Is Gold Capitulation Coming? [SPDR Gold Trust (ETF), iShares Gold Trust(ETF), ETFS Gold Trust]

record gold holdingsToby Connor: At the beginning of the month I theorized that stocks were about to enter a final bubble phase, and that during that process gold should deliver a capitulation phase to end the three year bear market. This is a follow up to see how things are playing out now that we have another month’s worth of price action behind us.

For stocks it still remains to be seen whether or not they have one more surge higher into a final top. If one just looks at the NASDAQ it would appear that stocks have begun moving down into a bear market. However as I pointed out in my previous article it’s not unusual to have one, and sometimes two very severe corrections before a final leg up in a ending bubble phase. As I pointed out in my previous article the NASDAQ had two back-to-back 10% corrections before a final 34% surge into that 2000 top.

So we have to ask ourselves, is the NASDAQ rolling over into a new bear market or is this just a final correction before one more surge higher? From a long-term perspective this looks like just a normal pullback to the 200 a moving average after a particularly powerful move over the last year.

I think at this point one still has to give the benefit of the doubt to the bulls. The fact that the Advance-Decline line is still making new highs suggests that this is probably a consolidation in preparation for a break above that 1900 resistance zone.

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