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
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.
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.
Gold Prices From 1971 To 2014 in 3 Waves July 31
Gold prices will rally much higher in the next 5 years. Jim Sinclair’s initial target of $3,500 seems very likely by 2016 – 2019. If the powers-that-be choose hyperinflation to deal with their massive debts, then much higher prices are “in play.” There are many other options. For example, if you don’t trust or like gold, a bank will pay you 1% interest each and every year if you invest in a Certificate of Deposit.
Silver Price In 2014 Establishing Another Megaphone Pattern July 28
Silver prices have increased but in a disorderly manner. Over 40 years of silver prices can be represented by four zones of megaphone shaped price patterns. My round number target is $100 or more in 2016 – 2019. Although I hope that the powers-that-be will not choose to create hyperinflation in the US, if hyperinflation does occur, the $100 target will be easily bypassed and much higher prices will be “in play.”
Gold Price In 2014 Consolidating Above Major Support Area July 25
So far, the gold price in 2014 in the first six months has been trading in a tight range between $1190 and $1390. The yellow metal had one significant rally in February / March and one moderate rally starting in June. The price chart has a clear “line separator” in the $1270 – $1280 area which has served as major support throughout the first half of the year.
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Hold physical precious metals outside the banking system to survive the coming financial winter.
