GOLD TREND July 23 - 27, 2012

 July 27

 Long Term=Up (major resistance 1767-1804 needs to be exceeded on a monthly close) 

Medium Term=BEARISH (Major Resistance 1672-1705 Monthly Close) Technically in bearish mode until we close above 1672.  The 1642-1660 area is first medium term resistance. 

Intermediate Term= bullish – Need a close above 1620-1625 to favor a key intermediate term low and go bullish 

Short Term= BULLISH–  The uptrend is bullish and it takes a close below 1567 to turn bearish Support and Resistance for Initial Resistance for 1628-1634 and 2nd tier 1645-1655 Initial Support 1606-1609 and 2nd tier 1595-1601

What Next?    

 GDP REPORT AT 8:30 NY TIME --- DON”T KNOW IF WE CORRECT OR NOT.  If you have more than 1 contract --- sell some    

BOTTOM LINE  

THE CORRECTION IS OVER-- the bull market has resumed -----------------  Could hit resistance today.  See hourly chart. THIS was why I did not send out a SELL at resistance 1620. We could get pullback either before  or after GDP report

 

July 26

 Long Term=Up (major resistance 1767-1804 needs to be exceeded on a monthly close)

Medium Term=BEARISH (Major Resistance 1672-1705 Monthly Close) Technically in bearish mode until we close above 1672.  The 1642-1660 area is first medium term resistance.

Intermediate Term= Neutral / bullish – Need a close above 1620-1625 to favor a key intermediate term low and go bullish

Short Term= BULLISH–  The uptrend is bullish and it takes a close below 1567 to turn bearish

Support and Resistance for Thursday Initial Resistance for 1615-1624 and 2nd tier 1635-1642 Initial Support 1595-1599 and 2nd tier 1580-1590

 Gold Very Short Term

Yesterday’s dual reversal fake out was a set up to spin heads and keep as many off balance as possible. It was not an enjoyable afternoon, but these things happen and once reflected upon, one has to move on.    We discussed when major fake outs occur, the tendency is to freeze up as the market has thrown a few fakes and given a few hits. Often, it is then that the market makes their moves. There were five major spikes down from July 15th and all were reversed including the major dual reversal on Tuesday. Resistance was right at the purple line.  The red line is the next target at 1614.  Support for Thursday is 1695-1697 and we favor that to hold. Maximum pullback should be 1685 if we are correct about this move and we don’t think we will see that.

 What Next? 

 

We believe a major trend change happened on TUESDAY that led to Wednesday.  We could get a minor pullback just below 1600 on Thursday. Otherwise favor higher.  

Bottom line 

 

We have waited for over a year and will say it for the first time.  We believe the correction is gold is over.  Any pullback to 1590-1595 should be bought as well as 1585.  

July 25

 Long Term=Up (major resistance 1767-1804 needs to be exceeded on a monthly close)

Medium Term=BEARISH (Major Resistance 1672-1705 Monthly Close) Technically in bearish mode until we close above 1672.  The 1642-1660 area is first medium term resistance.

Intermediate Term= NEUTRAL – Need a close above 1620-1625 to favor a key intermediate term low and go bullish

Short Term= NEUTRAL– A close above 1592-1603 will neutralize the downtrend and go to bullish.  A close below 1547 would put the trend back to bearish.

Support and Resistance for Wednesday Initial Resistance for 1584-1594 and 2nd tier 1603-1612 Initial Support 1560-1570 and 2nd tier 1547-1555

