Recent volume spike in GLD is perfect technical setup for a reversal.

Gold and silver went up like crazy into a 3rd wave which peaked in Sept 2011.  I think what followed was a so called failed 5th wave.  I warned that this might turn out to be the case back on April 14th based on my interpretation of the Elliott wave model for the GLD ETF.  I wrote, "If this breaks below the low of the 4^th wave, EW computers that assume failed 5^th will assume that we have an a-b-c decline to at least 38.2, perhaps 50 and possibly 61.8 fib. "  I also wrote that other upside possibilities that I mentioned were negated if GLD could not hold $150.

Well, GLD did continue to pull back and now I think it is time to comment again because we are at the first potential decision making threshold that I mentioned above: the 38.2% fib retracement.  You can see today's chart below. 

Beside the pullback to the 38.2 % fib, I want to point out that this pullback was accompanied by a huge volume spike that was only exceeded slightly by the volume spike of the peak of the 3rd wave.   Volume spikes like this generally point to conditions of maximum greed on the upside and maximum fear on the downside.  I also want to point out that the last few days might have just put in a double tap (double bottom) on the 38.2 as shown below.

While all of this is good evidence that a bottom is in (and perhaps even worth making a long side bet on if you are a trader), I will also point out that this low is coming off of a so called declining double top that took significant time to build.  Declining double tops indicate significant weakness and in fact would drive me to think that a 50% fib retracement is actually more likely than a 38.2% retracement.  But I also cannot ignore the massive volume spike at the 38.2% fib either.  If I had to wager I would say it is 70-30 in favor of us having just seen a significant bottom put in.  I would quickly remove these odds if the 38.2 fib cannot hold.  In that case, the 50% fib would be the next major support IMO.

Keep in mind that I think we just saw a massive 7 year long 1st wave finish in Aug of 2012.  That means we are into the a-b-c retrace portion of the model which will lead to a large 2nd wave retracement.  When that 2nd wave finishes, I expect a 3rd wave to unfold which will dwarf the 1st wave that ran from 2005-2012.  I believe that the coming, multiyear 3rd wave is what will make everyone in the world remember that gold is money and nothing else is.  Large aspects of the global monetary system (i.e. the global debt Ponzi) will collapse which is what will support increases in the dollar price of gold.  I expect the COMEX to basically collapse and to admit as Nixon did in 1971 that they do not have the gold on hand to pay back to those who have bought and stored it there.  I expect corporations to start listing gold as an asset on their balance sheets, something that nobody does today and that nobody in any of the financial press or blogs is calling for.  This will be strong proof that the re-monetization of gold has occurred and it will be a sign that it might be a good time to move out of money (i.e. gold and silver) and into income producing assets (like rental property).

If you are considering buying some gold and silver, watch GLD and if it cannot hold the 38.2 then wait.  Otherwise, I would not hesitate to buy physical gold because the only lever that the global governments have in slowing the crash (so they think) is printing massive amounts of money.  As one government prints so must they all.  It is a completely interconnected scam and both the US and Japan are now printing up 85 billion per month with no limit.  They will continue until they get the results they desire or until people lose confidence in them completely.   I'm convinced we will see the latter and not the former.