Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GLD over the next 72 hours.
When I read the propaganda of gold bugs like Jim Sinclair, who call every dollar uptick as the absolute start of the rally to take metals to ridiculous new heights, it just makes me chuckle. Two weeks ago, Sinclair stated that gold will trade to $4,990 in the coming bull run prior to settling into a role as currency for the beginning of the greatest economic expansion in history. Well, maybe he is right this time. But, calling for this rally to begin every single week sets him up as another candidate for the "broken-clock-of-the-year" award.
For those that know Sinclair, and the many "bugs" like him, this is a common proclamation, which is always based upon some fundamental reasoning. And, this was also the perspective they all maintained almost two years ago when gold was at its all-time highs over $1,900. In fact, Sinclair and others of his ilk were shouting from the roof tops and prematurely celebrating what they "knew" was the imminent rally over $2,000.
Just like uber-bears, like Robert Prechter, who see every move as the start of a new crash, these "bugs" are just as dangerous to investors and traders as they can only see a market in one way. And, when someone asked me about Eric Sprott and Rick Rule last weekend, I responded that both Sprott and Rule are perma-bulls and were not able to warn investors when the top was in several years ago. Rather, they were leading the cheering section, and were even the loudest of the cheerleaders. So, when an "analyst" is completely unable to see anything other than "higher, higher" in the metals, for that reason, they are completely untrustworthy in my book. And, when you throw on top of that the fact they are trying to sell you something, I will pay no heed to their "analysis," and rather view their essays as pure propaganda.
However, to be truly successful as a trader or investor, one must maintain objectivity at all times. And when on is a "perma-anything," one loses all objectivity, from my perspective. I also want to repeat what I said last week. If you are seeking "validation" for holding un-hedged metal's position since the market topped two years ago, then, by all means, continue to read someone like Sinclair. He will provide you with the emotional support you are seeking. But, I still maintain that emotional support should be sought from your spouse and not from an analyst. Rather, a trusted analyst should be providing you with relatively accurate assessments of where the market is headed in the short, intermediate and long term.
So, where are we now in the pattern for gold? Well, nothing has really changed since last week:
As for GLD, it has still not been able to take out the long time support region we have been noting at the 151 level. So, for now, the immediate region of resistance I see for GLD is the 157-158.25 region. Assuming we can see a strong move through that region in GLD, then we can look towards the 161 region next, which represents the .764 extension down, as well as the .500 retracement of the prior larger rally.
And, if GLD can move through that region, then the final region that will be contested is the 170-174 region before we can see a massive break out taking us to new highs.
So, while I can still see a move higher into the 158 region, that may only conclude a corrective structure, and set up GLD to break down below the important support level in the 151 region, on its way to the 148/149 confluence region, and then potentially down to 146. A break down below 146 will take it down to my long time ideal bottoming target region of 142/144, at which time I would view the entire decline from the all-time highs as potentially complete.
Although I know I am providing a list of support clusters that are relatively within the same region, it is important to note that I look for Fibonacci confluence within the next decline, assuming there is one, which overlaps one of these cluster levels of larger Fibonacci confluence to provide a high probability target. But, until any further decline begins, I am unable to offer a more specific target for the bottom of this correction at this time.
However, if GLD can prove its bullishness to us with the initial strong move through the 158 region, then we can view it as potentially more bullish. But, I am not truly hopeful for seeing such an immediate break out at this time. And, without seeing such a break out, our decline may continue into the end of April and we can finally hit my long time target region between 142/144.