After breaking out above Friday's high this morning, prompting us to enter a long position at 1588, gold found resistance at 1594 this morning before retracing back to currently trade around 1590.
The 4 hour chart still looks encouraging for longs, with a series of higher highs and higher lows, coupled with a steadily rising RSI. Once the market gets above today's high, the next resistance area comes in at 1598-1601, then 1610 and 1618.
Our initial target for this recovery rally is 1630, with the potential for an extension into the 1650s before we would expect gold to fall back and possibly retest the 1550-1575 area. Fed Chairman Ben Bernanke starts a 2 day testimony to Congress today, which has the potential to move the gold market significantly.
We are of the view that, since the market is so oversold and has reacted so negatively to the idea that Quantitative Easing is going to come to an end, there is the potential for an upside surprise over the next couple of days, with the likelihood of any downside limited. However, this is just speculation and we will have to see what happens.
Oil has given back all of its gains from this morning and the dollar is slightly higher, this is not helpful to gold, however the stock market looks to be in the process of putting in a top of some significance, which should be bullish for gold over the next few months.
The 4 hour chart still looks encouraging for longs, with a series of higher highs and higher lows, coupled with a steadily rising RSI. Once the market gets above today's high, the next resistance area comes in at 1598-1601, then 1610 and 1618.
Our initial target for this recovery rally is 1630, with the potential for an extension into the 1650s before we would expect gold to fall back and possibly retest the 1550-1575 area. Fed Chairman Ben Bernanke starts a 2 day testimony to Congress today, which has the potential to move the gold market significantly.
We are of the view that, since the market is so oversold and has reacted so negatively to the idea that Quantitative Easing is going to come to an end, there is the potential for an upside surprise over the next couple of days, with the likelihood of any downside limited. However, this is just speculation and we will have to see what happens.
Oil has given back all of its gains from this morning and the dollar is slightly higher, this is not helpful to gold, however the stock market looks to be in the process of putting in a top of some significance, which should be bullish for gold over the next few months.
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 1631 for neutral.
Short Term=Neutral --- Need a close above 1616 for bullish & close below 1542 for bearish
Support and Resistance
(APRILGOLD – SUBTRACT TWO DOLLARS FOR APRIL GOLD)
Initial Resistance 1597-1607 and 2nd tier 1620-1627
Initial Support 1575-1584 and 2nd tier 1554-1564
CME GROUP RECAP (Chicago Merc Exchange)
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 1631 for neutral.
Short Term=Neutral --- Need a close above 1616 for bullish & close below 1542 for bearish
Support and Resistance
(APRILGOLD – SUBTRACT TWO DOLLARS FOR APRIL GOLD)
Initial Resistance 1597-1607 and 2nd tier 1620-1627
Initial Support 1575-1584 and 2nd tier 1554-1564
CME GROUP RECAP (Chicago Merc Exchange)
The gold market showed some initial strength early and pulled back into the Monday 8am selloff but over all today saw some back and forth action between 1585-1592.
After seeing mostly supportive early action in the currency markets, the dollar managed to carve out a fresh new high for the move and in the process that spooked some gold bulls. However, seeing a reversal in the US equity markets and watching them tank almost 300 points from high to low and countervailed the dollar market influence as renewed US slowing concerns and uncertainty from the Italian election most likely rekindled some flight to quality buying interest in gold today.
Bottom Line:
Here’s the executive summary:
What next?
Here’s the executive summary:
• Gold blew through the stop herd in the $1,630s and tested the high $1,590s, closing just above $1,600 mainly on the selling of short contracts by Managed Money aka The Funds.
• The Funds are pulling a short raid while hanging onto their long contracts, a tell.
• The Legacy Gold LCNS.TO has entered the top of the zone we consider bullish in a contrary sense. That occurs frequently at or very near gold lows.
• The producer Merchants are at their lowest net short gold position in years. The lower the LCNS the more likely gold is about to turn higher.
• Managed Money traders are at a very low net long level. Similar to where they were last summer with $1,580 gold.
• Managed Money “got there” by putting on a record high gross short position, about half of which was added only in the past three weeks with gold then from the $1,650s to the $1,690s.
