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Gold & Silver in a LT rally

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Gold and Silver just got simpler for me with Friday's price action.  Since my previous post both of these markets have dropped hard and Silver in particular has closed below my potential neckline, albeit marginally and at support.  Gold still has some way to go to catch up on Silver.  I see the likelihood of a rally from here as low given a dearth of appropriate signals.  I still believe it is more likely we will see a rally in precious metals when stocks eventually capitulate, although it could begin first in safety assets as Bulls begin to shift Bearish, the first movers so to speak.  I remain in favour of Gold turning around the Fib 50% and Silver retesting the long term supporting trend-line.  I will continue to track all my indicators to see if I get an across the board buy signal around these points.  Although not at all predictive it does seem like markets in general are trending to a resolution, one way or another, around about the end of May... 

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PS: forgot to add, net COT data hit triple digit positive (+128k) on Tuesday last, just as the market spiked and dropped, a contrarian dream...  Silver continues to deteriorate into negative numbers.  This supports my view that Gold will now hammer down faster than Silver in a catch up move as the non coms unwind their Longs pronto. 

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Sliver is pretty much down to long term trend line. Bearing in mind the Gold/Silver ratio, Silver has got to be considered as oversold. Doesn't mean it can't drop further though !!

Keep a close eye on those silver miners, may soon be time to go all in.

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Bit more to go yet @draa46 but it has certainly stalled on my possible neckline.  Given Gold probably has a way to go to bottom out then Silver should drop further, although I expect not by much and a fair bit of consolidation action between current levels and the LT trend line around 1420.  It is the breakout from such a consolidation, if it happens, that is of interest for Precious Metal Bulls, especially if Gold is also breaking out of a credible turn point.

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Silver is providing a better set of indicators than Gold for me at present, and is a more lucrative market to trade (more risky too therefore).  The precious metals are still conforming to my road map, and all 3 of my scenarios remain in play (2 Bullish, 1 Bearish).  For me the Bearish one is not a strong scenario, unless you believe in a continuation of the Bull market in stocks for the next few years, which I do not.  With Oil looking Bearish, and stocks too, I think it is only a matter of time before the precious metals Bull triggers big time.  Maybe the trigger will be a USD bear move short/medium term?  Precious metals do seem to be acting more in concert with currency just now than as a safe haven.  I think the latter will be what drives the Bull out of the larger time horizon consolidation but short term it could be USD weakness that kicks things off.  That also means I am not yet convinced we have seen stock indices capitulate but if they do then Precious metals should explode up.

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1 hour ago, Mercury said:

Silver is providing a better set of indicators than Gold for me at present, and is a more lucrative market to trade (more risky too therefore).  The precious metals are still conforming to my road map, and all 3 of my scenarios remain in play (2 Bullish, 1 Bearish).  For me the Bearish one is not a strong scenario, unless you believe in a continuation of the Bull market in stocks for the next few years, which I do not.  With Oil looking Bearish, and stocks too, I think it is only a matter of time before the precious metals Bull triggers big time.  Maybe the trigger will be a USD bear move short/medium term?  Precious metals do seem to be acting more in concert with currency just now than as a safe haven.  I think the latter will be what drives the Bull out of the larger time horizon consolidation but short term it could be USD weakness that kicks things off.  That also means I am not yet convinced we have seen stock indices capitulate but if they do then Precious metals should explode up.

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Sir gold chart

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Gold has arrived at an important juncture for me but before that looking at that I looked back at the long term charts to remind myself of the big picture.  Unsurprisingly there are 2 scenarios (1 up and 1 down), actually a third which is continued consolidation (sideways) because in the big picture Gold remains in a long term consolidation Triangle, which is narrowing.  This is significant as at some point Gold will breakout of this Triangle and that will signal the resolution to which of the 2 scenarios wins out.  For my money it is scenario 1, a massive Gold rally in concert with a massive stocks Bear as Gold once again reverts to its historic role as a store of value in uncertain times, and do we ever live in such times..!  Note under these conditions Gold can, and almost certainly will, go in the same direction as USD.

