Fundamentals
On gold market we see dramatic action now. As Reuters reports gold
dropped 1.7 percent on Friday, notching its biggest one-day fall in more
than a month, as surprisingly strong U.S. jobs data raised the prospect
that the Federal Reserve may soon decide to temper its bond-buying
stimulus. A flurry of sell orders in heavy volume sent U.S. gold futures
over $10 lower just minutes after the October nonfarm payrolls data,
setting a weaker tone for the rest of the day. A similar move in gold
futures was also seen after Thursday's strong GDP report – take a look at the chart:
U.S.
job growth unexpectedly accelerated in October, with employers adding
204,000 jobs, while 60,000 more jobs were created in September and
August than previously reported, the Labor Department said. "Those
payroll numbers made the folks who buy gold nervous as they did not go
in the direction they wanted to see, suggesting that tapering could be
back on the table," said Axel Merk, chief investment officer at
California-based Merk Funds, which have $450 million assets under
management. Gold has lost about a fifth of its value this year due to
fears the Fed would begin cutting back its $85 billion monthly bond
purchases. The metal's inflation -hedge
appeal has been burnished by the bond purchases and low interest rates.
"At the moment, the market is looking at underlying growth and can see
how the U.S. is accelerating and that very simply leads to tapering one
way or another, which is obviously not bullish for gold," BofA Merrill Lynch analyst Michael Widmer said.
The metal had managed a rebound in recent weeks after a prolonged budget battle in Washington in October led investors to believe the Fed may not start withdrawing support for the economy and possibly push the tapering into next year. However, after Friday's strong jobs report, some economists said it would be unwise to rule out chances the Fed could curtail its bond-buying as soon as its next meeting in December.
CFTC data shows significant increase of short positions. Although gold still stands as net long, but there was a solid contraction of it. Another moment that we see here is that this contraction of net long position is not supported by open interest. It is difficult to expect this moment. If we would see growing open interest previously and its contraction now – that easily could be explained. But, as you can see open interest stands flat and shows no reaction on whether increasing or decreasing net position.
The metal had managed a rebound in recent weeks after a prolonged budget battle in Washington in October led investors to believe the Fed may not start withdrawing support for the economy and possibly push the tapering into next year. However, after Friday's strong jobs report, some economists said it would be unwise to rule out chances the Fed could curtail its bond-buying as soon as its next meeting in December.
CFTC data shows significant increase of short positions. Although gold still stands as net long, but there was a solid contraction of it. Another moment that we see here is that this contraction of net long position is not supported by open interest. It is difficult to expect this moment. If we would see growing open interest previously and its contraction now – that easily could be explained. But, as you can see open interest stands flat and shows no reaction on whether increasing or decreasing net position.
Monthly
Weekly
Daily
4-hour
Whether we will get upward retracement and possible BC leg of larger
AB=CD down move or not – that was our question for previous months.
Chances on this event are melting. While october has shifted to doji
right in the end of the month, November is started to show its face and
moving down. Currently this action does not look like possible upward
reversal and starting point of notable retracement up. Fundamental
situation and CFTC data also stand not in favor of possible
appreciation. Seasonal trend is still bullish, but it is not always lead
to growth. Sometimes, it could just hold depreciation and now we see
something of this kind, since market stands in some range since August.
Our previous analysis (recall volatility breakout - VOB) suggests upward retracement. As market has significantly hit oversold we’ve suggested that retracement up should be solid, may be not right to overbought, but still significant. Take a look at previous bounces out from oversold – everytime retracement was significant. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. If market will pass through it, then, obviously we will not see any AB=CD up.
Now market is approaching to previous lows and probably will take a second challenge of major 1283 Fib support. Once it has been tested already. The second test will clarify situation on monthly chart, probably. If price will hold around 1200, it could turn to weekly Double Bottom and our upward reaction on strong oversold and VOB could start. But if price will break through it – then we will continue move down, since market is not at oversold now and has a lot of free space till 1130.
That’s being said, current situation on monthly chart looks mostly as indecision, although theoretical chances for upward continuation still exist. At the same time growing concern of investors about QE tapering and CFTC data in long term perspective could change picture on monthly chart.
