The Microcap Speculator

UPDATE 8/11: Hypothesis failed.  No ifs, ands, or buts.  I was wrong and have adjusted accordingly.

FINAL UPDATE 4:15pm ET:  After a stomach-turning trading day, I have little evidence to prove or disprove my hypothesis that gold could have put in a bottom today.  On the one hand, after my initial post both the futures and spot prices dropped about $5 more.  On the other, Dec gold clawed its way back and closed slightly above the 862 mark at 864.30.

Outside markets fared worse.  Silver, euro currency, crude oil, and ags were hammered all day long.  As a result, gold actually rose over the 24 hour period in Euroland (see below).

With the verdict still out I remain long; however, because the metal did not show the resilience I expected, I have trimmed my position considerably.  Now back to your regularly scheduled microcap programming…

INITIAL POST: I’m going out on a limb here with Dec Gold trading at 862 to say that there is a high probability that the bottom gets put in gold today.  This is not a prognostication; its a recognition of a number of factors: 1. gold is near critical support  2.  the downtrend this week leaves gold very oversold on a near term basis  3. gold softness is largely a result of dollar firming, but as Trader Mike charted yesterday, the dollar is facing trendline resistance at around current levels.

I’m testing this thesis with gold/silver futures.  If I’m wrong I will be out by the end of the day.

UPDATE 9:10am ET.  Dec Gold is up slightly but the real test is ahead.  If this is going to be more than very-short term intraday relief, Dec gold needs to recapture 873.

UPDATE: 9:55 ET.   Dec Gold broke to new lows, together with the Euro and Sep. Crude.  I’m going to give the trade a bit longer, but plan on closing out today’s positions if they are not green before the end of the day.

DISCLOSURE: Long gold/silver futures and a few mining stocks.