September 18th 2010
Gold Stocks – Update
A few weeks ago I posted about the bullish pattern that was taking place in the gold stocks index on the weekly chart. Well since then this index (XAU) has broken out which is why is why I feel it’s time for an update on this market. As you can see the index has broken out of its symmetrical triangle and appears to be holding above the apex which is a good sign. If I am right about this pattern and we do get a rally, I am looking for the index to trade up to the 237 level which I marked off on the above chart. If on the other hand the index heads south, my protective stop would be around the 175 level. For those of you interested in trading this pattern you can buy GDX or simply buy several individual gold stocks which are showing a similar chart pattern.
Today was a big day in the stock market as stocks gapped open higher and never looked back. I’ve been bearish on the market but unfortunately got stopped out of all my shorts right around the open this morning. Looking at the above chart of the S&P you can see the market is right at its 50 day moving average and is still making lower highs which technically means the downtrend is still intact. If the downtrend is still intact you may be wondering why I exited my shorts prematurely. The reason is because they simply stopped going down. Over the past two weeks as the market moved lower, many of my shorts were not acting right and were slowly moving against me. Other than the semiconductors, many of my shorts actually began to rally as the S&P moved lower which was a warning sign. I did however lower my protective trailing stops which all got hit on the gap up today. The market has been difficult to trade which is why I am now on the sidelines. Keep i