Traders Edge Blog

The Traders Edge Insider: May 2013

Hey everybody, here’s the May edition of the Traders Edge Insider!

Traders Edge Insider: May 2013

We’ve had some beautiful weather out here as of late. Man, it just makes you want to get out and enjoy life.

I hope you’re taking time to do just that. Sort of gets lost in the shuffle when you’re battling in the trenches, but you’re here to build something for yourself – to create a better, more secure future for you and your family.

You, the entire Crew and myself – we’re all working hard and need to take time to reward ourselves a bit…and to remember what this is all about. Trust me, doing so is essential and it’s a wonderful way to go about refocusing and recommitting to your plan for success.

My question today is what happened to that big-time reversal so many talking heads told us was inevitable. You know, “The rally is overdone, exhausted and without merit given the problems that remain here and abroad.” Hmmmm.

Well, no doubt they’ll be right…eventually. That game of Tom-n-Jerry chasing tail never ends… The experts will continue to predict the future and there will remain audiences that continue to listen with baited breath. People wanting to believe there are gurus who see the market in advance or who are in search of the latest “sure fire” cookie cutter approach to trading. The only thing that neither group appears to seek for guidance is the market…and what it’s telling them.

Comically sad, but that’s the way it is and will continue. Not our approach, as each of you well know. We’ll continue to stick to our methods premised on understanding market cycles, trading in any direction based on what the market tells us, and utilizing strategies and trading plans that provide a statistical advantage – proven…simple…successful!!!

For now, I invite you to sit back, read and reflect on the May edition of TEI. It’s packed with good, actionable info, including a compilation of some of the best insight offered over the past year in our Traders Talk interviews. It’s worth a read and sure to serve you well this month and beyond.

-PJ

Funny How That Happens…

Well, we’ve been saying for some time that Gold was looking pretty suspect. It really started looking weak last October and November when it broke down and failed on a retest of what had been a strong supporting trendline. That trendline was formed off the breakdown lows of 2008 and sustained itself for four years, during which time the metal traded to all-times highs.

The real trouble had set in as of more recent, when Gold broke down through the 1,600 level and then failed to retake that mark for more than a couple short-lived forays. Gravity, unfavorable headlines, focus on decreased demand, the growing sense that the Fed’s QE program was nearing an end-stageůall issues that weighed heavy on the precious metal.

Moreover, there were the comparison with equities and the fact that they were trading to new highs at a time when the metal was struggling mightily. As such, there was a growing sense we might be witnessing the decoupling of a positive relationship that started during the midst of the financial meltdown that beset the world markets back in 2008.

Fair to say that we did get that decoupling (some might call it a drive-by) in the past week, as Gold broke through the critical levels we’d previously laid out. Once it did so, the move was decisive and played out quicklyůconceding more than 250 points (at the height of the sell-off) over the course of a couple sessions…Yeikes………

The velocity of the sell off caught many a peep off guard, to be sure. The only thing that wasn’t surprising was the level Gold broke down to before bouncing and catching some rebound loft. As we pointed out previously, were Gold to slip, the 1450 area would be important, followed by the key fib-level at 1,300ish. This spot on the map is very significant because it represents the 50 percent retracement level of the entire ’08 bull-leg – drawn off the 2008 low to the September 2011 record high.

What I find ironic is the number of peeps who mock such activity as sheer happenstance. Funny how that happens……….A LOT!

Now I’m not a believer in many indicatorsůfrankly just keep it to price action, volume and key levelsůbut that does include Fibs. Why, you might ask? Not because of any type of affinity, I assure you. Fact is they only measure price activityůwhich is a reflection of human emotions and actionsů things that tend to repeat themselves. Nuff said…

Whatever your thoughts on the matter, the real question now is whether this breakdown has played out or has further still to go? To be taken seriously, the gold bulls are gonna have to get this back through the 1,450ish level and ultimately 1,500 – which was a key support level. Not gonna be an easy road back up.

If the map continues to weigh heavy, then we will see 1,300 retested. A fail there and peeps are really gonna spooků.quicklyů Now there’s lots of stopping points downside from 1,300, but the big ones would be 1,260ish and then the key fib level (62 percent retracement of the ’08 bull run leg) around 1,170ish. At that point, the pull of the millennium mark (1,000) is gonna become a huge factor – one the bulls are keen to avoid altogether.

What is sure for now is that Gold is volatile and the activity is likely to be spiritedůand still definitely weighted to downside risk……
We shall See…

~LH