With the fundamental news now being widespread, providing a “pool” for profit takers to sell into, this crowd of smart money will be looking to rotate into another market for a bull market play. I started to see some of that action last week in Gold. From a technical point of view I noted last week that a potential bear trade was setting up in Gold. Now that prices have move above their most recent highs, the “failed” breakdown in late July along with its “volume spike” has trapped a fair number of bears. This trap will be punishing as the bulls push prices higher causing the shorts to cover. As noted last week I expect new highs in gold and for prices to trend higher in the month of August. The outlook from last week is now reinforced where traders should expect “the daily range to expand and volatility to increase. Don’t fade the breaks, trade them.
Playing a few of the laggards here may also make sense. Silver should follow behind gold. Prices for Silver have been locked in a trading range that actually dates back to 2008, the old price level of 17 to 20. Like gold it is now prepped for a run to new highs. Market condition indictors like ADX and %C both suggest a trending move is set up and prices are ready to explode. As a rule the longer prices remain dull – churn in one place – the stronger will be the move out of that “trendless period. ADX staying below 15 for the last two months would suggest a trending move is near and %C which cycles faster but is prone to more false starts than ADX has already broken into a trending mode. From my view any dips early in the week are buying opportunities.
