Gold Setup

This is a follow up post to June’s blog post – Gold is Ready to Perform and is an excerpt of the weekly premium report.

This is once more a very bullish setup for gold, as the second Daily Cycle within a bull market advance will often significantly surprise traders with its intensity and duration.  Predicting price movements is a difficult game, but a rally over 20 trading days (up to day six now) is to be expected, adding a minimum of $100 from the Cycle Lows.

When we widen the timeframe out to the weekly Cycle, we see a similar bullish picture.  A clear bear market trend was decisively broken in early 2016, and now that a second straight Investor Cycle high has been made, the trend has clearly reversed.  The early, massive out performance shown by the precious metals miners tells us that a new bull market is already well under way.

For this Investor (weekly) Cycle, a drop back to the 10-week moving average during the first Daily Cycle Low (DCL) was just classic bull market behavior.  Although the ascent off the December bear market lows is certainly steep, and arguably not sustainable over the longer term.  But for now, we’re still in the early portion of this Investor Cycle with some serious momentum behind this sector.

There is a tendency during bull markets to overthink each setup or for traders to become overly aggressive/greedy.  I have seen many traders lose capital trading the long side of a powerful bull market.  By adding more and more leverage as a Cycle rally extends, only to be shaken out by a DCL because they did not have “strong-hand status”.  And far too often traders look to out of money call options as a means to riches, only to see a powerful rally fall just short of the aggressive strike price.

The lesson here is not to over think the setup.  In any bull market, it is best to buy large early out of a Cycle Low and then sit back and watch.  If you decide to use leverage, then again do so early to allow for a tight stop (off prior Cycle Low) and wait for the bull market to get your positions deeply in the black.  Then it becomes a matter of reducing that leverage as the Daily Cycle progresses, as opposed to being under invested when the move begins to where you feel like you’re missing out, at a point where you should be harvesting profits.    Above all, as I have said all along, establish a solid core position that you can buy and forget.

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Bob.