WHAT TO DO? OH, WHAT TO DO?
After a week like last week many speculators (everyone's a speculator) are wondering what to do now. As a pure market technician who doesn't have a clue as to why the markets do what they do my only answer is always follow what the charts tell you. After all, the charts are the daily actions of all the experts in the market. They are most often right but do err on the occasion, no one is perfect. But what to look for? Very briefly, 2 or 3 things.
Trend, always trend. If the trend is not going your way, bail out. There are literally dozens of trend indicators one can use. I use more than one but the basic trend indicator would be the moving average line. Above the line is good, below the line is not.
Strength of the trend or price momentum. Again, there are literally dozens of momentum indicators but the one I like best is the Relative Strength Index (RSI). Momentum informs you of the strength of the recent price moves. Positive momentum good, negative momentum bad. Of course there are grey areas such as a decreasing momentum in the positive zone or an increasing momentum in the negative zone. One must do a little bit of brain process.
Volume, the third thing to watch. Daily volume increasing with a rising price good, daily volume increasing with a falling price bad. Lots of nuances in between.
These are the indicators I try to look at each week (plus others but this is not a technical course).
Most investors rely upon information and/or recommendations from outside sources, usually their brokers or independent advisory services. As you can imagine these services can be anything from great to disastrous. In the end, as they all will tell you, or should, it is up to you to decide what to do with your investment or speculative capital. You have the final control and RESPONSIBILITY..
I told you so, I told you so, see, I told you so.
The easiest way to be proven wrong is just to say "I told you so" and see what happens next. However, two weeks ago I had this to say about a potential gold action, " ---- we could expect some still more upside followed by a several week rest period during which time gold will drop some 17% and then see a really, really wild ride to that $1575 projected level.". Well, so far so good. We're into that rest period that might take gold to the $620 to $640 level yet.
And then a wild ride. It's during the rest period that one can start getting his act together for the next move. However, one must always remember that forecasting is very, very dangerous and not to take any forecasts as a given. That is why I prefer to wait, most of the time, for a new move to start and be on the right side of things from the start...... more