A Gold Trading Idea

By: Bob Loukas | Thu, Mar 19, 2015
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Gold Dominoes

Yesterday's FOMC was bullish for most assets, as the FED indicated it was not ready to beginning raising rates. The FED's ZIRP policy, designed primarily to encourage lending and speculative asset purchases, is clearly here to stay for a while longer. But for gold, this policy has done little for it over the past 3 years, as speculative money is much more concerned with chasing equity and bond markets higher.

Which is why we should be careful here and to avoid reading into a solitary $20 move on a bullish FOMC day. For starters, the dollar fell by a massive amount, this alone accounted for much of the gold increase. But also more importantly, gold was extremely oversold, being down for 12 of the 13 preceding sessions. Therefore, there was an expectation for gold to move higher yesterday, the asset was setup and ready to rally on almost any excuse.


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As I outlined with much more detail (premium report) this past weekend, the Cycle timing is simply not right for a sustained rally. A combination of (early) Weekly Cycle timing, gold sentiment, and the COT report, all show evidence to support an Investor Cycle Low that is just a shy too early. I also cautioned members to be on the lookout for a "suckers rally", and not to confuse it with a new Investor Cycle rally.

So as yesterday's move higher was expected, it is also likely that gold will continue higher for the coming days and the action to appear convincing. However, as gold recently entered into the final chapter of this Investor Cycle, it is unlikely to have the strength required to get beyond $1,200. Traders should be on the lookout for a peak around the $1,180-$1,200 from which they could short the gold Cycle, because the decline from that peak should be of the "capitulation variety". The good news is that if we're incorrect on this Cycle outlook, then gold only needs to exceed $1,223 (prior Cycle high) to prove us wrong.

 


 

Bob Loukas

Author: Bob Loukas

Bob Loukas
The Financial Tap

Bob Loukas is the founder of "The Financial Tap", a membership site dedicated to helping traders and investors navigate the markets while increasing their expertise and understanding. Bob has over 20 years of experience in trading the markets, is a life-long student of economics, and has an abiding passion for the financial markets. Much of his investment philosophy is top-down in nature, beginning with a global and macro outlook which is used to create a framework that drives his intermediate investments.

Bob is a leading expert in Market Cycles. His love of Cycles grew after his introduction to the work of Walter Bressert, one of the pioneers in the field. Cycles were a natural fit with Bob's passion for top-down analysis. As Cycles are intertwined on multiple time frames, understanding the global outlook greatly helps him to identify the long dated Secular Cycles. From that point Bob is better able to identify the shorter Cycles and to build a cohesive investment strategy. Bob's Cycle Analyzer, a software based analytical and intelligence system, is used to predict the future movements of the major financial markets.

Originally from Sydney, Australia, he is now settled and has been working in New York City for the past 13 years. His background and education is in Computer Sciences and he holds a bachelor's degree from Monash University in Melbourne Australia. He has extensive experience in the Financial Software area and has served as a senior executive at various Fortune 50 management teams developing financial trading and reporting software.

Happily married with two children, family is a big part of his everyday life. Other passions including golf and long distance running. He plans to complete the 2012 New York City marathon.

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