Tuesday, May 19, 2015

Gold Trend May 20, 2015

Long Term ~ Bearish - Need a monthly close above 1800 to confirm the bull market 
final phase underway. Need a monthly close above 1560 to neutralize the trend.
Medium Term ~ Bearish   Need a monthly close above 1255 to remove bearish trend.
Intermediate Term ~ Bullish – Resistance for this week 1234-1244.
Short Term ~Neutral –Short term cycles are due to peak and turn down between 
the 18th and 21st into the beginning of June.  

Initial Resistance 1214-1218 2nd tier 1222-1227
Support 1193-1203 2nd tier 1182-1186

Housing in perspective 

Today’s strong housing start numbers sparked the same rabid fascination from pundits, as a dog jumping into a pool after a tennis ball. We first hear that this is the strongest report we have had in the past few years then the discussion degrades into that same sad song that tight lending is holding housing back.  The usual refrain of excuses for why housing “isn’t what it could be” is  given by people who don’t understand that main street America simply doesn’t have the income in this cycle to have a Nirvana-like recovery.
The responsible economist feels compelled to remind them how soft this recovery actually is.
 Housing starts 1950-2015
When one considers the epic crash in new home sales and starts that occurred after the housing bubble burst, you might assume that by now we would see more velocity to the upside in total activity.  But this does not account for the fact that we simply won’t have enough quality home buyers at this point in the  economic cycle to have a real recovery. This  is true for new home sales as well, which are typically sold to the more well-to-do buyer and make up only 1/10th of all home sales in this cycle, usually 1/6th. Some of those buyers are finding better value in existing homes.
The problem with the builders is simple. New homes are very expensive because they’re big.  The metric of Median Income to Median Price homes has deviated too much for main street to afford the debt of a new home (or any home in most cases) if we are looking for strong housing demand recovery.This is the reason why new home sales trend have been soft in a 90% mortgage marketplace that is tilted to the more wealthy buyer once you adjust it to population growth.

Gold Short Term

As you can see by the chart we reached 1205 on Tuesday.  So we go up 40 dollars in a bit over a day last week and we come down 30 from the Monday peak.  This is how it has been over and over.  It’s a trading nightmare, which is why I have just been sitting back on my short term trades.
Its possible we’ve made the peak for May but in this market nothing is certain except choppy and wide price swings in each direction.  Support on Wednesday is 1193-1203 and resistance 1214-1217 and then 1222-1225.  The FOMC minutes come out so gold will probably not move much until then.  Once they are released, gold will do what the control boyz want it to do.
 Gold price chart since the 2015 high
  What Next?

The FOMC minutes on Wednesday might also have gold pulling back to test support near 1215 on Tuesday.   When we look at the overall picture, while things have improved vastly for gold we have to be careful that this is not a bull trap with prices ready to turn back down.  That has happened over and over during the past few years and we do need to be cautious.  
While it is always hard to remain on the sidelines when gold moves higher, we have to remember that last weeks low at 1178 is only 50 dollars higher than the full bear market low of Nov 2014.  So it’s not like we are missing some big gold move.   On the contrary just one look at the GDX chart above shows a potential head and shoulder pattern.  
At the moment, we have to favor gold peaks this week and pulls back into the 1st week of June.

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 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. 
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