Zentrader started out in July 08′ as a way for me to share my nightly research, provide trade ideas, and keep a trading journal that kept me accountable and systematic in my trading. This experience has been good to me as I have built invaluable long-standing relationships. It’s also been therapeutic for me by helping me organize my thoughts, and I’m finding the longer I trade the markets, the more ways I need to detach myself emotionally and relax my mind as the internet’s ability to deliver endless information can be a blessing and a curse to a trader. I believe that to have longevity with investing, one must find ways to calm the mind and trade from a detached point of view. -- Jeff Pierce
At some point, it will be “different this time”, and we will see a change in Gold’s character that is reflected in a new bull trend. At that point, recent Investor Cycle history will no longer be relevant. Similar to a satellite in orbit that needs an event to alter its course, Gold will need some catalyst to escape the pull of the bear market. Until then, we can only be guided by history. The last 7 Investor Cycles show that once speculative positions have reached current levels (as seen in the COT report), the Investor Cycle has peaked.
As bearish as this sounds, there is a “rest of the story” in support of my view that we’re still at a major decision point for Gold. If June 2013 was the final capitulation low that ended the bear market, and I still believe that it was, it was followed by a retest in Dec 2013. Each cycle since has attracted fewer Short speculators and far less hedging…and that’s not bear market behavior. Such apathy and disinterest is often observed at – or after – bear market lows.
The dollar looks set to challenge 2013 highs. Crude oil hit support with its recent move lower. Gold is at a similar junction where the recent bottom seems too obvious. My best guess is that in the short term we’ll see dollar strength and oil & gold weakness, or sideways action in these commodities.
From an Investor Cycle standpoint, we’ve yet to break the bear market trend-line. That’s OK, because Gold is the slowest in this sector to react and it’s only 14 days into what should be a 6 month Cycle. What a new Investor Cycle shows, however, is the potential ahead – a normal Investor Cycle can add up to 20% in gains before topping out.
There is evidence that gold is turning bullish – and even that Gold formed both a DCL and ICL this week. Because Gold was technically oversold and deep in the daily count (27 days), the Swing Low this past week was most likely confirmation that a new Daily Cycle has started.
I’m encouraged by what I see with the Miners. For the first time since the markets topped, investors are not pricing in a failure of the Gold Cycle. Generally, the Miners will overshoot the Gold Cycle both on the high side in a bull market, and on the downside in a bear market. They are leveraged to the price of Gold and carry a higher beta, so can be much more volatile around key Cycle pivots.
The waiting game for the declining portion of this Daily Cycle has certainly been frustrating. Generally, by this point, the severe decline towards the next scheduled DCL\ICL would have been well and truly in progress. Along with the powerful rally out of any ICL, the drop and collapse in the latter portion of an Investor Cycle are the two most dependable events within any Cycle.
Up until today I was open to the idea that Gold has bottomed but if we don`t find support on near the daily RSI on gold then I think we`re heading back to the lows. It`s too early to make that conclusion as Gold will at least have an attempt to take our recent highs and if it fails there then it`s going to be tough for gold traders. If it breaks and closes above that level then this will likely trade up to the $1400-1460 range before any meaningful resistance.
There is little doubt that the 2nd Daily Cycle has topped, so we need to be patient with the decline. The timing for a top is acceptable, and the oscillators have clearly turned and are headed lower. The upward Cycle trend-line has been broken and Gold closed below the 10dma. At this point, we should assume that we have 2-7 sessions lower, with an target of between $1,290-$1,300.
For now, let’s continue to support the notion that a further move higher is coming. But at the same time, let’s acknowledge that a close below $1,322 would be Daily Swing High, a trend-line break, and a 10dma break. The next couple of days will be telling, because gold hitting that trifecta of events would certainly confirm a Daily Cycle headed towards the next Cycle Low.
Gold is still a few confirmations from a final declaration that this is a 1st Daily Cycle, but the evidence is mounting. For now, we’ll treat the first DC scenario as primary. “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck”.
Since it’s extremely unlikely the Euro is in Week 3 of a new Investor Cycle, our expectations must be for the Euro to fall immediately from this point. The Daily Cycle does not support further upside here, as a Left Translated DC is necessary for a drop into a mild Euro ICL.
I’m looking for the miners to break below the June Low, but for Gold to hold above it. A decline by miners below the low should trigger exhaustion selling, but if Gold doesn’t confirm, it should mark a significant bear trap for investors in miners.
On the other hand, if Gold moves higher next week, Gold bugs should be fearful. With Gold at 25 days from the last DCL, a move higher through the 10dma ($1,294) and the declining trend-line will confirm that a new Daily Cycle is in play. On the surface, a new DCL is bullish, and many investors will interpret and trade it as such. But a new Daily Cycle will likely be the 5th in the current Investor Cycle, so should fail and lead to significant low.
No Trade In Gold For Now - March 05
Gold has not developed a daily chart bottom — and I believe this is a necessary condition for any future bull market in the metal. I thought Gold had formed a H&S bottom in Jan 2015, but the recent decline has been too severe, so we are back to the drawing board. I see no trade in Gold at the present time.
Events Impacting Gold And Silver In The Week Of March 2nd - March 02
For the week commencing March 2nd, there are some important economic data and central bank announcements, as seen in the table below. The interest rate decision of the European central bank on Thursday is undoubtedly the key announcement this week. Friday is an important day because of the unemployment report and nonfarm payrolls for the month of February. Our expectation is that the events on Thursday and Friday have the potential to create volatility in COMEX gold and silver, hence influence the gold and silver price. The PMI report in the U.S. and Europe, CPI in Europe, and Yellen’s speech at Citizens Budget Commission’s Annual Awards Dinner are not likely to cause volatility in the metals market.
Technical Analysis: Expect Contratrend Rallies In Most Metals - March 01
Bear market declines are in place for nearly all the commodities except for a strong Palladium.. Kickback rallies (contratrend rallies) are in place or in progress; some already may be failing. What to watch for is a test of the lows, which may result in a further breakdown, and lower lows, or contrarily, a decline that fails to achieve the former low, thus holding at a higher level, which could suggest the potential for another rally over the weeks / months ahead.
April 27 – 28, 2015, in Florida.
Keynote speaker Felix Zulauf with 40 years of experience in financial markets and investing.
This Forum is organized by BFI Wealth Management, a group of experts in interntional investing and wealth planning, operating under Swiss jurisdiction.
