Really, when you stop to think about it we all tend to make the practice of successful trading and investment harder than it really needs to be; we apply dozens of conflicting indicators and then listen to too many different points of view, and then wonder why we've become powerless to choose just which side of the market to be on. Sound familiar? It should, because if we're all honest about it, everyone who's ever traded and invested for any length of time has probably found themselves mired in a similar situation, one in which confusion and fear overshadows sound logic, long-term fundamentals and high probability patterns of momentum, support and resistance. So let's simplify things a bit, right here, right now, starting with this easy-to-decipher weekly chart of the cash Gold market.
Glancing at the chart above, we see three easy-to-understand chart dynamics at work, as follows:
- Gold has successfully broken above a significant swing high, the one made in March 2008.
- The spread between the 12 week and 50 week exponential moving averages (EMA's) is widening, implying increased momentum.
- The A-B-C swing dynamics (with point 'A' being a major swing high and point 'B' being a major swing low) are suggesting that Gold will continue up to meet the Fibonacci 127% extension price near $1,091.00.
For those investors who may be wary of putting large sums of cash to work right now in the Gold market, here's a possible way for you to dip your toes into the water without fear of getting in too far over your head. First off, if you believe that the current Gold bull market is a generational event, one destined to run higher for another five years or more, then why not consider putting a modest 'core' position to work now, one that you'll hold for the remainder of the bull market? Then if the price continues higher, you can be glad that you didn't miss the boat entirely. If prices pullback somewhat, you'll be happy that you didn't buy too much of a core position even as you re-evaluate the long-term technicals and fundamentals, to see if putting on additional trading or investing positions is a wise course of action. The future is unknowable, for the most part, so taking an 'easy does it' course of action at this point might be just the ticket for those who are late to board the eight-year run in the Gold market. For those already long Gold, keep an eye on that 12/50 weekly EMA spread; with Gold looking as if the Fib 127% price level at $1,091.00 could act as a de facto 'price magnet,' an ever-widening spread will be the tip-off that Gold intends to hit that 127% retracement price sooner rather than later.
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