So I am Bullish gold and given all the bullish chatter of late you might imagine I am happy.  Alas I remain unconvinced of this rally and will not be so until there is a break of the previous high, around 1347, which we are very close to. Actually I really want to see a break of the upper resistance (LT Triangle line and potential H&S neckline breakout).

The short term offers 2 scenarios as well: the first a break of that prior High and turn at 1347, the second that we are currently seeing a wave B turn back down to a final wave C bearish run of the EWT1-2 retrace and a test of the Fib 50% line (also Weekly chart Fib 23%) before the true rally gets going.  I am minded to the latter unless or until I see a break of the 1347 high. 

Technicals:

  • A-B-C retrace could be completed where I have marked Green A at 1266.  A break of the 1347 high would confirm.
  • If not then the retrace is a complex version and the market will turn before or at 1347 and drop in a wave C.  The form of the rally is currently in an A-B-C, which is not motive, however a break of the 1347 zone will change this set up.
  • There is an un-closed gap around the Fib 50% level.
  • There is a pin bar and inside bar price action formation at the current market area, showing a potential turn once this is resolved.
  • RSI and Stochastic are over-bought.
  • There is NMD on the 4 hour and 1 hour chart at the pin bar high, although we could yet see another test of the 1347 level before this resolves.
  • Note also that we have seen a reverse Death Cross (some call this a Golden Cross) but I would ideally like to see a cancellation of this and then a final cross to cement a rally.  This will only occur if we get a big bearish move now followed by a wave 2 retrace turn into a very strong rally.

I am not looking to trade the bearish move, I prefer to wait for the Bull rally triggers and prefer to trade this in Silver rather than Gold, the former having remained more subdued.  Add to that the Platinum bearishness and I can't yet see a case for precious metals rally.  I think we will see continued stocks bullishness for a while, albeit likely to contain a lot of whipsaw action rather than a rocket, which does not support a massive precious metals rally, yet.

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So we did see a fresh higher high on the current rally but I remain unsure of this rally so long as it remains under the key resistance levels around that 1360 area.  It is possible the last retrace is simply a pennant (albeit a big one) in a wave 1 rally that could terminate around key resistance and plummet back to close that gap.  A clear breakout of the 1360 area is what I need to go all in Bull on Gold (or I should say resume).

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Gold hit a new high as my road map had projected and right on cue bounced back down off the potential neckline resistance.  The drop was quite strong, stronger in Silver and produced a Bearish pin bar on the Daily chart.  COT was high at net +205, supporting a contrarian turn however it has been a lot higher so this is not conclusive.  I could easily see another leg up before a drop, especially if USD drops off from here.  Ultimately I would need to see a breakout of the crucial resistance zone to get Long again but am not minded to trade this Short as there are too many scenarios in play.

If a Bear move is on the cards I would expect a break and retest of the 1 hour Triangle and rapid fall away.  Of course we would see this kind of price action for a short term bearish move as a presage to another higher test of Resistance above.

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SO Gold is on a rampaging rally eh?  Well maybe, maybe, but just like my views on Silver (see alternative thread) I am not yet convinced, and I am firmly a long term Gold/Silver Bull.  Gold seems to be responding to USD at present rather than acting as a safe haven and no surprise as the safe haven facility would only be triggered if we were in global financial meltdown, are we?

So Gold and Silver are merely responding to their own internal market dynamics for me and perhaps the rally has just reached its natural conclusion, for now.  Markets move in waves not straight lines as we all know.  Markets are chiefly driven by sentiment but when this sentiment gets too lob sided, without good reason (e.g. a financial meltdown) they tend to reverse.

