Jan
20
2010

  Nailbiting Time

Gold has been trading in a range for a while now, it hasn't been able to finish it's upward pattern. The pattern I trade by hasn't broken down, but that doesn't mean it won't. And the support level my own charts show would give me too large a loss for my taste if I waited for a complete breakdown. So I might sell before the pattern is completely rejected. A lot of the pros I follow are already lightening their gold positions, some have liquidated completely. I've looked at the charts several times, and I don't see a reason to do that yet. You can't base trades on how other people are trading, you need to have your own method (although I certainly keep abreast of what others are doing).

While I've decided not to sell into the close today, that doesn't mean I won't sell tomorrow or another day soon. Personally, while the upside I was hoping for might not follow through, I bought low enough I won't need much of a bounce to show a small profit. But if the price continues down without a bounce, I'll bail. I'm going to guess I'll either have to either take my profits or losses sometime within a week. But the metal could go either way, so there is a lot of chatter but anything could happen. Not a good time to place a bet, but if you're already in the game you just have to do your best.

I'm long the Russell 2000, and while that hasn't been doing spectacularly, I feel much better about the IWM chart than the GLD. IWM is still on a pronounced upward trend (despite down days). There are at least 6 more days of countdown to go in my pattern, and 6 more weeks of upward tics on the weekly chart. Volume is decreasing, I wouldn't recommend anyone get in at this point, but I'm pretty happy to hang on to this one for a while probably.

The other indexes are just chugging along, but I'm not in them since only the IWM hit resistance twice (usually a signal that there will be a turnaround) but instead it broke to the upside. That was significant, so I bought. The other indexes never really had topping patterns so I am afraid their ascent could end at any time now. If I had bought in earlier, I would continue to hold until they ACTUALLY begin their decline, right now they're just THREATENING to decline. But that's not really tradeable, so I'm sitting it out for now.

As for my other trading position, SRS, I'm sitting tight with that one, also. It's the inverse of the IYR (real estate sector), so I follow the IYR chart and use SRS in lieu of shorting (less risk). And while SRS hasn't exactly been rising like a rocket, the IYR chart looks so weak I can't help but hold onto SRS. IYR is still going up, so if you only looked at the price charts you'd want to buy. But the volumes are waaaay down on this last push up, and it's relative strength index(RSI) has been declining since the end of December. When the RSI moves opposite the price, it's a signal to watch for a change. So I'm watching.