Elliott Wave 5.0 "Reboot"

Monday, March 4, 2013

GLDX Implodes, As The Gold Bears Are Walking Into A Bear Trap!

The GLDX implosion is starting to fit better into the last little bit of the channel lines. There are about 20 companies in this ETF which is important to fully understand, as it is not just a single gold stock that we are dealing with. If this was a single stock you have to make sure the company is not going bankrupt as it is crashing.  I started mentioning GLDX when it was around $6, and it is now very close to have dropped another full dollar, and presently is sitting around $5.01.

 As you can see the volume has been picking up and yesterday saw another big spurt in volume. If GLDX drops another 50% we would end up close to $2.50.
The majority will never buy this gold stock ETF because they are afraid of losing money. They will wait until it turns, and they can see clear upward momentum, and then they jump in because they love to buy high. If a contrarian investor is already buying than he is buying low or always buying when the charts are pointing down. They never buy when the charts are pointing up! Only emotional  investors do that trying to chase a trend. Jumping on after the bandwagon has left the station leaves lots of money on the table as the person who has bought below $6 will be completely in the green as it hits $6.00 on the way up.

 It may take 10 dumb investors selling 1000 shares but only one contrarian with 10 orders for 100 shares each to absorb them all, and they will never budge the price in the process. The volume on GLDX clearly shows this. Also if the fear level is so high that you have to run stops with this ETF then you are not ready to be a contrarian! Getting stopped out just before a potential bull market turning is the worst thing that can happen.

Those investors that have done this a few times will have no emotional hangups about it, but for the first time contrarian it will be terrifying as the entire trade is in the red every time a order kicks in.