Options Trading News

November 8, 2011  Tue 8:55 AM CT

The gold rally of the last week is a stark sign that we are not going into a depression, and we are not going to have massive deflation that would be a symptom of a multi-bank wipeout.

Gold's been fickle of late. When the quarter ended, gold got hammered, but it looks like now that was just some front-run selling by hedge funds trying to break once-ascendant, now-descendant John Paulson and his leveraged gold bet.

When several days went by and Paulson issued that statement about how he didn't have many redemptions, that was all she wrote with that trade, and there's been buyer after buyer coming into the market.

Throughout this period, there have been various tells of what's happening.

When the CurrencyShares Euro Trust goes higher, we have tended to go higher. When copper goes higher, we have tended to go higher.

TheStreet.com logoBut when gold goes up or down, it doesn't seem to correlate--until now, because the big worry was that former European Central Bank chief Jean Claude Trichet's philosophies would be continued. Policies that, I believe, would most certainly lead to a tremendous depression, with prices plummeting for everything.

I continue to believe that you must be in gold. We like the iShares Gold Trust, but the SPDR Gold Trust will do fine too.

Right now, a gold rally is bullish and as long as you see gold going higher, we have to be encouraged about the trajectory of stock prices.

Disclosure: Cramer's charitable trust is long IAU.

(optionMONSTER and TheStreet.com exchange a select number of posts each day as part of a limited content-sharing agreement.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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