Bullion Charts and Commentary - Supplemental
posted Jan 9, 2005 at 11:52PM
If you noticed my recent commentary it would appear that I am a bit wishy-washy...and the truth is that I am. Again it is all a question of which technical data should get the most emphasis and quite frankly I don't really know.
If POG looks good overnight and some market depth looks good, I may take a punt...although obviously I won't bet the ranch.
Of course the learning process involved in trading dictates you understand why you buy, so you know if your methodology is correct or not.
Now I can tell you one of the reason't I won't buy is because of the latest Mark Hulbert article which is going around like wild-fire.A Golden Wall of Worry
In that article, he writes,
"In fact, the average gold timing newsletter that the HFD tracks is now more bearish than at any time since late 1997, more than seven years ago. Furthermore, the HGNSI's level at that time -- negative 31.3 percent -- was not that much lower than the current reading."
Ok, fine..but go back to the gold chart in late 97. What do we see? A short little snap-back rally followed by three years of bear market. The fact is they were right then, and they may be right now.
Remember newsletter writers are not the "herd"...indeed by the fact that they make thier living offering professional services one can assume, that most of them are probably better than average traders.
Now there are reasons to buy...one is the level of the +DI, on the daily bullion chart, which is at the lowest level in years. When no one wants to buy then yes that is usually a good time to buy.
Another reason to buy is the Maclellan Oscillator which is also at levels associated with at least short-term rallies.
A lot depends on the dollar, and technically the dollar looks pretty good. Remember if gold was always overbought on the way up...it can stay oversold on the way down.
In this environment, stock selection, risk and money management are just as important as market timing.