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Gold Pops On Monday - Real Or Dead-Cat Bounce?

Commentaries & Views

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Yesterday we wrote that if gold broke through $1,280, it was in danger of going down to $1,220-$1,240. The low was $1,282. Gold reversed and bounced hard, closing over $1,300.

Here is what we wrote:

I can hear the chants of the pundits and gold longs -- “that can’t be right”; how can gold continue to go lower? The answer is simple. The gold pattern suggests lower prices, and market correlations are not absolute at the time they happen. If gold breaks through $1,280 on the downside, the odds increase of seeing $1,220-$1,240.

Monday’s rally signals the lows are in or just another dead-cat bounce in a market that wants to go lower. Nothing has really changed. The pattern in gold still suggests that it could break lower, which means we are still watching the $1,280 level at support and the $1,310 level at resistance.

We remain short-term bearish gold and never get too excited on a one-day dead-cat bounce. Gold has a lot of work to do to change the trend, which is still down. There is a better case to sell the rally; however, as we have stated many times -- MARKETS DON’T ANNOUNCE THEMSELVES.

Sometimes the best trade is the one of observation. For now, we watch the $1,280-$1,310 levels and will not be buyers until there is a couple of closes above $1,310.

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