Gold broke down from support last week from a rectangle formation. See my original post here. It appears to be retesting resistance.
I did not take this trade. Nor do I plan to take it. Even though it fits in perfect with my plan I was hesitant to short gold. I do not trade mechanically. I would rather miss a trade if it does not “feel” right to me. This trade smelled like a bear trap for several reasons.
First , inter-market analysis showed the USD was approaching resistance and was set to at least take a pause from its bull run.
Second, the mining shares did not confirm a break down in gold.
The miners were not phased. Over the years, the miners have been very sensitive to large drops in gold.
Time will tell if this is just a retest of gold 1305 resistance before it test the 1240 target. If you were going to short it, the time would be now with a tight stop at 1310. However, I think this will be a proven bear trap.
The key take away is this: Inter-market analysis can save you a lost trade.