27 October 2010

Here Is What A Significant Selloff In Gold Might Look Like With Our Active Chart Formations



If there is a severe correction in stocks a selloff in gold could ensue that would be a more severe than a simple retracement and consolidation. I am showing this not because I now think it is more likely, but rather because people write in and have asked for this type of more pessimistic scenario.

Here is what the correction might look like as a retest of the breakout trendline. From a timing standpoint the US November election looks likely as a pivotal event and a decision point in the November 2-9 timeframe.

On a nominal basis, the depth of this selloff would be approximately the same as that which happened in July and August of this year following the initial breakout in the cup and handle formation.

If there is not a severe correction in stocks, gold is more likely to stay within the short term trendlines in blue until it regains the upward momentum and follows the intermediate green trendlines higher.