Why I think Gold's pullback isn't over yet

Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show "Investors Edge" on over 50 radio stations. Gary is also editor and publisher of "Gary Kaltbaum's Trendwatch"...a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary's Daily Market Alerts click here or call 888.484.8220 ext. 1.

A few important group notes...starting with GOLD.

We have been telling you that GOLD was due for a pullback. We have been telling you COMMODITIES were due for a pullback. There was a simple reason why. Just take a look at the chart of GOLD vs. its moving averages. GOLD had been moving into the $725 range with the 50-day moving average at $600. Are you kidding? If there is anything we have taught you throughout the years, it is knowing when risk picks up.

When markets, sectors or stocks are stretched so far away from their moving averages, it is getting close to the party ending. We would consider what happened in recent weeks a climax run in GOLD as well as other COMMODITIES. This occurs when all the dumb money jumps on top of the pile AFTER a move up. Just remember 1999.

GOLD dropped over $27 on Monday. GOLD STOCKS were smoked along with the metal. COMMODITIES and their underlying stocks followed suit. This is normal. It is now time to kick back and wait. We suspect there is even more of a pullback to come. As we have been telling you, EIFFEL TOWER charts do not last long...and their corrections are vicious. Whether or not the COMMODITY party is completely over is another story.



Other thoughts:

Hand in hand with COMMODITIES getting smacked, the DOLLAR bounced nicely on Monday. The DOLLAR has been very bearish but like GOLD being extended to the upside, the DOLLAR has been extended to the downside. This is a bounce in the DOLLAR...and won't go further than that.



OIL continues to put in a top...but many OIL STOCKS have been breaking down. We have been taught that the stocks usually lead the commodity, so hopefully, we will see OIL PRICES finally break down.

We are finding some areas that are turning up here. We are just not thrilled with them. CONSUMER STAPLES are turning up. Names like (KO | Quote | Chart | News | PowerRating), (PEP | Quote | Chart | News | PowerRating), (HNZ | Quote | Chart | News | PowerRating), (BUD | Quote | Chart | News | PowerRating) and (CL | Quote | Chart | News | PowerRating) are showing good relative strength here. Whether or not it lasts is another story.

We have been liking BIG BANKS for weeks. Names like (WM | Quote | Chart | News | PowerRating), (STI | Quote | Chart | News | PowerRating), (C | Quote | Chart | News | PowerRating), (BAC | Quote | Chart | News | PowerRating), (WFC | Quote | Chart | News | PowerRating) continue to act bullishly.

We are liking the action in INSURANCE. Names like (MET | Quote | Chart | News | PowerRating), (PRU | Quote | Chart | News | PowerRating), (ABK | Quote | Chart | News | PowerRating), (PGR | Quote | Chart | News | PowerRating) are in very good bases.

Gary Kaltbaum