Yesterday’s rally was the most promising we’ve seen on the hourly chart in weeks. It surpassed no fewer than four prior peaks without taking a breather; moreover, the pullback has been shallow so far. We’ve been short this vehicle with an 1176 basis, but the current stop-loss at 1093.70 should be closely minded, since even moderate strength on Friday could trigger it. If so, it would give us a theoretical gain of $9300 on the position upon exit. If the rally is for real, bulls should be able to move the futures easily past1086.50 Thursday night.
Gold was looking good until last week Wednesday, October 28th. It must be a coincidence that the COMEX futures gold price always drops significantly on the day of an FOMC meeting / announcement. Right now, gold sits on its 50 day moving average (DMA). If support fails, our downside target becomes $1125 at the lower median line of the blue modified-Schiff fork. The lower median line of the red modified-Schiff fork is around $1050.
Gold is working its way higher with a nice pullback to what should be support along the median line of this modified-Schiff pitchfork. This chart is meant to emphasize the failed triple-bottom zone where, IMO, a significant amount of resistance can be expected. After a multi-year downtrend many people were expecting the $1180’ish level to be the bottom. When it failed in late-2014 sentiment became very dark which of course set the stage for a quick rally up to $1300. Breaking above this triple-bottom zone and establishing it as support again will be a major milestone.
Despite a modicum of weakness today, gold’s technical outlook remains optimistic in the near-term. After peaking near 1190 last week, gold has nudged its way back down to 1165 as of writing. The shallow, controlled pullback after the big rally of the previous days has created a clear bullish flag pattern. It’s worth noting that, despite its name, this pattern is only seen as a bullish sign if we see a breakout above the top of the flag (currently near 1180).
There has finally been some positive price action on Gold ($GOLD) and to some extent on the gold miners. Let’s take a look. Gold has been building this red wedge for almost three years now. The past two weeks it broke above the trend line and tonight we’ll see a taller candle approaching horizontal resistance around $1180.
Gold executed the bullish declining wedge with last week’s breakout. Confirmation is arriving in the form of a new PMO BUY signal and a STTM BUY signal that triggered when the 5-EMA crossed above the 20-EMA. We await a positive 20/50-EMA crossover to retire the ITTM SELL signal.
Monday’s moderate weakness looks innocuous in the context of the bullishness of the 240-minute chart shown. Notice that the presumptive C-D phase of the rally begun from 1081.40 in early August stalled precisely at the 1141.90 midpoint pivot. This confirms the authority and reliability of the pattern itself, while also shortening the odds that a decisive push past p would go at least to p2=1164.00, or to D=1186.10 if any higher.
One of the obvious beneficiaries of the accompanying dollar weakness has been gold, which is both denominated in US dollar and seen as a store of value in competition with the greenback. Today’s big rally has created at least four significant bullish technical signals
Gold’s punk price action this week has turned me mildly skeptical, but I’ll follow the bullish lead of a chat room denizen who saw encouraging signs on Thursday. He posted as follows: “Just to let you guys know, [something happened that] I haven’t seen in a very, very long time: NUGT is up 16%, many of the miners I follow…are up quite a bit, and Gold is not down. This is a telltale sign that Gold…is ready for a launch.”
Gold is moving lower and support along the bottom of the price channel is failing. In the daily chart price remains in its $1084-1100 price range but the big picture suggests that we will see lower prices. The entities pushing the paper price of Gold and Silver lower are going to continue pushing until they can’t make anymore headway with their strategy.
While the price of gold is significantly oversold from a technical perspective, and a rebound to correct the recent over-extension to the downside should be due, the possibility of a relief rally will be largely dependent upon shifting speculation with regard to upcoming Fed statements and decisions.
Friday’s rebound looked ever-so-slightly promising, since it followed a moderate selloff that did not quite achieve its ‘D’ target, 1064.00. Now, if bulls can push this erstwhile cinder block above the two peaks shown, it would generate an impulse leg with enough vigor, perhaps, to power a rally into week’s end. The burden of proof will remain on bulls nonetheless, and it should be noted that the last such impulse leg, in mid-June, sputtered out almost immediately, giving way to a $125 decline.
Gold is testing a critical support level around 1085. This zone represents the convergence of two Fibonacci extensions (the 127.2% extension of the November-January rally and the 161.8% extension of the March-May upswing), as well as the intraday lows on Monday and Wednesday. As we go to press, gold is peeking below that support zone, but it may be worth waiting for the weekly close before assuming that it’s been conclusively broken, especially given the deeply oversold daily RSI indicator.
Let’s take a look at the Gold and Silver charts and see what’s going on. Most of the charts in this letter use Heikin Ashi (HA) candlesticks, a variation of the traditional Japanese candlesticks. The HA candles filter out some of the noise in a price chart and make it easier to focus on trends. In this monthly chart of Gold it is obvious that the current trend is down even without the HA candles.