 RECAP

the markets were all over the place again today in one of the wildest days I’ve ever seen. I’ve been watching the markets for 30 years, and I was ok with the drop from 1579 to 1572 this morning as New York opened.  I was ok with the rally to 1584.  I was even ok when we dropped all the way to 1567 as there will be reversal days and it was a classic set up where resistance was broken above the gold channel line and then it reversed.  But when gold rallied back from 1567 to 1582 I turned off my screen. The markets spent the Asian quiet in gold as a private survey of Chinese business sentiment showed a modest increase from June's reading, but it did reach its highest level in 5 months expectations, even though it still indicated contraction Then the London session focused on the mood in Europe as it continued to dampen, with Moody's downgrading Germany's AAA rating to from stable to negative, citing the problems in Greece, Spain and Italy. Then data from  Euro zone manufacturing came in at 44.1, down 1.0 from last month and lower than market expectations and German manufacturing was at 43.3, down 1.7 from June and lower than market expectations. By time we neared the New York session gold had moved down to 1571. But the market got a lift after the release of the Richmond Fed Manufacturing Index, which indicated that manufacturing activity for the mid- Atlantic region was at its worst level since April 2009. From there Gold started rallying and moved to 1584 not once, but twice going into 10 am NY time as a Fed official stated that the FOMC may consider fresh easing measures at next week's meeting. Meanwhile, Greek officials were meeting with representatives of the European Commission, the European Central Bank and the International Monetary Fund to renegotiate bailout payments and the dollar started gaining ground as the Euro sold off and then gold joined the fray on the downside. Not to be outdone, by half past noon, gold had dropped to 1567 and it looked like a major reversal day was taking place when all of a sudden the gold overlooked the equity sell off, the limit down in grains and the dollar rally and staged a full recovery back to the 1580 area to end the session.

 

What is going on?

We suspect that the bulls and bears are now at full attack force trying to gain control of gold in this sideways pattern we’ve been in.  The bulls are coming on full force as the seasonal trend is favorable to gold this time of the year as Christmas jewelry is being ordered and the Indian  wedding season is approaching. When combined with China and other nations building up gold reserves and central bank purchases, it’s bringing in the speculators and funds in anticipation of the upside. On the other side, the shorts are trying to stop the trend from reversing as they know once it does and gains momentum, it will bring in the momentum boyz and a slew of speculators. And the gold market is currently in strong hands as the commercials are net their longest position in gold since the 90’s and that only leaves the speculators and the banks (who are probably working for the government/Fed) in trying desperately to keep the gold market down. With the corruption scandals that have been exposed with LIBOR, the long spoken manipulation of the markets is spreading from the internet sites and is now beginning to move to mainstream media.  The LIBOR scandal is leading to stories on manipulation in Crude Oil and a host of other markets. Think about Crude Oil for a moment. How did it go from 88 in Jan 2008 to 147 exactly at midyear, only to fall from 147 to 33 by the first week of 2009?   A full 114 dollars in 27 weeks.  This is now bringing the gold and silver manipulation story much closer than ever to the forefront as well. With this type of scrutiny, the manipulation is going to be much harder to conceal. Lastly, the world is coming to the realization that the debt situation is beyond the point of ever being paid. Thus the only thing that remains then is more QE bailouts and eventually defaults on the debt.  And when that comes, the world is going to change rapidly. The forces for gold are now very high and the shorts are trying desperately to stop a rally from taking place. Once it does, and regains momentum, it will become very difficult if not impossible to stop the upward trend. In summary, there is a major battle going on for control of the market as all the bull forces of gold are coming into play and the shorts are on throwing everything they can to stop it. For once gold begins to rally and makes headline news again and the debt situation becomes acute, the final phase of the bull will take place and the public will try and join in as the panic begins to spread.   When they do, the very low physical supply will overwhelm price and when gold moves front and center, the currencies will be exposed for what they are, paper with nothing to back it but confidence.  And when that confidence is gone, the value of currency will drop quickly. It only took one night to go off the gold standard.  The potential downgrade of currency might be just as quick.  

