Gold stock sentiment indicator.
Finished my first book on technical charting this week – Charting for Dummies.
Here are some of my observations, deductions and opinions.
Had I read this book before deciding on Point and Figure Charting I would more than likely never developed what I have done, probably be a swing trader and definitely NOT built the sentiment indicator – and done ALL my dough.
Not because the information in the book is incorrect. Quite the opposite.
What it did do was give me a big picture view of the markets and how traders might think, play the game and respond to signals.
There were also quite a few useful stats in the book that, when looked at in a different light, showed how often and easily investors can come a cropper.
When signals and indicators are firing, you can make plenty on a particular stock. Then they stop firing. The stats might show a particular signal has, on average, a 60% success rate.
A lot of stats are gathered over extended periods on multiple charts – during both bull and bear legs.
A question –have you read, learned or been told that you should sell when you see lower highs and lower lows?
That particular signal is for me a buy – but only when the SECTOR is in a bull leg and the EQUITY longer term trend is rising.
Professional investors use the programmed (Pavlovian) response of traders to hand over their shares at these times.
These are often buy signals for me when the SECTOR is going up and sell signals when the SECTOR is going down.
Reversal and continuation patterns can be a trap if used counter to SECTOR direction. This is what generates the failures in such patterns. The signals/patterns work fine when telling you to go in the same direction as the SECTOR.
Often the same signal or pattern appears on multiple EQUITY charts at the same time. This should not be ignored and is one of the few confirmations a trader can get.
At the most recent bottom I saw double bottoms appearing on short term charts along with new rising trends. Prices were sitting on support on longer term trends(quality stocks) though many were taken out weeks or even months before.
The INDICE is as near as we come to having an overview of the sector. Problem is they are weighted and therefore prone to showing what a handful of majors are doing.
The commodities INDICE is massively influenced by the iron ore sector therefore practically useless for guidance when buying non-iron ore stocks.
Charting the commodity has some value but at the top and bottom of major runs, stocks lead the commodities by around 2 weeks and this can amount to 10 – 15% being shaved at the top and bottom.
At the moment, pretty well all of my buy signals are doing their job. This is further confirmation (for me) that we are at the beginning of a bull market for gold.
Understanding TA signals can be of immense value but just as important is knowing when to respond to them.
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Saw two magnificent shake-outs over the last 2 weeks – AIS and RGL.
And the games continued with the release of quarterlies on Friday.
You can tell the most desirable juniors. They fell around 5% or more with the release.
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This isgoing to be a very interesting week.
Will theshort squeeze in silver eventuate? There could be an attempt to ‘scare’ buyersaway with a plunge in the price of silver. If there is, what a gift.
Both goldand silver are in backwardation but not by a lot.
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Friday night was quite different to previous occasions.
While ther eare still attempts to push POG lower, competing forces are in play.
The USD was up around 0.75% (a relatively BIG move) but gold only dropped 0.15%. I do notlink gold to the USD. Smoke and mirrors.
Gold closed approximately A$20 higher.
The XAU and HUI were down over 1%.
The market is all over the place.
Here is the indicator which ticked up slightly on Friday.
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