Gold slices through multiple swing points on dive

In the equity markets the grind continues, and it is monotonous enough to make one forget that markets can and do go down occasionally, too.

At this point, almost all ABCD up projections have been met on the indexes and the sectors. The biggest event this week is the Nasdaq Composite attempting to take out the highs from last September. If it succeeds in doing so, that will be yet another feather in the cap for this market, and the great escape higher that defines the beginning of the year.

At this juncture, you do have to start selectively taking some profits or tighten up your stops because either a nice spill is brewing or another gallop higher is yet to come. You want to protect against the former and continue to capture the latter if at all possible.

Away from equities, though, we continue to see weakness. In my last article I noted the bearish setup on the bonds. Well, it is evident in the commodity markets as well, with grains breaking lower and now precious metals. The same setup I outlined in bonds last week now applies to gold, as it broke the swing-point low Thursday on the daily and weekly charts, and if that holds today, it is another case of multiple swing points broken on multiple time frames which carries with it a high probability for a fast move in the direction of the break.

Here's the weekly chart showing the ABCD projection and how support is absent for a great many points.

I won't repeat all the details on that trade setup once more since the principals outlined in last week's article are the same here - just a different instrument. You can read that article to get the nitty-gritty.

The real story for traders and investors is to simply stay out of trouble and quick thinking so much. Sure there are plenty of problems. There have been so many problems for so long that most of us are gray at this point, but that hasn't changed the fact that the central banks keep printing money and it keeps finding its way into the markets. That is the largest factor for why the infinite up continues.

Disclosure: Mr. Little is long TBT.