Gold Moving Down as Expected; March 24, 2009

Just to update the short gold trade from the post on March 21st below; the head and shoulders pattern proved a great indicator for the bearish potential that came about (see above updated gold chart). Gold has sold off nicely this week and I expect it to continue. It's time to move my position to have the stop losses at break even in the $955 area. Now I can just sit back and let the trade run. I expect gold to get to $880 at least, in about a week or two.

FYI - I don't always post updates here if nothing significant or new has happened in the markets. I don't see a point to post "nothing has changed", or "waiting". I've beeen waiting for the stock market to show signs of top, which I got wrong a few days ago, so I've been on the sidelines essentially. Now I see a stock market top and gold has moved significantly in my favor so I'm posting an update.

Right now my trades are short gold with a stop at breakeven, and I'm mildly short the S&P with a stop at 821.

Big Downward Correction Underway; March 24, 2009

The strength of this rally sends a strong signal to me that this market has formed a bottom that should last for months, or more. For that reason, it's time to start trying to get long this market. However, the market appears severely overbought, and momentum indicators are not confirming the new price highs and are dragging downward on the larger time frames. You can see on my 4hr S&P futures chart above that even the RSI has failed to make any significant new highs since the S&P hit the 760 level. So that's about 60 S&P points uncomfirmed by the RSI. This is very bearish. Plus, with the amount of progess this market has moved upward in such a short period of time, some pullback and profit taking is due. The financials (XLF) has been leading this market up and down, actually brokedown at the close today and closed down almost 5% on the day. It made new lows and declined impulsively. So the short term trend appears to be down for the financials and they should drag the entire stock market down with it.

Key target areas for this decline are the fibonacci 38% retracement level and prior 4th wave area at 761, which should prove to be formidable support, as well as the 743 and 725 levels. I am mildly short the market right now but will quickly move to start establishing bullish positions once the S&P gets into the 760 area.

So, to sum up, the market appears to have formed a significant bottom and I'll be looking to get heavily long once this market pulls back enough to releive these overbought indicators. In the very short term, the market looks bearish and should take it down to the 760 level. From there I will start shifting from a short bias to big long bias.

Gold's Bearish, Stock Market's ???; March 23, 2009

Gold sold off near the close of today's US session and should mark the beginning of a significant decline to at least the $880 level. The stock market obviously did not decline like I thought it would but today's fierce rally was on strong breadth and technicals which strongly suggests that this market has formed a significant bottom (S&P 666 cash) and is in a major rally phase. It's too late to chase this rally on the long side so I'll wait for some significant pull back to get in long.

Gold Looks Immediately Bearish; March 21, 2009

After the Fed news on Wed. and me watching a nice short gold profit evaporate in less than a minute, gold has had little follow-through. This is bearish. Now look at the 1 hour gold mini futures chart above that shows a MACD bearish divergence (bottom indicator) and the classic bearish head and shoulders pattern price is forming.

I'm short gold again with a stop at a new high. If I'm stopped out, I will re-enter again on weakness.

S&P Has Begun its Pullback; March 21, 2009

The S&P is moving just as expected. It was repelled by the 800 level and had no follow-through after the Fed announcement on Wed. Some type of top is in the market in the short term. Momentum indicators are showing major bearish divergence on the 1hr-4hr charts so this decline could be significant. I'm not certain it will take the market to a new 2009 low because the rally above 800 should be a wave 4 but it violated the previous wave 1 so it can't be. It's possible this final wave down is much larger than I previously thought and we're undergoing a very large wave 3 down right now, but I'll let the market prove that to me first and not assume it. Right now I'm a short term player only, because that's what's clear to me. The market has rallied too high and too quick and momentum indicators suggest a large pullback is in its early stages.

I'm short the S&P and Nasdaq 100 through ETF options and will stop out with a strong break above 800 in the S&P. I'm also short the gold ETF.

Short Term S&P Looks Bearish; March 19, 2009

Attached is the 4hr S&P futures chart. It shows why I think a significant bottom might be in. The projected wave (4) has entered the territory of wave (1) which is a big rule violation in EWP. Are there there other alternatives to still offer a bearish scenario suggesting another major selloff, yes, but this is what we have now so I'm going with it for now. But as you can see, this rally has been pretty straight up and needs to correct before it moves higher..............IF it moves higher. Also notice the MACD momentum indicator at the bottom. There is a major bearish divergence building which acts like a rubberband and when it snaps it will be a strong snap that should shoot this market downward long and fast. So in the short term I'm bearish the stock market will option protection. Once I see the structure of the decline it will help me determine whether it's a correction and the market will move higher, OR if the market has resumed its downtrend. So, to sum up, I"m short term bearish the stock market waiting for clarity regarding the larger trend.

Long Term Chart Shows Significant Bottom May be in; March 19, 2009

Attached is a daily chart of S&P futures which I put a projection of market movement back in January. As you can see, the market has followed my red line very closely. It's quite possible the S&P has formed a significant bottom and will rally for months, if not years from current levels. However, I'm not jumping on big long just yet. The short term wave count would look better with one more new low (below 666 S&P cash), and the social environment just doesn't seem pessimistic enough to think a solid bottom can be in. I am not getting heavily short based on the long term picture, so I will play the short term side while always protecting my positions with options. The rally from the bottom looks impulsive, which suggests the trend has now changed from down to up, but we'll have to see how the decline unfolds as well. If the market rallies in an impulse wave and then declines in a choppy and messy decline with moderate internals, then that means it's time to buy. So we'll have to wait and see the structure of the decline to determine if the larger trend is up or down and that will tell me whether I should be looking for only long or short trades. But for now, the short term looks bearish.

