We have been watching gold closely as it pulled back from its rally in a fairly normal manner. we gave you two areas where it was potentially pulling back to retest the support, at the intermediate-term 30-week m.a. at $1,344 an ounce, and the short-term 30-day m.a. at $1,355 an ounce. Gold closed yesterday just above $1,360.
But what a day today.
The CME reported that just before 3 a.m. eastern time last night it was also quiet in gold, "with very little activity around for gold in either direction at the time". And then a single trader placed a huge sell order of 2,000 December gold future contracts "out of blue", in one second and at the market, no attempt to use limit orders or spread such a huge sale over several hours or days. It caused trading to automatically shut down for what the CME called a rare "Stop Logic Event', until its computers could find enough buyers to take the contracts. And it could only do so after dropping the price to $1,344 an ounce, the price when it re-opened.
Was it a deliberate attempt to crash gold down through the support levels most everyone was watching? We'll never know, but it sure succeeded in doing that.
We were hopeful the odd sale by one trader would bring bargain-hunters in during the day and we'd get the bounce off the support.
But it didn't happen. And when it didn't, others apparently watching the same support levels with the same hope, finally gave up and gold really plunged in the final hours, to close down $44 an ounce at $1,321, crashing through the supports.
We have been so right with the signals, most recently the sell signal in last October, not being tempted back in by the several false attempts to rally, and then the buy signal in August, then correctly identifying the 30-week m.a. as overhead resistance, warning that it was going to probably be only a bear market rally within an ongoing bear market. And now this?
You know the problem. Greed. We had a profit of what, about 10% or 12% on GDX and 6% or so on GLD. But that wasn't enough. There had to be more. A pullback to successfully test support and then back to the rally would do it. But no.
As we expected they would if the support levels didn't hold on a closing basis, our technical indicators have deteriorated, but only to a mixed condition and therefore neutral, ending the July 23 buy signal.
That's enough to have us exit the much more volatile holding in the mining stocks etf, GDX tomorrow.
MML Price at posting:
$2.10 Sentiment: LT Buy Disclosure: Held
(20min delay)