Gold Trend 01/March/2013

Gold spent the morning selling off steadily, before forming a bottom at 1565 and vaulting higher at the COMEX open to currently trade around 1582.

We saw an interesting Fibonacci relationship at the lows of the day - if we assume that we traced out an ABC correction from the 1620 highs, we can see the following;

Wave A    1620 to 1592.4 = 27.6 points

Wave B    1592.4 to 1602.9= 10.5 points

Wave C    1602.9-1564.7 = 38.2 points

Wave C is therefore almost exactly 1.382 x Wave A and Wave B is 38% of Wave A - you have to stand back and admire how these Fibonacci relationships occur time after time.

Anyway, what we have today is a classic engulfing upside reversal, where we made a lower low and then moved higher than the high of the previous day on the daily chart.

Provided we close above 1580, this bodes very well for next week and also makes the weekly chart look immeasurably better than it did 6 hours ago.

Oil continues its steep correction and the dollar is powering ever higher, though interestingly both markets appear to be have almost no correlation with gold at present.  It is also interesting to note that silver made a new low today on the daily chart whereas gold did not, demonstrating gold's relative strength at this time.

We need to see a close above 1580 to confirm the reversal and get the shorts worried - a move above 1600 will probably see the shorts panicking and scrambling to cover their positions ahead of the weekend.

Although our initial position was taken out on the basis that Wave A would be equal to Wave C, amongst other factors, it appears that in the end, Wave C = Wave x 1.382.  Even those who are doubtful of the importance of Fibonacci relationships in financial markets must marvel at that.

Have a good weekend all, 

let's see how the shorts react to this move.  

If we were short, we wouldn't want to hold our position over the weekend!

Long Term=Bullish - major yearly resistance 1792-1804 needs to be exceeded on a monthly bass and close above 1840 to resume long term up bull trend.
Medium Term=Neutral - It takes a weekly close above 1694 to turn the trend back to bullish. Resistance 1755-1765(Oct/Nov 2012 Resistance) Support 1500-1550.
Intermediate Term= Bearish--it takes a close above 1627 for neutral.
Short Term=Neutral/Bearish --- Need a close above 1604 for outright neutral and 1627 for bullish

Support and Resistance
(APRILGOLD – SUBTRACT ONE DOLLAR FOR APRIL GOLD)
Initial Resistance 1587-1597-and 2nd tier 1601-1606
Initial Support 1568-1576 and 2nd tier 1550-1559
Last night’s update listed initial resistance at 1604-1614 and the high was 1602.5. Initial support was listed at 1581-1591 and 2nd tier was 1563-1573 and the low was 1574.20

CME GROUP RECAP (Chicago Merc Exchange)

The gold market rallied up into the first sweep of US economic data before reversing course and falling down sharply into and through the second set of US data points. Periodic gains in US equities, a soaring US Dollar and weakness in the rest of the metals complex probably emboldened the bear camp in gold this morning. Ideas that the sequestration debate might be pushed forward could have weighed on gold and other physical commodity markets today, as an ongoing cloud of uncertainty hanging over the US economy might prompt weak handed commodity longs to exit.

In the end it was another range down washout in gold into and through patently supportive claims figures had to be discouraging to the bull camp, especially as that news was accompanied by somewhat disappointing US GDP results. With KC data just ahead of midsession showing weak data and gold remaining under pressure it seemed as if the bear camp had the edge and second and third tier data wasn't going to alter sentiment. Once again adverse dollar market action and negative technical talk (regarding the lengthening monthly slide in gold prices) apparently left the bear camp in control. While Friday might bring about an anxiety event from the US Budgetary wrangling, the gold market isn't showing signs of interest in that story line. However, Thursday was the last day of the month and selling pressure by the funds for reporting purposes were evident throughout the session. 

Overview

February’s 35 years of data showing a choppy first half and weak 2nd half played out to the tee. The seasonal outlook still calls for lower prices into the end of March and then a bounce to the May/June time period.

