Wednesday, November 27, 2013

Gold Trend Nov 27/2013

Long Term ~ Neutral - need a monthly close above 1800 to confirm the bull market final phase underway
Medium Term ~ Bearish - Need a close above 1351-1404 to neutralize.
Intermediate Term ~ Bearish - resistance 1333-1343
Short Term ~ Bearish –  support 1220-1225 and 1205.  A close below 1205 will favor new lows below June.  A close above 1272-1280 weekly favors correction from November is over.  
Support and Resistance
Initial Resistance 1254-1264 and 2nd tier 1272-1280
Initial Support 1230-1240 and 2nd tier 1218-1222

The last update listed resistance at 1254-1264 and the high was 1258.
Support was listed at 1230-1240 and the low was 1239
The gold market saw an early high in the Tuesday trade and then gradually gave ground throughout the remainder of the trade. Apparently a weaker Dollar and some soft US scheduled data failed to provide the bull camp with enough ammunition to hold the initial attempt to recover. Some traders are suggesting that looming month end book squaring might provide some lift in the coming sessions but that potential windfall might be moderated by thinning holiday trading conditions. Unfortunately gold failed to benefit from positive US housing results and then the market failed to benefit from slightly softer than expected Consumer Confidence data. In short, gold doesn't seem to be tracking classic economic readings but it is possible that gold might be tracking more closely with the currency markets.
Gold Overview
A more plausible reason for gold not paying attention to other events is the Rollover out of December gold and into February was the most likely cause of Tuesday’s action as the last few volume days took place on Monday and Today.  From here on into next week the volume will reduce as USA goes on holiday.
Things will mostly return to business as usual next week, but the last month of the year will have funds locking in gains in equities in case of a downturn and the 15% bash of the gold stocks still may have to put up with end of year tax selling as investors unload the dogs of the year and the gold stocks are clearly the leaders there.  The Junior’s face the toughest challenge as many of them will be going under as the lower of them are pretty much out of cash.  The divestment in GLD inventory this year is coming from all sides --- Funds like Paulson down 65% are getting a lot of liquidation and perhaps those who really seek physical are taking some deliveries from the GLD inventory to supply demand to the East.  You have to ask yourself where else it could possibly be coming from?
Gold and the November correction
The lower green channel line is the lower price range from the 2008 low and momentum and this is where price is sitting at the moment.  It is also at an EXACT point where the 2011 downtrend line is touching the 2008 line and PRICE IS THERE AT THE EXACT SAME TIME.
This is a most important juncture to watch because we could be at the low point IF JUNE IS IN FACT THE BEAR MARKET BOTTOM. Here’s what to watch for.
This is the last line support before the June lows.   If we support here the angle of the ascent will be similar to what we saw from 2009 to Aug 2011.
A CLOSE ABOVE 1272-1280 on a FRIDAY will suggest that the line is holding.  A close above 1310-1322 adds to the forecast.  A close above 1351-1404 and the MEDIUM TERM BEARISH TREND upgrades to NEUTRAL.  That would be a big sign that the correction in gold has ended. Each sign will add to the other in confirmation. A weekly close above that red line would encompass all three items we’re watching.
What if the June low is not going to hold?  Here’s the two scenario’s.
If we do break below and close below 1205-1220 --- odds favor we test 1100-1160. If gold can climb back above the green line within 2 to 3 weeks and close above 1272-1280, odds will be high that the bottom has taken place in metal.
If not --- then odds favor a test of 1030-1050 and silver near 16 before the next potential bottom in gold.
What about Silver ?
Silver has actually touched the medium term moving averages on two different occasions   ----- one day each time.   The 25.12 high of August and the 23.09 high of October.  They both turned out to be important peaks ----- so at the moment ---- the traders are still selling the medium term points --- but that won't always be the case.  A weekly close above 23.09 would also take the TREND of silver from bearish to neutral.
Gold Short Term
The potential that gold has made a low is possible due to the scenario we discussed earlier.  The other downtrend lines on the daily are more important than the hourly.  The purple downtrend line is from November and we could still go down and test it. If we do early next week or even during this holiday week, I think it’s going to hold as support.
Resistance is the same as Monday, 1254-1264 (We hit 1257.70 Tuesday) and the ideal target is that green 200 hour moving average.   The only other key number right now is the 1272 line.  A weekly close above 1275-1280 favors higher.  (Note: the wedge line on the daily charts that broke must be overcome also and that is in the same price range right now.  Keep in mind that wedge line is a MUST TO OVERCOME in order to have a chance to turn things up.
Support on Wednesday is 1231-1241.  And then 1218-1222. Odds favor 1231-1241 as the area that holds on Wednesday.
gold hourly price chart
What's Next?
We got our bounce to 1255-1260 on Tuesday and now the question is what about Wednesday?
Odds favor a range of 1235-1240 on the downside and 1254-1264 on the upside. 
At the moment the 200 hour moving average is 1259 and weekly resistance is 1272.  By Wednesday volume will be small and that means that any moves could be enhanced due to liquidity.  Usually things are quiet at this holiday but not on every year.
We’ve tested the 1st weekly support (1220-1225) on Monday and 1st daily resistance.
 It’s still possible to go visit the weekly resistance at 1272 but odds do favor 1255-1264 a bit more as a high.  A close above 1272-1280 this week would give us a short term reversal that would neutralize the intermediate term downtrend and send fresh buy signals.
Bottom Line
Gold and silver are in downtrends and the first sign of a bounce did develop at 1st support on Monday with a nice reversal.  But we still need to get back above 1272 for something more meaningful.

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