Market Timing Gold: Same as Silver. Risk of Less Risk.

Market Timing Brief for 7-29-2011

8-2-2011 UPDATE AFTER DEBT DEAL: Gold is still creeping up. Take a look at the chart today: GLD ETF Chart

7-31-2011 UPDATE ON FRIDAY CLOSE: There was a minor failed breakout attempt above 158.64, but the up trend is not dead. That 158.64 number would be the next target; however, with a debt ceiling deal in the wings, gold and silver are likely to take a near term hit UNLESS Europe boils over again. The correction on the first day for GLD would be about 1.25 to 3.00%. SLV could drop from 5.5% to 9.0%. So although the longer term trend is still intact, the very short term is bearish in my opinion.

The same trading situation is occurring with gold as it is with silver. There is a fairly large risk of “less risk” in the markets soon, meaning there is an increasing likelihood that risk falls soon. That means that a solution in Washington, which will likely occur before a default occurs, could on an immediate basis cause the price of gold to plummet. It could go all the way back to the big breakout that occurred above 153.61 in the GLD gold ETF. Or lower.

Remember that we have been in an increasing risk environment to date. Reversing that will cause stocks to recover a bit in a reflex rally (then to fall again based on the re-emerging recession – more on that later today) and gold to fall. The US dollar will strengthen as risk falls for a default. Today the dollar is weaker in the midst of the Congressional childishness.

Practical Investing/Trading Pointers: Do not touch your long term gold positions. Put a mental stop on your trading positions, because they are more, not less vulnerable here. If you own no gold, you should average in as we go up OR down, but slowly because I feel prices will be lower soon. Could the entire system collapse driving gold to $2500/ounce? Yes, but not this week. Responsible action is likely to emerge in Congress very soon. Surprisingly!

As for stocks, to keep up with my weekly analysis, you can sign up here: Free SP500Tracker ™ Newsletter I’ll have a new Tracker out this weekend.

For more of the numbers see my GLDTracker ™ here: GLD Tracker™

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