With the new short term cycle now in play for the next two weeks we are once again confronted with a choppy and overlapping price pattern and as discussed last night, it really has me concerned.  How do we rectify the stories we see of massive physical tight markets and yet a continued loss of momentum and strength?  Obviously the only one is the theory of market manipulation.  It’s the only viable explanation if gold hasn’t entered a much deeper bearish trend as the gold bugs are giving credit.  Here’s where it’s interesting.  We hear of record silver purchases and major difficulties getting physical.  We don’t hear that in gold but we do here that the market is tight.  What scares me is that record buying doesn’t occur with prices near their lows usually but when prices are on the upper end of the price range.

And lastly for the past 10 years the call for the total collapse of the US dollar and repeated calls lately.  And yet look below.  We’ve discussed the currency trend changes during July and January and that is happening again.  Recall we said last month at the Davos meeting the BOYZ might conspire to now take the EURO down and the USD higher in order to bail out the Euro nations continuing move to danger levels again.  Look at the move in the USD for February.  It went from its lowest point in a year to now challenging a breakout above 82.  (Chart Gann GLobal)

Bull/Bear Pivot Zones

 both zones showing 1585 as the pivot ---- so watch that area and a few bucks above and below.  If we can’t conquer that level price will remain under pressure.

Friday Daily Bull/Bear Pivot Zone = 1583-1587 (Ideal 1585.50)

Weekly Bull/Bear Pivot Zone = 1580-1587 (ideal 1584.50)

Gold Hourly Chart

Once again we are presented with conflict as the short term cycle turn is here but the pattern is one that we have identified before and kept us on the right side of the forecast and that is the choppy and overlapping look that it has.  Not all chop and overlap ends up being down and quite frankly they can continue for a time before they revert back to the downside.  The only good thing we can say at the moment is that perhaps what we’ve seen is an A (up) and B (down) move in this chop. That would leave C (up) before it reverts back to the downside.   With that said today’s failure to close above the 1583 area and MONTHLY below 1580 is another development that we’re not very keen on.  We got to our resistance area on Thursday listed at 1600-1604 and from there we turned down hard.  We discussed a break below the green 200 hour moving average would favor a move to retest 1580 and our support of 1575-1585 yielded a 1574.20 low on Thursday.

Price got as low as it can on the chart below without breaking that last trend line near 1572. The only uptrend line (purple) is a MUST that we absolutely need to get back above on Friday. The only supports remaining are the downtrend lines and they now move down to1568-1570 into today’s session. Last night was a battle of 1600 and tonight it looks like the 1585 area is going to be key.  If we can’t get above there and we break 1570 price could plummet back to 1555 and potentially 1535. In summary, a break below 1572 leaves the downside potential alive.

Gold Cycles

Every quarter or season there is a medium term cycle window that opens and when it does it allows for a cycle inversion to become much more possible. I’ve highlighted them on the chart tonight. The problem is that it doesn’t have to happen but just that it can and it occurs 4 times a year.  We are in the window for such an event.  The first event produced the 2012 low for the year. The 2nd event did not happen until the very end of the cycle where we had a BLUE cycle high in October and that launched this entire correction and our outlook for lower prices to the end of December/early January. We got the initial start in January but we just weren’t able to overcome 1700.  Still the cycle played out and we got the pullback into the end of January blue cycle. And that’s when we entered into the wedge.  The breakdown of the gold stocks during that time is when we got the clue saying something was wrong and then two weeks ago we got the breakdown in gold and silver.

Our current outlook has been for a low to form this week and a 70% chance of a two week rally before we get a final low near the 22nd of March for this cycle. But if we can’t hold this lower downtrend channel then the potential for another probe lower can come into play.  Let’s go to the next chart.

The cycle inversion scenario

This is what we’re worried about.  This pop up during the cycle window has opened the door for a possible cycle inversion of the medium term cycle and the potential that this blue cycle can be labeled in such a manner as displayed below.  In summary, the new month begins today and with the current setup it is possible for gold to invert lower if it can hold this bottom dotted channel line and have the rotation look like this. Not all cycles invert but we have no choice to remain cautious and can’t dismiss it at the moment.

Gold Stocks

Gold Stocks Short Term (NUGT) –

BEARISH at 10.47 since 1/24/12

(Moving average trend) 6.99-7.37

NUGT remains bearish and will need a close above 6.99-7.37 to neutralize the downtrend.  The next channel line as nutty as it sounds is near the 3 dollar level.  The trend remains down. 