Silver Structure Now Unclear After Fed Manipulation; March 19, 2009

Silver and gold's rally messed up a what was a perfectly unfolding EWP wave count suggest serious downside potential for the metals. The rally was too big too strong and too fast and I was stopped out of half my positions. If silver and gold are going to collapse as expected, then we can label the rally the other day as a wave C of a flat correction, but this means they should both top and reverse to the downside immediatetly.

Silver and Gold are in the Next Decline Phase; March 16, 2009

Gold and silver fell hard today right when they needed to and should be in the next decline phase which should be very very heavy. I'm now fully short both metals again.

Silver/Gold Short Running Out of Room and Time to Decline; March 14, 2009

Above is an updated 1hr silver mini futurs chart. The rally needs to end soon, and judging by the MACD and stochastics, that should happen soon and lead to a major selloff. $13.53 in silver and $945 are crucial levels, however even if they're only slightly broken we could still count the entire rally as a "flat correction". However it can only be a slight break in my view. I cut back on half my shorts to lock in some very mild profits and will reshort ONLY when I see weakness again.

The stock market rally is in its final stages. 804 in the S&P is the make or break point as it's the end of wave 1 and cannot be exceeded. I will exit my long positions between 770-780 and will begin to short again with stop above the 800 level. To make a nice 5 waves down over the past few weeks we need one more new low on the year. I'll position myself for that with stops at the 805-810 levels.

Silver Short Position Continues to Look Good; March 11, 2009

Silver continues to fall in 5 waves and rallies in slow, choppy, overlapping waves. The MACD and stochastics are showing a bearish divergence at the tail end of this rally today and it's barely moves a few percentage points to the upside. Once this correction is complete, it will lead to very heavy selling. I remain short and I'm well into a very nice profit as I essentially nailed a top in this metal.

I also have a short gold position on as well. Gold's EWP structure is not as clear as silver's so I'm just posting silver.

As for the stock market, the rally that started yesterday should have some follow through in the next day or so. The market should charge toward the 770 area before meeting resistance and rolling back down to lower levels. We should see one more new low on the year before this big cycle of selling over the past 18 months ends. I have a very small long position on right now with a stop at the S&P 675 area. I will look to enter a strong short position if the opportunity presents itself.

Silver Moving Down as Expected; March 9, 2009

Silver and gold are moving lower as expected. Both have broke below their initial surge up peak, which creates an overlapping of waves, which means a correction. So whether they move higher or not, the rally from $12.79 is clearly a correction. I strongly feel that the declines in both the metals look impulsive so I expect them to move much lower in the very near future.

See the progress of the trade I'm tracking in the past few posts on the 1 hour silver mini futures chart above. My last short entry was at $13.31, near the peak at the 50% fibo retracement of $13.52. I will stop out at a new high just above $13.52.

Silver Short Looking Real Good; March 7, 2009

Here's an updated silver mini 1hr chart showing the rally stopping exactly on the 50% fibo retracement level. The MACD has been declining since almost the very beginning of the rally from the low at $12.42. Gold's momentum indicators are extremely bearish as well. On an intraday basis, gold made 3 slight new highs on Friday but silver actually made 3 new lows! This divergence says "TOP" all over it. I'm heavily short both gold and silver and expect them to plummet soon.

My minimum target for silver is $8.50 (currently $13.38) and my minimum target for gold is $680 (currently at $940).

Do the percentage calculations on those moves and you'll see why I'm so excited about these two trades.

As for the stock market: I have very very small call options in place that I'll let run until their expiration in April if there's not a significant rally. Other than that, I'm standing aside and waiting for signs of a huge rally. The risk of staying short is too great because it's way too crowded a trade right now, and getting long now trying to catch a bottom is a fool's errand. So I'm waiting for an opportunity.

Shorting Silver Looks Promising; March 5, 2009

While I was wrong on the stock market call from last post, I do understand that trying to pick a bottom in a wave 3 down market is a fools errand. I still have some small call option positions in place, but I have no confidence in adding a heavy long position now. The market still looks poised to fall more. And the short trade is quite crowded and negative sentiment extremes are being reached, so the risk of shorting is way too great.

So I look to other markets. Gold and silver look very bearish and very promising. I am short both metals. Silver shows the clearest impulse pattern from its peak. Attached is a 30min mini silver chart show a clear 5 wave drop from $14.62. It's now correcting that drop. If I'm right, it should be on its way to breaking its previous low at $8.47. So that's a 36.5% minimum fall from current levels ($13.30). The maximum stop loss area for this trade is the previous high at $14.62. So I'm risking 10% to make at least 36.5%. That's a risk/reward on a high probability trade I'm all over.

The rally should halt around the $13.26 - $13.80 area. Once it tops and reverses again, the fall should be huge, fast and furious because it should be a 3rd wave.

I'm short silver and gold with a medium sized position.

One More Rally and Decline to New Lows; March 4, 2009

Just thought I'd add my 2 cents with this S&P futures 4 hour chart. It appears like a 3rd wave, within a larger 5th wave, completed yesterday and is now rallying in a wave 4. So far there are only 3 waves down but the past couple large 5th waves over the past 18 months have actually fallen in 3 waves and kicked this elliotician in the twins a couple times already. So I'm on guard for this to happen again.

The chart above shows a prior 4th wave area in the 38%-50% fibo levels at the 750-770 area. If it is a 4th wave, I will probably go heavily short against a tight swing high, and purchase April or June call options for protection. If a triangle appears to form, I think I'll sell March or April options against a short position to try and collect some premium before it thrusts to a new low. Either way, I won't get aggressively short as this is a bit late in the game and the larger structure should be ending any time now and large ferocious rally should ensue for several months, at least.

Anyway, just thought I'd comment.

Gold and silver look to have topped and their 2008 lows should be broken in the coming weeks before they make new highs from 2009.