downside if new advances don’t begin before this week is over.”  Well new advances did not begin.  Contrarily, we’ve had a five wave sell-off (yellow #1) and we may have just completed a triangle (yellow #2), which is highlighted by the two blue trend lines on the chart below.  IF price breaks down below the trend line, it’s highly probable that wave 3 has initiated.  I have marked the potential target of this drop. This is my primary count.

There’s more.  Never is a projection guaranteed.  Certainly, positions should not be initiated until after the break-out, because alternative counts can override the primary projection.  Here is my alternative count.

Either way, we have a situation where a huge break-out will occur.   I believe the probabilities favor a break-down.  The recent triangle has qualities of a descending triangle, which is bearish.  If gold sells-off here, a lot of money will be made available to buy other assets.  You should be asking yourself, “What asset class goes up, when gold goes down?”  That’s where the money will flow.  As always, do your own due diligence.

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