 

The other side of the coin 

 

Now it JUST might be that OPTIONS EXPIRATION on Wednesday is causing this as the control boyz moved price lower to put the option premiums near zero on the 1580 and 1600 calls and then BOUGHT them back.  Then let price come back and then do it again.  This has been one of their tactics so it is possible. My confidante "Darth" told me today that this might be a fake out and he was right.  He has been right about this entire collapse coming five, ten years ago. He made a good point -- APPLE earnings were bad on Tuesday----- and that might bring STOCKS lower on Wednesday and as he points out, that might mean that Gold and Silver tag along.  Its not always that way, but its favored. He feels that an "event" must still happen in order for the control boyz to "lose" as the masses pile in.  He agrees with the desperation and everything mentioned above, but he is urging caution here. In summary, I still feel Tuesday was not ordinary, and I will concede it could most likely be Options Expiration related.  However, its best to remain ready just the same. A move is still favored from 1580 one way or another this week. The move can still be in either direction.  

 What Next?

Mid week Wednesday arrives and it also adds more to the table of options. As we’ve noted on many occasions and have seen, Wednesday’s can often produce the high prices for the week.  This adds one more bit of complexity to the situation where we’ll have to watch for a potential high developing for the week.  With all that is happening, and all the spikes on the chart and the Tuesday DUAL reversal, we have to think the market is setting up to make its move. Often times it will do what it did today to leave as many blindsided and with a bit of bloodshed just enough to stand aside for a moment, and then it makes its move. And most often, when the move does develop, its hard and it doesn’t pullback until its much higher or lower. A move above the purple channel line and 1592 sets the stage.  The daily channel at 1603-1610 is the other area to watch. Wednesday or not, we would favor the upside for this week and the new cycle if this develops. One thing painfully obvious after Tuesday whipsaw, is that the RANGE in gold is big and it has to be respected – more so than I gave it on Tuesday in my trading.  And that means that CLOSES are most important and deep probes in price are something that has to be dealt with.  As much as I hate using micro and mini contracts, this type of market calls for it. Even options are a consideration. With the Tuesday close above the GOLD channel line --- but not above the Purple channel line we have to label the current price at 1580 as NEUTRAL. Perhaps the best quote from Monday was first --- “fake outs need to be watched” and ---“we’re not sure what to expect on Tuesday.” If there’s any consolation, this is what it’s like at a MAJOR PRICE POINT.  Confusion, reversals, and a trick at every corner. ONCE OUT OF THE WAY --- the trends that we saw from 2009 to 2011 is HIGHLY favored to return and once trend resumes, it will be a lot easier.  In fact, the ability to survive a correction like this and hold on to the money in the account is what it comes down to. A close below 1547-1555 in spot gold would favor lower.  

 

Bottom line

after such a move on Tuesday, the potential for price to now run away has to be watched.  After such a whipsaw like we’ve seen with six spikes since the 15th of July and with the dual action on Tuesday is a perfect time for the market to move. Odds favor that “the” move will be quick, and will not pullback either. With what I saw on Tuesday, it won’t surprise me one bit if it develops now. With the dual reversal and FIRST CLOSE above the gold channel, the odds are still on the upside.  The 200 HOUR GREEN MOVING AVERAGE IS ALSO AT 1580 and the 89 WEEK MOVING AVERAGE IS AT 1583.  ODDS FAVOR ITS DECISION TIME one way or another. THE PURPLE CHANNLE LINE IS AT 1588 and goes to 1592 over the next 24 hours.  The gold Channel line is now at 1575 and will be down to 1572 in 24 hours.  

 

July 24

Long Term=Up (major resistance 1767-1804 needs to be exceeded on a monthly close) 

Medium Term=BEARISH (Major Resistance 1672-1705 Monthly Close) Technically in bearish mode until we close above 1672.  The 1642-1660 area is first medium term resistance. 

Intermediate Term= NEUTRAL – Need a close above 1620-1625 to favor a key intermediate term low and go bullish 

Short Term= NEUTRAL– A close above 1592-1603 will neutralize the downtrend and go to bullish.  A close below 1547 would put the trend back to bearish. 

