Well what a couple of weeks for the bulls, resistance was taken out on a daily weekly and monthly basis. It was certainly unexpected…but then they don’t ring a bell at the bottom.
We have been bearish for a couple of years now -- and have been patiently waiting for a sign that the bear is waning. Well we’ve certainly had a sign…but is it enough to declare the bottom is in and a new bull has started?
Well maybe, but I am hard to please, we will see if this holds through the month.
The problem is this is not a nice steady stealthy accumulation but a frantic disjointed parabolic short squeeze, currently gold is up over 16% in a little over 6 weeks since the start of the year that is unsustainable and the faster something goes up the faster it falls.
This short squeeze is more reminiscent of the 2000 bottom which took a full year to settle down before the new bull phase began. We don’t think this squeeze should take so long to consolidate provided it settles down but we would certainly like to see some consolidation before the picture becomes clearer.
The 1990s bear ended up being a double bottom after the short squeeze there is the possibility that we could have a double bottom in a few months’ time. The buyers were more than likely shorts who couldn’t push through their advantage and were probably liquidating profitable positions to cover losses in other markets.
We would definitely urge caution to anyone thinking about buying something that has risen so much so quickly patience should be rewarded. We believe there will be better positions to be had that represent a better risk reward than today’s price which are at extreme levels relative to sentiment.
Stay close to our charts for profit opportunities.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.