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Saturday, February 23, 2013

Scary Gold Headline Selling Panic, Fear, Doubt, and Hiding Bullish Money Flows

Be patient and strong.

Gold's sharp decline, reinforced by 'scary' headlines, has generated panic, fear, and doubt in precious metals.  The decline as also generated diffusion index reading of 71% - a bullish setup not since 07/24/13 at $1572 (chart 1). As pessimism grows, so does the panic selling that hides the transfer of control from the weak to strong hands.  In other words, don't expect the headlines to recognize it.  DI readings above 70% only need a trigger event to generated an unexpected outcome.

Chart 1: Gold London P.M Fixed and Gold Diffusion Index (DI)

A weighted TA below 5% is extremely rare and demands attention (chart 2).  This suggests substantial energy bubbling underneath the trend; a trigger event that changes the trend's direction will release it. The public's response to that trigger event will likely be inaction driven by uncertainty and fear as the gold band wagon sheds passengers at an alarming rate

Chart 2: London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic Exponential Moving Average (13DEMA)


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