Support and Resistance for Tuesday Initial Resistance for 1588-1598 and 2nd tier 1603-1607 Initial Support 1560-1570 and 2nd tier 1547-1555  

RECAP

We were looking for higher prices on Monday, but did leave the potential open for 1555-1565 to be reached and that is what ended up happening. We discussed if we moved to 1555-1565 that we still favored we would rally and after making a low at 1562 we did move back up to the 1580 area and closed at 1576. We still feel we need to move above 1592 – 1603 to favor higher prices.  On the trade page, I tried to anticipate the move last night by going long at 1580 with a 10 dollar stop, and I paid the price as I got stopped out.  I should have waited. The big crunch came as no bailouts were announced for Spain, which was down very hard again today.  Crude oil was down 4 dollars at the open and the US stock market off 220 points.  Prices did recover during the day but all eyes remain on what is going to happen in Spain and soon to come, Italy.

The USA will soon be facing the same tests coming as there is no way out of the debt situation that is coming. So what happened today?  Well, all those calling for a major bailout over the weekend by all central banks were dead wrong again.  No need to mention names.

What happened is there was so much speculation that Angela Merkel had been won over by Spain and others and that they had outmaneuvered the ‘Iron Lady.’ 

Don Coxe (who manages billions explains) in an interview with King World said: The only agreement that they really got was one that’s going to take months and months to implement, and only if all of these countries live up to their promises. There’s very little chance of that.  Right now, in Spain, which was one of the supposed victors in this, not only is the central government in trouble and Spanish bond yields have soared, but in addition you’ve got the various provinces going broke one after another. They are coming desperately, cap in hand, and it’s not clear who supplies it. Greece is meeting with the Troika again this week. There’s no chance they’ve met their responsibilities. So by the end of the summer we might be facing two of the PIIGS going into default without any new schemes coming forward. What can be the outcome for Spain and Greece?

 

 What Next? 

A move above 1592-1603 on Tuesday would favor the upside for this week and the new cycle. As mentioned last night, there’s always potential for an inversion when it’s been six months we have not had one. We also mentioned if Monday couldn’t get above 1592, the potential to pullback to 1555-1565 could develop.  It is never easy when markets are caught in such a sideways pattern as we are in and the level of patience that is put upon traders and investors can and does reach extremes.  In my own experience, I’ve seen these types of markets force many to throw in the towel and of course, within a few weeks, it turns back up. A close below 1547-1555 in spot gold would suggest that all is not right and would portend lower prices could be in store until the first week of August.  THE TREND LINES ARE CONVERGING here and fake outs need to be watched as we saw on Monday.  Quite frankly, we’re not sure what to expect on Tuesday at the moment. The only thing we can hang our hat on at the moment is the need to get above 1592-1603 to favor the trend has turned up. That LOWER PURPLE and UPPER DOWN TRENDING GOLD LINES on the hourly chart are the  bull/bear zone or the PIVOTs where price direction should be decided. The UPPER GOLD down trend line at 1580 and the purple line at 1585-1588. Any close above 1592-1603 will favor the upside as the choice. First target would be 1620-1625.  Since last Wednesday we’ve used a close below 1580 leaves the downside open and we’ll stay with that for Tuesday.

 

 Bottom line 

the short term cycle is in play and any close under 1547-1555 favors the cycle is failing. Price has tried to get above the upper gold channel line four times now and so far is unsuccessful.  Until we breach above 1585-1592 we have to say the downtrend still has potential. If we can get above 1592-1603 the market should be moving higher this week.  Below 1547 means the cycle is most likely inverting. Things seem to be unraveling rather quickly in all aspects, so let’s be careful. At times gold seems to want to break away from other markets, but turns back down as we saw today.  The Debt Crisis also seems to be coming to a head and we’ve always maintained that gold can be taken down in a liquidity crunch, at least initially.  At some point, some event is going to occur, but as we enter Tuesday, we still need to get above 1585-1592 to favor higher.  Until then, the trend can still be down.  Watch that Gold and Purple channel at 1580-1585 as that is where the pivot is on Tuesday.

