When you're high you never, ever wanna come down. Stocks continue to put up a fight. They still flinch faster than my kid brother would at the sight of my fist, but like him they pop right back up again and are in your face. The signals are garbage. As Tim pointed out earlier in the week, bulls and bears alike are having a tough time. That's what the bear does. He wants your money, and he doesn't care whether you've got horns or a coat of fur.
As for gold, the action has been equally frustrating. It continues to squirm after this year's spectacular rise and fall. A serious rip or dip seem equally possible. So what's a trader to do? Combine the two would be my advice, as I've done on the following chart:
That's better. Sort of makes me feel like I just found my glasses. It's pretty clear we've got a corrective retracement under way in an established downtrend. In my neighborhood we also call that a bearish rising wedge. If you're a spread trader like me, I'd say this isn't a bad time to be averaging into short bets on the market priced in gold. This upward drift could continue for a while, though measured in time the pattern is likely to resolve soon. If you don't spread trade, you've got pretty clear trendline support to tell you when the real bear is back and the headfakes are likely finished.
by Brian Thomas for varsityinvestor.com
