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
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.
The bearish performance to date likely indicates that once the Cycle ages that it could quickly turn down sold aggressively. This might well coincide with the dollar coming out of its own DCL late next week. Up until then though, gold still has a chance to prove me wrong. I believe even in the bearish case that gold should have enough steam to get it to $1,300. But now is its only chance to shine. If the gains cannot come quickly from this setup, then I’m afraid gold is setting up for yet another big fall.
Friday’s powerful reversal has me convinced that a new Daily Cycle is born. Based on the depths of this DCL it’s only natural to expect a decent (at least counter-trend) rally back up to the declining trend-line. But that’s about the extent of the “high probability” trade that I’m willing to predict. We can’t argue with the fact that this bear market remains in effect until proven otherwise, and therefore a rejection at that declining trend-line ($1,330 area) is a very reasonable expectation.
I mentioned in Thursday’s trade alert that we could expect a back-testing sell-off from that breakout, and that would be normal. But I did not expect to see anything more than a retest of the breakout line around $1,394. I certainly did not see a move all the way back into the ascending triangle. So this week will be an important week for gold because if this is a Left Translated Cycle, then Friday morning would certainly have marked the top of this Daily Cycle.
If this does end up being the start of a new Investor Cycle, then we won’t know for sure until the next Daily Cycle. The next dollar Daily Cycle should top very early and form Left Translated. If however it goes on to make new IC highs then it will almost certainly be the 2nd Daily Cycle of a young Investor Cycle. If this occurs, then gold will also form Left Translated and drop again, likely making yet another deeper low in June.
The good news is that with the culmination of this Daily Cycle we should be starting a new Investor and Yearly Cycle and it should be good for at least a $200-$300 move. Even if the bear market still has a hold on gold, we should expect violent counter-trend rallies. We know there is no way of knowing whether this will end up being the start of a major new bull trend. But in the least, this is shaping up to be a powerful and bullish setup.
Silver this week also finally shows that sentiment has also finally fallen to bull market lows. We know that when sentiment reaches these levels of extremes (see Green lines on below chart), that it has always marked a significant low. As Silver has retraced back to its 2 year support area (low $26 area), sentiment has dropped even further this time compared to past lows.
Last year my long term projection was for the markets to continue higher along with the dollar. The dollar has continued higher while the Dow and now the S&P have made new all time highs. This trend could continue throughout the year and we could see the dollar continue to gain strength.
Gold’s Daily Cycle is offering up very few clues as to its short term intentions. The Cycle remains Left Translated, and that typically is a bearish omen for any Cycle. The fact that it will not sell-off is very positive, it suggests that gold has found a floor that is going to be defended.
Gold Almost Back In Long Term Trendline
The chart shows the trend in a range based on a 95% prediction band. The stand-out feature on the chart is how gold remained within the range for the past 10 year for most of the time. The two exceptions were gold’s peak in the summer of 2011 and the collapse in 2013. Gold is close to entering the long term trendline.
It’s Official: Platinum and Palladium Have Broken Out
In the last few weeks, we had “warned” several times how the price of platinum and palladium were at major resistance on their long term daily charts. As of today there is no doubt anymore. Both metals have broken out strongly on big volume. All conditions are met for a long term break out.
Gold Model Calculates Gold Price Of $2400 To $2900 In 2017
A reasonable projection for the equilibrium gold price (a “fair” price for gold) in 2017 is $2,400 – $2,900. Remembering that market prices can spike significantly above or crash below the EGP for many months, we could see a spike high above $3,500 or $4,000 in 2017. Extraordinary events such as a global war or dollar melt-down could push prices higher and sooner.
Hold physical precious metals outside the banking system to survive the coming financial winter.