 July 23

 Long Term=Up (major resistance 1767-1804 needs to be exceeded on a monthly close)

 Medium Term=BEARISH (Major Resistance 1672-1705 Monthly Close) Technically in bearish mode until we close above 1672.  The 1642-1660 area is first medium term resistance.

 Intermediate Term= NEUTRAL – Need a close above 1620-1625 to favor a key intermediate term low and go bullish  

Short Term= NEUTRAL– A close above 1592-1603 will neutralize the downtrend and go to bullish.  A close below 1547 would put the trend back to bearish. 

 

 Support and Resistance for Monday Initial Resistance for 1588-1598 and 2nd tier 1603-1607 Initial Support 1582-1592 and 2nd tier 1555-1565

 What Next? 

A move above 1592-1603 on Monday would favor the upside for this week as the new cycle kicks in. There’s always potential for an inversion when it’s been six months we have not had one.  If Monday can’t get above 1592, the potential to pullback to 1555-1565 one more time can develop.  A close below 1547 however, would suggest that all is not right and would portend lower prices could be in store.  THE TREND LINES ARE CONVERGING here so fake outs need to be watched.  A move down towards 1555-1565 can still occur to start the week. We don’t favor it, but need to get above 1592-1603 to favor the trend has turned up. That LOWER PURPLE and UPPER DOWN TRENDING GOLD LINES on the hourly chart are the  bull/bear zone or the PIVOTs where price direction should be decided. The UPPER GOLD down trend line at 1585-1588 is the downside line.  In between 1575 and 1592 is a neutral zone (giving a bit of leeway for fake outs). Any close above 1603 will favor the upside as the choice. First target would be 1620-1625.  Any close below 1580 leaves the downside open..  

Bottom line 

 

A close ABOVE 1603 has us favoring higher and favors the cycle low is in place. A close below 1547 opens up the potential for lower and a hard drop. A new short term cycle is due to begin between  Mondays. If we can get above 1592-1603 the market should be moving higher this week.  Below 1547 means the cycle is most likely inverting.
Things seem to be unraveling rather quickly in all aspects, so let’s be careful. Gold did not follow the equities down on Friday. They tried to sell off silver and gold in the morning but prices recovered for the weekly close.  Let’s see what happens on Monday.

 

Gold Weekly Update

Long Term – Up - Price failed at key resistance of 1767-1804 and correction in progress since August 2011.  

Medium Term –Bearish – The moving averages are down trending, the red average is above the blue and price is below both averages. We need a close above 1647-1668 on a weekly basis   to neutralize the bearish reading to Neutral.  

Intermediate term –Neutral – The intermediate term needs a close above 1633-1642 to favor higher but it needs a close below 1547-1555 for bearish.  

Resistance for this week 1592-1603 / 2nd tier 1618-1625 Support for this week 1560-1570 / 2nd tier 1535 undefined 1545 

 *NOTE – 1592-1603 has a good chance of being exceeded this week. Resistance last week was listed at 1606-1612 and the high for the week came in at 1599 August gold. Support was listed at 1576-1583 and the low was 1567 August gold. We usually start with a RECAP portion and show the commodity chart last on the weekly. This week we want to start with the commodity index – as the first possible clue that the metals might be very close to a trend change is displayed in the chart below:  

COMMODITIES  --- FROM BEAR TREND TO NEUTRAL – and not far from bullish. 

Last week we discussed the commodity index was on the verge of neutralizing the downtrend and potentially having made an interim and possibly an important low of medium term potential.  Prices moved significantly higher last week and has neutralized the downside buy moving above the medium term moving averages and is right up against the 2009 downtrend channel.  This is a clue to us that the metals may also be on the verge of an upturn as well. We also discussed the markets attempt at making a major bottom at the channel line where price reversed from 6 weeks ago. Last week’s rally adds significance that this indeed may have been a major bottom. The move has been led by the grains no doubt but it always takes a commodity to initiate an overall turn.  This action is the most constructive thing we’ve seen for a potential bottom to develop in the metals as well. In summary, the market looks to be putting in a major bottom in commodities, and a move above this long term downtrend line would add significantly to upside action potential in gold and silver. The first challenge of moving above the averages is complete. Now the key is whether we break above the downtrend line. We think the odds favor the upside on a push above this trend line. THIS COMING WEEK In GOLD  – Two key points are a close above 1592 and 1603-1612.  Both will favor higher into month end.  A close below 1547-1555 would favor lower to the first week of August.  The market has become trendless with a very tight range.  The good news, is that trend is about to re-establish itself very soon and the commodity chart is on the verge of providing an important clue that it may be the upside that is about to unfold.  

