Gold Bear

With today's big sell off, the gold price slipped into bear territory as it is now about 23%
below the all-time high set in Half  2 '11. The sell down took gold below the previously
firm support level in the $1550 - 1555 oz. area and also sank it below important trend
line support of $1525. By my estimate, that takes the safehaven premium down to a still
substantial 29%. Weekly Gold

The gold decline took out secondary support at the $1500 level, leaving the next interesting
support measure down around $1350 oz. Since I never had a firm fundamental handle on why
it went up so high in the first place, I defer to others to explain the recent action with precision.

The gold bugz did get the wind knocked out of them today. There was reason to be cautious
after Goldman Sachs recommended clients short gold earlier in the week, but the severity of
the hit had to be a shock. So now the bugz bull strategy establishment will have to re-tool and
try and wrest the momentum away from the sellers. As the indicators for the GLD ETF show,
the market is strongly oversold in a clearly negative trend. GLD

From a strategy point of view, remember the rule about not trying to catch "falling knives"
and also the rule about working hard to avoid value traps -- that which suddenly looks cheap
but is not. Finally, keep in mind that in a bear market one should think first about selling the
rallies instead of buying the dips and declines. Good luck!