A New Sell Signal for Gold

I'm establishing a position in UltraShort Gold ProShares ( GLL) after a new sell signal for gold was registered at Tuesday's close.

The position, which will be taken as soon as this article is posted, will probably be somewhere above $15. The current price, as I am writing this piece, is $15.16.

In Contrarian Ideas for the Summer, which was last updated July 16), the short position in gold had a stop loss at $14.50 for GLL. This was hit on July 20.

Here are the signals that led me to my new position. First, gaps in the price charts appeared Tuesday for SPDR Gold Shares ( GLD) and GLL. The GLD chart gapped down and GLL gapped up. Price charts are shown below, with mid-day prices for Tuesday:
SPDR Gold Shares

I am looking for GLD to drop to the $89 region this week and to $87 within three weeks.

The chart for GLL is shown below. Targets for GLL are $16 this week and $17.20 within three weeks. Initial stop loss is $15. This will be moved to a trailing stop of $1 once there is a close at or above $16.
UltraShort Gold ProShares

Gold futures are showing a clear sell signal. The August mini-gold contract is followed by Bill Kurtz, president of CandleWave LLC, Palm Harbor, Fl. His annotated chart is shown below, reproduced with permission of TradeNavigator.com:
Mini-Sized Gold August 2009

According to Kurtz, this pattern is very bearish. Kurtz said, "It did not quite engulf yesterday's price bar, nor can it count precisely as an 'outside down day', but in this case 'close is good enough.' Today's 'real body' in Candlestick terms bearishly engulfed the real bodies of the six preceding days. We consider this to be a strongly bearish signal. Gold's major underlying bear trend is intact."

At the time of publication, Lounsbury said he is going to take a position in UltraShort Gold ProShares.

John B. Lounsbury is a financial planner and investment adviser, providing comprehensive financial planning and investment advisory services to a select group of families on a fee-only basis. He worked for 34 years with IBM, and spent 25 years in R&D management and corporate staff positions. He also was a Series 6, 7, 63 licensed representative with a major insurance company brokerage for nine years.

Specific interests include political and economic history and investment strategy analysis. He holds degrees from the University of Vermont, Columbia University and the Illinois Institute of Technology, where he studied chemistry, physics and mathematics. He is a contributor to Seeking Alpha and his own blog, PiedmontHudson.

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