RECAP 

The gold market was down only 5 dollars last week as the trend has now reduced itself to a very tight range.  For us that means that the sideways action is very close to completion. The chart below shows the situation.  Look how tight the weekly ranges are now.  There is virtually no trend whatsoever.  But that means that the gold market is about to end this neutral position and a trend is most likely to resume very shortly.  The 89 week moving average has held every probe lower over  the last 10 weeks and has closed above the average on Friday’s.  Last week the average was at 1581 and the Friday close was 1582.  This also is suggestive that a decision point is due.  The red arrows on the chart show just how important this time of the year is for gold.  Last year gave us an August peak and the start of the correction.  But the other years clearly has gold at a turn point when prices are at the lower end of the price range.   Look at the 2010 low. Note that one price bar. That was a week when a new low was made during the week but price turned around and finished higher. That turned out to be the bottom and a nice rally unfolded.  With the type of pattern we have at the moment, that type of action is possible.  Should it develop it will most likely mark the low and a new uptrend will develop.  The bottom line is that this sideways trend is close to completion and a more trending market is very close to return.   A weekly close above 1625 – 1650 would tilt the odds that gold is heading higher over the 2nd half of the year. A close below 1480 would favor a continued downtrend into November but with the commodity index having turned, it just might be enough to get the metals going also.  

The dilemma of the Fed (Commentary by Chris Marcus)  Regardless of the results, monetary expansion remains the only tool in the central-bank tool kit. Global markets have not revisited the type of chaos experienced after the Lehman Brothers failure, but that’s simply because the problems have been avoided and pushed into the future. In America the federal debt is expanding as rapidly as the Fed balance sheet. And while government and central bank officials constantly remind the public about the disaster that was avoided, they rarely mention how these short-term solutions will eventually be unwound. Think about the composition of the Fed’s holdings. These are mainly Treasury and mortgage securities. These are both interest rate sensitive assets. Their value moves inversely to interest rates, meaning that as rates go down they become more valuable. Of course the problem is that as interest rates rise they lose value. The Fed claims that as conditions improve it will begin unwinding this book of securities. But in this environment, interest rates will be rising, which means that the Fed is going to be selling assets that are losing value. A quick look at the composition of their balance sheet requires little advanced math to see that it is hard to construct a scenario in which the Fed is not already currently insolvent. And we are to believe that the Fed will raise interest rates, sell of its balance sheet all while Congress is finally making serious efforts to address fiscal problems as well? Consider the current state of the housing market. Right now it’s still incredibly weak and that’s with historically low mortgage financing rates. Higher interest rates alone will be a drag on the housing market and if the Fed is also removing itself as a buyer of mortgages then where is the additional demand going to come from? And if housing begins to weaken, it’s very likely that the Fed would step in and say there is a need for more easing. The fact is that there is no exit plan. This is one of many reasons why the current policy is incredibly reckless. It also sets up a pernicious cycle in that as the problems get worse the temptation to print becomes greater. And as more money is printed the problems will only get worse. It’s a losing hand that is just waiting for the rest of the cards to be flipped over. In 2006 it was hard to find many people who thought that home prices would go down. In 2008 it was not quite as difficult. 

YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.

Do your own due diligence.   

No one knows tomorrow's price or circumstance.  

I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.  

 I do not accept responsibility for being incorrect in my speculations on market trend. 

King Regards