On Gold right now I see the following scenarios:

  1. This is the conclusion of a wave 1 (blue) rally with a pin bar reversal off key resistance (very Bearish but not yet confirmed with a day close) that will bring up a strong Bearish move that could carry as low as a retest of the long term support trend line around 1230ish.
  2. We get a short term retest of the 1360 zone and a rally away.

The current price action is strongly Bearish, it could reverse later in the day but if it doesn't then I prefer scenario 1.  A break back below 1360 will confirm.  From a more fundamentals perspective we could be seeing a reversal of the Bearish bias on stocks as US large Caps approach fresh ATHs and the Bulls start to believe again in the never ending Fed story.  That one will end in tears, and worse, and at that point precious metals will be into that mega rally I am tracking.

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Aligned to my Silver post, where I am putting most of my precious metals energies for now, I see 2 scenarios for Gold.

  1. Short term drop to the potential H&S neckline (or weekly/monthly chart Triangle) and rally again that takes us through the overhead resistance.
  2. A Bearish move that takes the market back to close that gap with a retest of the potential pennant (pink triangle) that formed the halfway point in the current rally.

I guess there is an addition scenario that the market simply turns up from here and breaks through my last line of resistance into "clear air".

The overall move up could be described as either 1 motive wave 1 (blue) and the large A-B-C (red) as a half way Pennant OR 2 separate moves whereby the A-B-C (red) is actually the wave 1-2 (blue).  These 2 readings support scenarios 2 and 1 respectively.  The wave 1 (blue) turn is on a strong pin bar, backed up by a second in bar in Friday last.  Financials COT data spiked to net long highs of +279k on futures and options, very bullish and a contrarian indicator.  This spike occurred the very day we saw that pin bar turn.  Oscillators are heavily overbought.  I believe some form of bearish retrace is indicated but not sure or course how far it will carry.

 

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Just to update my Gold charts similarly to my post on Silver Bullet just now (see that one for a more comprehensive view on precious metals).

As with Silver, Gold has been stopped at a critical juncture (LT resistance circa 1440).  We have seen 2 failed tests of this level now (3 on Silver) both rejected with pin bar price action.  If we think of this as a double top (not quite exact but it rarely is, then we can call NMD across this double top (Bearish).  There was also NMD at the wave 1 (blue) top and turn on both 1H and 4H Bearish).  The rest of the technicals are harder to read than Silver as there are 2 possible ways to read it as follows:

  1. The retrace (pink Triangle - daily chart) is a 1-2 retrace and the recent strong rally is part 1 of a much bigger wave 3 rally.  This stacks on all levels, including fundamentals but Silver gives me pause for thought as does timing issue (see Silver Bullet post)
  2. The Pink Triangle is a pennant that formed at the halfway area and culminated in the recent top (wave 1 blue).  This is also highly credible.
  3. I guess there is a scenario for a swift breakout through over head resistance but right now the technicals do not support this.

As with Silver I see several retrace points and scenarios as follows:

  1. Retest of the 1360-80 prior resistance zone or potential neckline (Purple line) at Fib 50% off the May low (Triangle/Pennant low), if scenario 1 above is true.
  2. Retest of another possible neckline position (light blue line) or Fib 38% (off the Aug 2018 low, if scenario 2 above is true.
  3. Retrace to the Fib 62% off the Aug 2018 low (or a little lower to close that Gap), if Scenario 2 is true.

Short term the set up is very similar to Silver, except with a double top rather than a 3X resistance fail, so we are looking for either a breakout up through that critical 1440 zone or a new lower low through 1410 and on down.

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Similar story as seen on Silver with a firm break lower on Friday after US NFP seemingly gave pause to the Fed rate cut thesis, although that is by no means certain in today's crazy central bank and politics influenced market place (perhaps it was also thus).  Decent break lower after US NFP, although not as bearish as Silver.  This means that Gold may execute a catch up on Silver if the bearish sentiment takes hold and therefore there is potentially more profit opportunity here.  Or may lag and turn earlier...  I will be keeping a close eye on correlated price action.

