IIFA... is it Friday already? Interesting move earlier this morning in the major indexes. Maybe my observation from yesterday is starting to play out. I mentioned that this market had a "sell the news" feel to it. Today, the markets made a pretty quick and furious move to the downside and as I type, the markets are doing their best to erase those intraday losses which has been the theme of late. The only difference is this morning's move down was a bit stronger and with more conviction than we've seen of late. The close today will likely prove critical to what will transpire next week. It's too soon to tell but if volatility starts to pick up, things are going to get pretty interesting pretty quickly. One thing I've learned in the market is anything can happen and it likely will. That sounds like a Yogi Berra comment, eh? A true hero of mine going all the way back to the late 60's and early 70's when he would entertain us to no end. I digress. Since it is Friday, I kicked around a few different subjects for today's edition. I narrowed it down to two choices. Is gold topping out? Or, how to short sell stocks you don't like. I opted for the first. Why? From a timing perspective, the gold charts are looking very interesting right now and if we can peg it before the rest of the Street, then we're going to make some serious money or save some serious money if you've been long gold for quite some time like so many other investors. Has Midas Overextended His Touch? Gold investors have had an amazing run for a long time now. An ounce of gold is up 162% over the last five years but it's literally flat for the last six months. Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives. The history of the gold standard, the role of gold reserves in central banking, gold's low correlation with other commodity prices, and its pricing in relation to fiat currencies during the Late-2000s financial crisis, suggest that gold behaves more like a currency than a commodity. Well, completely understandable why gold has done what it has done for years now. With complete and total currency debacles taking place around the world, is the worst over or are we literally on the edge of mass currency destruction? The major shoes have dropped in the last few years being the U.S. and Europe. What about China? What about them. They just do their own thing marching to the beat of their own drum. Some say we haven't seen the worst yet. I don't necessarily believe that. Some say the worst is over. That has yet to be seen as well. I believe the monthly gold charts are telling us everything we need to know right now. And, it's telling us something very big is in the works, for better or worse. However, don't get overly excited just yet, it may take a few months to prove itself out. The Chart is Speaking I looked at all of the gold charts and as you can probably imagine, they all look very similar but one stood out with much less noise than the rest, the NYSE SPDR Gold Shares (GLD). This speculative ETF is 100% weighted to physical gold bullion. Now that you have a good understanding of what we're looking at (or maybe you already did), then you'll see now why this major spy novel is starting to read very compelling. I've included a monthly chart of the GLD here for your review and analysis. Ever since its inception, the GLD has managed to move in a parabolic state returning GLD investors as much as 500% return. Like I always say though, when a chart becomes very volatile, something big is in the works. You'll notice the monthly bars in the chart here have gotten bigger and more volatile in the last few months. Go back and look at the NASDAQ in 2000, look at the housing charts in '07, the oil charts in '08. You will see the exact same volatility in these monthly charts and what happened? All three imploded. The flip side of that would be the monthly chart of Apple (AAPL) that also had these kinds of wild swings in its monthly chart and the stock went the other way ripping into new highs and rotating short sellers like nobody's business. My point here is when a chart starts to act like this, it rarely means we're going to continue to see controlled gradual movement. What it usually means is it's going to implode or make ridiculously new highs very quickly. That's where I think gold is at. So, how do we play it to make the most of what might be coming? My absolute single most favorite technical reversal indicator was created and coined by Joe Dinapoli (hall of fame trader in my opinion) as the "double repo". A double repo is a double re-penetration of a displaced moving average. Huh? No worries. It's really not that difficult to understand. I've included two DMA's in the monthly chart of the GLD here. The 3x3 and the 25x5. The 3x3 is the one we're going to concentrate on here. When a chart breaks below the 3x3 and closes, then breaks back above the 3x3 and closes, then breaks back below the 3x3 and closes all within seven trading bars, that's a double re-penetration of the 3x3. And, in my opinion is the biggest and most reliable of all reversal indicators that exist. Is it 100% full proof? Nope, there is no single reversal indicator that is 100% full proof but the double repo is pretty darn good. You can see that GLD has thrust and stayed above the 3x3 since '08 until December of last year which it closed below the 3x3. First signal in place. Last month, it closed back above the 3x3. Second signal in place. Here we are in February and obviously the month is not over. We have the first two months in place so if gold is going to implode we must see the GLD close below the 3x3 within the next four-five months which includes February and stay below the February high. If GLD breaks above the February high, the reversal indicator has been negated for the time being and we could possibly see gold skyrocket which would likely mean a global meltdown of economies. I've been at this long enough not to speculate and tell you in advance what's going to happen with this chart until it has happened. However, if we get our sell signal reversal confirmed, I'll probably be shorting the living $*!* out of gold and it will likely mean the worst for our economy is definitely over. If gold takes out the $186 level to the upside? We'll all have a lot more to worry about than the price of gold. I strongly suggest you keep a very close eye on this chart in the coming months because although today's edition doesn't give you a definitive answer about what gold is going to do tomorrow, it is giving you an opportunity to see what's happening before the rest of the investing public likely knows what's going on. We're probably going to get our fair share of comments on this one so bring it on... we can take it. Actually, if you have a solid technical or fundamental argument to support which way you think gold is going, we'd absolutely love to read about it and may even publish it with credit to you. By the way, if you like our newsletter, please refer it to your friends. The stronger we can make the SmallCap Network, the better for all of us. If you don't like our newsletter, then what the heck are you doing reading it?! Have a fantastic weekend and we'll see ya'll Monday.