Trend Change Results on NUGT using moving averages since 3/1/201

Bearish at 22.45 on 3/2/2012 Neutral at 13.48 on 4/30/12 + 8.97

Bearish at 12.43 on 5/2/2012 – Neutral at 10.78 on 5/23 + 1.65

Bullish at 12.44 on 6/1/2012 – Neutral at 12.04 on 6/21 - 0.40

Bearish at 10.65 on 6/28/12 -- Neutral at 12.05 on 7/2 - 1.40

Bearish at 11.65 on 77/12 --2- Correction over 8.85 on 7/25 + 2.80

Bullish at 8.85 on 7/26/12 --- Neutral at 17.13 on 9/24/12 + 8.27

Bearish at 16.75 on 10/11/12 –Neutral at 10.97 on 12/31/12 + 5.78

Bearish at 10.11 on 1/4/13  --- Neutral at 10.17 on 1/11/13 - .06

Bullish at 10.47 on 1/22/13 --- Neutral at 9.64 on 1/23/13 - .83

Bearish at 10.47 on 1/24/13

GOLD MEDIUM TERM WEEKLY PRICE CHART

Medium Term Trend – NEUTRAL (1673.50-1680)

For the upside to get back to bullish mode on the medium term trend, we need to get back above the 2012 trend line and the moving averages at 1673-1680. The trend remains neutral on the medium term.  The key now is for gold to get back above the channel line and the moving averages to re-establish the bullish medium term reading.  The close below 1680 on a monthly basis keeps the downside potential still alive for now on a medium term basis.

GOLD USING ETF GLD

Gold Intermediate Trend –BEARISH since 2/11/13

Moving Average Trend – 158.09-159.30

 The intermediate term trend in GLD remains down. The lower channel line is still the key support to watch but a close below it would open the 148 area.   

GDX GOLD MINING INDEX (North America mining)

Intermediate term Trend –BEARISH

Moving averages 40.70-41.30 - Red above blue line and price below moving averages.
We are adding slowly but surely to GDX and have now ½ a position. Make sure it’s only 1 position in your portfolio. BUY ZONE TO build a position --- ¼ bgt at 52 on 10/16--- ¼ at 47 on 11/16 and ¼ at 45.24 on 1/16/13 --- I’ll PLACE THE FINAL portion of 1 order at 34.50.

There is no change in GDX as the trend remains down.

What next?

Last night we discussed the control boyz would try and close the month below 1600 (the high was 1602) and that the 1580 level we closed at last Friday could very well be the target.  The close was 1579.80

Friday is the 1st of the month and the first day that the cycle window is closed. The direction will be confirmed next week and at the moment we once again have conflict with a cycle turn but a pattern that is choppy and overlapping. The first area to watch is the 1583-1587 as that is the pivot zone.  Above 1587 gives the advantage to the bulls and below it the bears. There could be some fighting at that area and it may go back and forth a few times there.  A close below 1580-1583 will keep the pressure to the downside.  A break of 1568 would favor another probe towards 1535-1555 red channel line support on the hourly charts.  In summary, that 1583-1587 area is the pivot and since things are so dicey, its best to use that area as direction but keep in mind that it could go back and forth. The 1594-1596 area will also offer strong resistance and then 1604.  On the downside, the 1568-1570 and the 1574-1576 area are must hold.  If not then we’ll expect another probe of 1655.  Finally, if the short term cycle does end up choosing the upside, then the bulls might make a go at it in New York. If they can run it past 1687 then watch 1594-1596.

BOTTOM LINE

The big rally in the dollar in February just keeps on putting off all the DOLLAR is about to collapse stories for now.  The unavailable silver with high premiums are everywhere but my home town.  At my local coin shop there’s plenty of junk silver at 2% over spot and gold at the same. But I must be the only town in USA like that according to the internet.  The situation remains such that none of the reading on the short, intermediate and medium term have a bullish reading and at the moment, the upside trend does not have the advantage.  It’s going to take gold holding 1568-1570 and for price to rally for more than just two hours because that is all it did this week and there just wasn’t any follow thru.  The situation remains precarious as the non follow thru was a letdown and the pattern remains choppy and overlapping.

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GOLD CURRENT TRADE
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Our Position 
Bought 1Apr Gold on 28/02/2013

Entry: 1577

Stop Loss: 1552

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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. 

 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