My scenarios remain unchanged vs my recent posts; my positions are stop protected at break even so all that remains is to watch and manage in flight Shorts and see a reversal into Longs.  I will not be thinking of a pyramid strategy here as the risk of sudden reversal is too great, better to wait for the big Long trade for that.  This is the essence of medium/long term swing trading and use of EWT.  You only want to switch to trend following mode when you hit the long wave 3.  Until then you have to be mindful of whipsaw price action and 1-2 retraces, which is what I believe we will see on Gold (and Silver).  The question remains, how far with it retrace before the turn into the big one and how can I ensure I catch the initial Long opportunity to set up a firm foundation for a long term pyramiding strategy on the wave 3 (or possibly C)?

Time will tell, we probably have a few weeks to sweat this one out.  Price action, EWT, S/R zones and oscillators will all play a part for me in doing this.  Stochastic and RSI may be of particular note as one would expect these to touch down into oversold before any major rally.  All to play for and if we do see that big one on precious metals can a stocks top be far behind that..?  Or will it presage it?  Bit longer to go yet but not until 2020/21 as may pundits have said on TV I feel...

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Similar set up to my Silver Bullet post with Gold, being a bit more buoyant than Silver at present, having carried to the FIb 76/78% (only Fib 62% for Silver so far).  No doubt there could be another leg up to 88% and 78% respectively but that would not negate the A-B-C set up and if we do see a firm turn back down then Gold could well accelerate to catch up on Silver as the Long holders cover, which could see Gold break through than 1360 level and head on down.

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That potential wave B (brown) in an A-B-C form (light blue) held at the Fib 78% off the previous high/low and moved back off this sharply.  Now looks to be putting in a small 1-2 retrace (maybe to the Fib 50%) after a small 1-5 down.  If this concludes as such that will be a 1-5 down with an A-B-C up and a new lower low completes this move then this is a bearish set up and I would expect a retest of the 1380 support and a likely break through of that to test lower levels.  All this while Silver does similar and USD is starting a retrace higher...

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Still waiting for the ST retrace and drop, coming up on the Fib 62% but not there yet.  Lower high put in but not yet a lower low.  Non Commercials net COT data deteriorated by 20k off the highs of last week, if this continues then the bear will continue for a while yet.  A retest of the 1360 seems like a reasonable bet, after that, well we shall have to see how price action goes...

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Gold seems less bullish than Silver all of a sudden, as it looks to have put in a simple retrace at the Fib 62% and now a small 1-2 to back it up.  Looking for lower lows to confirm but I pulled the trigger at the Fib 62% for a Short.

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Adding to my Silver post, Gold has been more subdued that Silver, which gave me additional encouragement for considering Silver's resistance Trend line might hold.  On Gold itself the EWT set up remains bearish plus a small consolidation triangle has just been broken to the downside.  This offered an opportunity to go Short with a close stop just above the set up.  I would like to see a strong follow on, representative of a wave 3 or C and breaks of support zones in short order.

Fundamentals are the same as for Silver (see Silver Bullet thread) so perhaps we can anticipate a few weeks in any bearish move (or more whipsaw price action consolidation maybe).  With a close stop and low exposure I am content to wait for price action to play out.

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Gold broke lower and then reversed after a shallow 1-2 retrace then exploded with Silver back up through the small consolidation Triangle formation.  These types of Triangle are not that reliable but a break and now possible failed retest with key resistance overhead is setting up nicely for a major breakout.  Silver is also approaching a major breakout point, see my Silver Bullet Thread for more on that.  If USD does break down lower and stocks fall then Gold/Silver major breakout could be on.

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So Gold is breaking out of that long term resistance level (circa 1440) and the set up appears very Bullish, baring a significant break back below this level.  It is a weekly chart level so a close above for the week is important, not that it couldn't break below and try again for a breakout at a later time of course.

