Sunday, August 5, 2007

Gold again!

Gold is acting very strong during the recent stock market decline. Throughout most of the bull market gold has followed stocks pretty closely. I'm wondering if gold is starting to decouple from the stock market. This weeks COT report for gold is one of the most bullish I've seen in quite a while maybe ever. The commercials covered over 44,000 shorts this past week. This may be a historic high, if not then it's very close. Gold has done what is to be expected if the commercials stop selling, it's moved up. The point and figure chart is looking pretty bullish. It won't take much more strength on Monday to put another X in the 690 box and that would be a breakout. $10 more dollars would put an X in the 700 box and that would be a signal the next leg up is on! IMO. I still believe this is a correction.

Checking 20 of 22 sentiment indicators are now bullish, insiders are buying hand over fist and the smart money is extremely bullish while the dumb money has now reached levels that have signalled bottoms in the past. I'm guessing we still may have a bit more to go on the downside but somewhere soon it looks like we are going to get one heck of a buying opportunity. When we get that bounce I will be liquidating part of my stock portfolio to buy more silver and some gold. Not because I think the COT is going to be wrong and produce a losing trade. It may, I have no way of knowing before hand. But because I think the potential in the PM far outweigh anything I could make in stock indexes right now.