Our previous analysis (recall volatility breakout - VOB) suggests upward retracement. As market has significantly hit oversold we’ve suggested that retracement up should be solid, may be not right to overbought, but still significant. Take a look at previous bounces out from oversold – everytime retracement was significant. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. If market will pass through it, then, obviously we will not see any AB=CD up.
Now market is approaching to previous lows and probably will take a second challenge of major 1283 Fib support. Once it has been tested already. The second test will clarify situation on monthly chart, probably. If price will hold around 1200, it could turn to weekly Double Bottom and our upward reaction on strong oversold and VOB could start. But if price will break through it – then we will continue move down, since market is not at oversold now and has a lot of free space till 1130.
That’s being said, current situation on monthly chart looks mostly as indecision, although theoretical chances for upward continuation still exist. At the same time growing concern of investors about QE tapering and CFTC data in long term perspective could change picture on monthly chart.
Weekly
On previous week we’ve discussed the reasons why we think that situation
here looks bearish. First is, take a look – market has shown reversal
without any technical reasons, price is not at resistance or overbought.
When price stands in upward AB=CD it should not show reversals prior
hitting at least minor 0.618 target. But here we see solid downward move
right after appearing of potential “C” point of AB=CD pattern. Second –
action has taken a shape of bearish engulfing and price has moved below
MPP. Based on this chart, possible point of return to bullish sentiment
and trend is breakout through 1380 top. Until that will happen,
engulfing pattern will hold and situation will remain bearish in
short-term. Also, keep in mind guys, that current action easily could
shift to Butterfly “buy” as we’ve suggested previously. If this will
happen market will be under way to 1115 and 1025 areas.
Appearing on engulfing pattern probably will return market to second test of 1250-1275 support area. It includes 5/8 Fib support and MPS1. Despite on strong action in recent month, CFTC data suggests that all this action happened and is happening without new opening position, since open interest stands the same. This puts us to conclusion that may be market still indecision, despite solid action that we see. It means that big market participants make money on some tactical trading, but major game will start after breakout in any direction and one of the key levels here is 1170 lows.
In short-term perspective we have enough room till 1250 and probably will search possibility for short entry.
Appearing on engulfing pattern probably will return market to second test of 1250-1275 support area. It includes 5/8 Fib support and MPS1. Despite on strong action in recent month, CFTC data suggests that all this action happened and is happening without new opening position, since open interest stands the same. This puts us to conclusion that may be market still indecision, despite solid action that we see. It means that big market participants make money on some tactical trading, but major game will start after breakout in any direction and one of the key levels here is 1170 lows.
In short-term perspective we have enough room till 1250 and probably will search possibility for short entry.
Daily
Trend is bearish here, market is not at oversold. On Friday market has
hit 5/8 Fib support and minor 0.618 AB-CD target. Previous action down
is solid and if it will continue, next target will be 1240 that will
lead to taking out previous 1254 lows. Still as market stands at support
we could get a bounce up and try to use for short entry. Also, take a
look – on the way down price will meet significant area – crossing of
WPS1 and major trend line around 1270. Passing through it is 50% success
to 1240.
4-hour
As market has hit just minor AB-CD target on daily time frame,
retracement should not be too deep probably. It seems that K-resistance
1308-1311 and higher stand WPR1 is nice area for possible
re-establishing downward action. Also prior this level we have
combination of WPP and Fib resistance around 1300.
Conclusion
Overall long-term picture gradually is shifting to bearish
around the gold market. Currently major investors stands indecision or
do not take active part on gold market and do not hurry to increase
positions, as it follows from CFTC data. This situation probably will
hold until market is flirting inside wide triangle that we once
discussed on daily chart. But as soon as price will break through it
(and this could happen on next week already), this probably could
involve more traders and lead to inflow of new money. In short-term period market looks bearish and we will try to use possible rally up for short entry.
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2. Send me your MT4 trading account number and email address
3. Send me your Paypal or Moneybookers account number
If you do not have a Paypal or Moneybookers account,
please click on one of the links below to open your free account today.
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You will be paid $10 per standard lot of Gold traded and
all payments will be made by the 25th of each month.
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YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
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.
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.
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