However for today at least I am looking for a short term retest of the breakout level, which we are currently getting.  A bounce rally off this level will be important to set up a long term bull run that could run and run and run.  On the 1H chart you can see the small retrace and I would like to see Stochastic touch down into over sold before I commit to any follow on rally.  Alternatively wait for the rally/break back down resolution and go Long on a higher high.  Ideally I would also like to see USD DX turn bearish again (or really EURUSD to turn and rally hard, which is a lead scenario for me - see my EURGBPUSD Triad post).

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So gold is going up up up?  PTJ says so (see previous post), many other big time traders have said so in various forums, end of the world doom mongers have been saying so for some time (gold at 5000, 6000, 10000!).  This is agreed by those that say bitcoin will take over from gold as a safe haven, yeah not going to comment on that one but I wont be holding my breath...

I agree with the PTJs of this world regarding gold and silver (although I am not sure Jim Rickards 10000 call is right) but markets do not move in waves and I don't yet see the stimulus that would propel precious metals (PMs) to these kind of levels.  I have heard 2 credible fundamentals theories supporting a gold long term bull market as follows:

  1. The Fed turns the taps back on and we get a repeat of the 2009-2011 explosion in PMs and stocks and basically everything, USD drops.  Of course other Central Banks (CBs) will not be standing by and letting the Fed have its cake on this as all out currency wars join trade wars on the agenda.
  2. Central banks not only revert to QE and ZIRP/NIRP but come up with new strategies to keep their economic plates spinning, which would initially cause a burst of risk on followed by exhaustion and collapse that would be a trigger precious metals rally.  Basically the end of the financial world scenario.

The overarching factor that many serious PM players seem to be pinning their reputations on is that economic catastrophe is coming no matter what the CBs do.  There is a growing sentiment, still not main steam by any stretch of the imagination, that recession is just around the corner (not in 2+ years time).  There is well commented on social and political unrest.  Hell even all the talk of crypto currency bringing down the US Dollar is a factor, at least in terms of the zeitgeist.  But are we there yet for Gold?

I have mentioned this before but it may be timely to remind myself of the 3 factors I have heard some serious money managers call out that must be in place to support and drive a gold bull market as follows:

  1. Unsettling interest rates back drop - check
  2. Gold appreciating in all currencies - apparently we have this, I don't have the data but others who do say we have this now
  3. Gold out performing stocks (S&P500) - not sure we have this yet in a meaningful way

You will notice that none of the 3 criteria include USD moves, actual political and social unrest, or actual stock market collapse.  Clearly the latter 2 would in principle be positive for safe haven assets such as gold.  The USD moves are neither here nor there as how gold performs vs all currencies is more important, regardless of whether you consider gold to be an asset or a currency.  Under the above criteria we do appear to require stocks to top out to have all the pieces click into place (or at least to plateau and go sideways for an extended period, how likely is that given the nosebleed altitude of stocks?).  But many are forecasting a stocks rally to infinity on the back of the Fed crashing rates to zero and others are calling for that scenario to drive gold up a la 2009-11.  It's all rather confused really.

Out of all of this I take 1 key thing - there doesn't appear to be any fundamentals case for Gold falling through the floor...  Yeah forget about bitcoin taking over from gold...  Maybe then it is just a case of waiting patiently for gold to go on a rampaging rally and not expecting it is imminent, why would it be?

So let's ignore all this, news, Trump actions, received wisdom and so on and look at the only thing we can see, technicals based on price action.

If I look again at the long term charts (monthly) I see a clear period of consolidation since about 2013 that has formed a head & shoulders pattern.  The neckline is effectively the horizontal ice line resistance zone, circa 1440 (or at the recent high of you prefer).  Price looks to have failed to break through this resistance at the time of writing.  It is important to note that the move down from the 2011 highs is in an A-B-C form, there is really no case for a 1-5.  The move terminated in the Fib 50% support zone off the 2011 highs, a classic retrace turning point, and on strong positive momentum divergence (PMD).  After an A-B-C retrace comes a 1-5 motive wave in the dominant trend direction (i.e. another bull phase, that would carry beyond the previous ATH).

Zooming in on the rally price action since the early 2016 turn at wave C we can see a clear 1-5 rally to wave 1 (purple) followed by an A-B-C to wave 2 (purple), which terminated at the Fib 76% and with a failed retest of the previous Bear channel line.  We then had another 1-2 series (pink labels), which terminated with a pin bar rally off the long term supporting trend line (2 different possibilities coming together actually).  This is where I first went Long.  Finally we get the rally up to where price is currently sitting having knocked on the door of the long term ice line resistance but failed to break through, so far...  Note the pennant retrace on this rally (weekly chart), which occurs exactly half way between the wave 2 (pink) turn and the potential wave 1 top out (blue).  This is a classic from the chartists playbook.  We can also see a good 1-5 structure to the whole rally (green labels) and a bearish pin bar at the wave 1 top, which is all highly suggestive that the rally has come to an end.

Looking more closely at this recent rally on the daily chart we can see a potential ending diagonal encompassing the wave 1 (blue) top and all the price action since the wave 3 (green).  The lower line price points are a little messy.  There is very strong NMD at the wave 1 top.

Finally, on the 1 hour chart, there appears to be a 1-5 bearish move down to wave 1 (brown) followed by a retrace to the Fib 50% in A-B-C form and another small 1-2 (blue) to follow up.

Prognosis:

While I am long term bullish, price action is offering strong bearish signals at this juncture.  The set up looks to be a wave 1 top and turn, which should be followed by an A-B-C retrace.  There are several candidates for the termination of such a retrace if it were to happen, I will await price action to decide on this.  A break through the lower ending channel line and then subsequent ST support will confirm my medium term bearish bias.  If you add to this high the net non commercial COT bullish readings as a contrarian indicator the whole thing screams Short to me, so I did.  This is a tactical move as the real opportunity is to reenter Long trades on the termination of the retrace bearish move to hold for a long term bull market.

 

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Updated 1H chart with 3 failed retests of the ST retrace channel line.  NMD at the latest one, which is an A-B-C.  If this holds and the price drops away a retest of the lower daily ending channel is on.  If the general market mood is one of Fed disappointment on Wednesday then precious metals may follow stock indices south, for a while at least.

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Currently PMs and Stock indices appear to be in rough correlation (Fed/CB policy driven?  But for how long?  Not important right now).  Long term this wont last in my opinion but short/medium term the technical set ups (as posed previously) are pointing to a bearish phase on both.  On Gold we have had a clean break out of the ending channel (very similar to US large cap stocks - except of course that US stocks are at ATHs and Gold clear isn't).  We may see a brief retrace rally, maybe even a retest of the lower channel or breakout zone, before the next bearish move OR just a continuation down.

On my 4H chart you can see the ending channel and breakout.  The rally within the channel hit the Fib 50% before the drop began yesterday (before the Fed release - don't have to wait for data release if you are using technical analysis and this is where I went Short).  This rally could be either 1-2 or A-B but in either case a wave 3/C is next and that should a strong move down.  The first target is 1380 but this is shallow so I am expecting a test of the 1360 area in short order.  Note we could see a lower wave A at one of these levels so the form of the move down will be important in deciding the route being taken.  The crucial point here is that a break of the 1360 zone will indicate a likely test of the daily chart fib 50%, 1300 area, (that would be a retrace of the whole move up since Aug 2018).  Will also need to track stock indices as I think the correlation will probably hold for another round trip down up (unless this is the big one in which case at some point they will diverge as stocks plummet and PMs rally).  Time and price action will tell the tale.

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So stock indices appear to be rallying as the buy-the-dip boys kick in again, but is that all the drop we are going to get this time?  I doubt it, more likely for me it is a retrace (relief) rally to retest key support (now resistance) before another leg lower but that will probably not complete until the US markets open up.

In the event that stocks do rally on through I would expect to see a divergence with Gold as the signals remain strong for further bearish moves on Gold.  As I believe that stocks and PMs remain under the sway of the Fed policy short term I expect both to show further falls.

Specifically on Gold though I do also see a short term rally in the offing.  This is quite far behind stocks rallies so far but actually clearer from a technicals perspective.  On my 1H chart (below) I have a clean 1-5 down on yesterdays drop from the wave B/2 (brown) turning point.  There is a minor PMD at today's lows, which occurred at a decent zone of support (1400-05).  I now expect a relief rally that could carried to one of several key resistance points.  I have no way of knowing which will trigger and stocks price action on US open may inform this but the form of the price action on the rally will be a key factor (looking for an A-B-C form).  This could take all day or more to develop.  I would expect any Shorts above the channel line to be safe but personally I would cash of stop protect at BE anything below that line (which I do not have myself).  The retrace turn obviously offers a chance to get Short and the further price rises the more likely the turn become.  One to watch patiently I feel.

XAUUSD-1-hour_010819.thumb.png.3de9bdd9730b0900046e47ff78474bbb.png   

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Quite a set of price action moves on stock indices and Gold, not so much Silver, which is noteworthy I feel.  Got a bit of action on Oil too but FX was largely quiet.  US Bonds and Notes rallied, expecting lower interest rates (i.e. more Fed cuts) or just flight to safety?  If it is a flight to safety and this is the big one on stocks then naturally Gold would rally right?  And USD is signaling it may well turn and go bearish for a time at this juncture, good for Gold right?  That is the received wisdom.  The problem with received wisdom, and getting sucked into a sudden price move like we saw yesterday on Gold, is that the gut reaction is often wrong (well mine is anyway).  This is one reason many retail traders and investors find the markets so frustrating, the markets tend not to do what at face value seems logical and rational.  But that is because we can't know what is in the minds of the big market players.  This is why I use technical analysis to attempt to make some wider sense out of price action, which taken alone can be catastrophically misleading.  I don't rely purely on technicals but must also have a fundamentals backdrop.  I am long term Bullish on Gold and Silver BUT yesterday's price action has not changed the technical set up and I don't see any significant fundamentals change either.  The in-going thesis for the Fed rate decision was for Powell et al to disappoint.  Unless they cut 50 min that was always going to happen.  The suggestion in some circles is that they will circle the wagons and cut again quickly.  We might see signs of that in forthcoming speeches.  From a fundamentals perspective a disappointing Fed cut is bad for socks and bad for Gold (albeit it is still a cut...).  Stocks have reacted and Gold dropped initially too but then caught a bid.  Maybe the Trump tariff thing maybe something else, I don't know, no one does, except maybe the big market movers and they wont tell us.

So much for all that, what about the technicals?

The same situation as before still exists for me but my lower channel line is redrawn to accommodate yesterday's price action and now looks more like a parallel channel and cleaner.  The move up could be an A-B after a smaller internal A-B-C on the wave A.  The wave B (green), if correct touched the Fib88% and rebounded fast  to end the candle yesterday.  This points to a complex retrace that would end with a strong wave C down, breaking out of the lower channel line.  We should see a small 1-2 on the 1H/15min chart and drop to confirm.

The alternative scenario is that we get another touch on the upper channel line and then we see the drop from a repositioned wave 1 top.  I think it is 50/50 on these 2 from a technicals perspective.  Clearly a strong breakout to the upside negates the downside scenarios.

What is it Kipling said?  "If you can keep your head, while all around are loosing theirs..."  and so on.  Whether right or wrong on the assessment the key, for me, is to keep your head and not make snap decisions based on gut driven by a sharp move that you may not yet understand.  Unless you are a 1min chart scalper I guess but I know nothing about that.

XAUUSD-Daily_020819.thumb.png.431f061563d3997abef16e5a146dbca7.pngXAUUSD-4-hours_020819.thumb.png.0013fdf20e4d4fe80b357ccbcf8aa2ba.png

 

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Gold has just arrived at a critical juncture for me.  If it is in an ending channel with a bearish phase to come it should turn around the current level and breakout below the lower channel line, then carry on down to whatever end.  If it is about to embark on that long term mega rally a lot of people are talking about (perhaps too many people right now) then it should break the upper channel line and associated resistance zone.  It may drop here and retest of course.

I am short/medium term bearish on gold for reasons previously laid out.

XAUUSD-Daily_050819.thumb.png.91c90c2ce6ba708817171abaa5396a81.pngXAUUSD-1-hour_050819.thumb.png.c5e46771e485458a1aa4da6467fed45d.png

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Pretty much everyone is bullish gold right now and that may pose a problem for a breakout.  Also if stocks are executing yet another V shaped rebound then this isn't the big one and gold may run out of steam.  The techncials remain bearish, despite (or perhaps because of) the bullish trend of late.   The set up is the same as before for me so i would reiterate it but on the 1 and 4H chart I have a potential ending channel, almost vertical rally.  If this keels over at or before the overhead resistance an breakout out of the channel to the downside, while stocks and bonds rally then we could see a significant bearish retrace, despite what happens to the USD.  Obviously a breakout through that resistance brings up a strong rally.  Should resolve one way of the other soon.

XAUUSD-Daily_060819.thumb.png.78665f3c6c3ff038037c12d111799c51.pngXAUUSD-1-hour_060819.thumb.png.47e1df1d2bb578e6afe31267c91d3ff8.png

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Gold is making every effort to breakout of key resistance but so far hasn't quite mustered the juice.  Could the rally strength be waning?  Momentum certainly suggests it may be with NMD on daily, 4H and 1H charts.  On the 4H there are 3 pin bar candles (third one in prog).  If this one fails to breakout...  Nice 1-5 up to the current level, which has just poked through my LT red line resistance (this isn't enough, it needs to close above - on the weekly/monthly chart!).  Strong moves often poke above/below resistance/support before reversing in my experience but quite often this is a sign of a breakout at the next test (a few months away in this case).  If there is a failure here then I expect a strong bearish move to recharge the market for another assault but the wider fundamentals backdrop would have to be perfect and it isn't yet for me, unless stocks drop massively again.

Looking also at Silver I see some similarities.  Silver too is seeking to breakout through long term resistance but has been trading in a range of late.  Doesn't look like a classic sideways consolidation to me, yet, although it may yet morph into that.  Rather it looks like a wave 1 top, again a classic 1-5 with a flag consolidation in the middle (bit further down than the middle showing the strong bullishness on this move but maybe that is a good reason to doubt the longevity this time?  Very strong NMD now on Daily and 1H, which was missing until recently.  Ideally I would be looking for another leg up to test resistance, maybe an overshoot, to complete a 1-5 and then if we see a strong rejection that could be that.

XAUUSD-4-hours_070819.thumb.png.bf2cd112da9301044f822893753abd78.pngXAUUSD-1-hour_070819.thumb.png.e9f03956abfa0e58f34b068d7233600c.pngXAGUSD-Daily_070819.thumb.png.20ffd9bb3fb98ab01348418b7e2cbb8d.pngXAGUSD-1-hour_070819.thumb.png.f05b1d00d71f95041efaea5bfc5b19ef.png

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Posted (edited)

VanEck Vectors Gold miners EFT unavailable to buy, "closing positions only" on IG.  May means they can't offset clients buys with their own buys in the real market place.  Means there is no one on the other side of the trade.  One of 2 things happens now:

  1. Price rockets until there are sellers
  2. Buyer exhaustion leads to price plummeting

Everyone is focused on stocks but PMs are gonna be wild!

Edited by Mercury
to add a point
  • Like 1

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