• Very high MM gross short gold positions have usually been very short term events. They are usually very bullish in a contrary sense, but they scream to us that the futures market has now become hugely imbalanced – and therefore dangerous to both sides of the battlefield, very short term.
• Extremely high Managed Money shorts in futures are normally the highest of high octane rally fuel for gold.
• Managed Money chose to put on the extreme high level of shorts for gold, but not, repeat NOT for silver futures, another tell we believe.
At some point the Funds will move to cover those insurance shorts. When they do it will be difficult or impossible to keep it a secret. Nimble locals and smaller traders will likely attempt to front run their covering which could lead to a major imbalance of positive liquidity for short periods of time in the near future.
Momentum currently favors the Big Sellers (in this case the Funds). Additional selling on pure momentum is possible, but we look for gold to find increasingly staunch support forming and dramatic physical off take if gold shows a “15 handle” just ahead.
We doubt that we will see it, but should gold negative momentum overwhelm the futures enough to find its way into The Green on our charts, we would just about have to take a punt there, regardless of how it gets there or how violent the action is at the time. Our sense is that the gold market is setting up for violence in both directions just ahead, with very likely a total change in the short term trend now imminent.
We could be wrong, of course, and we do not want to sugar coat how dangerous the setup is, but we have come to the conclusion that the Funds are in the process of pulling off one of the great head fakes of our trading career.
Either that or they have correctly positioned for the gold market to collapse while forgetting to do the same for silver. Somehow that just does not square with our sense of the fundamentals for both gold and silver, which could scarcely be more bullish.
We hope that you found this update worthy of your time. In this one instance, feel free to share this PDF report with friends and colleagues. Kindly encourage them to take the time to understand just how imbalanced the gold futures market has become and to watch the action very closely just ahead.
We expect pyrotechnics. We are currently OUT, but not likely to remain out for long. No matter what, MIND YOUR STOPS.
That is all, carry on.
The bottom line is that there is going to be most likely a very volatile month coming in gold. It could be to the upside it.
There is one more thing to consider. The stock market has now started to sell off but the thing that is most interesting is the fact that if we look at the situation since October, GOLD has been going OPPOSITE the direction of stocks and now that stocks have begun to sell off, gold has begun to rally. HAS GOLD DISCONNECTED and gone back to the old tradition in where it performs the opposite of the stock market? If it has, we view it as a bullish condition at the moment more so than bearish.
Gold Hourly Chart
Gold reached our 2nd level of resistance on Monday at the 1590-1595 area coming in at 1596.50. As you can see by the chart price is trying to breakout above the first downtrend line and if that we’re successful the potential to move to the green 200 hour moving average near 1605 would come into play next. So this is an important 1st resistance point. We’ve exceeded the lines but it’s not exceeding them that counts it’s what it does after we exceed them. While I speculated that one of the two red channel lines would produce the low, the 1555 area came in very early before the cycles we watch we’re due. And so I went with what has been working and decided to wait last week to take a personal long position at the first line. With price now moving above the trend line it is possible that we’re going to move to the 1604-1609 area. With the Fed meeting on Tuesday/Wednesday, there is obviously still the potential for gold to get one more dip into this cycle. If not then this week’s high will most likely extend to the green moving average and potentially as high as the 1620 area. As the COT report has pointed out the potential for a big move on either side leaves the market and traders in a position to reap rewards or pain. Gold is definitely oversold in almost every technical aspect and as far as the global conditions go, we have not seen anything that suggests that everything is ok. On the contrary, it seems to be getting more and more dangerous as the markets get more and more disconnected day by day and week by week. For Tuesday if we exceed 1698.50 then odds favor we’ll move to the 1604 – 1606 area. With Fed chief Bernanke testifying on Tuesday, it would be unusual for gold to continue rallying but at this point anything is possible. I think what we have to watch out for and keep in mind is that gold has a history of burning the longs when the FEDs have a meeting and we need to keep that in mind. Support on Tuesday will be the 1575-1583 area and resistance 1698.50 and then 1604-1606. If we get one more dip over the next few days into the red channel area, it will favor a low and a two week bounce.
The stock market had its first drop last week and after a bounce into Friday and an move to 14080 in the Dow today, it dropped 300 points from the high into the close. If gold doesn’t join it and it keeps going lower, it’s possible we could get a big move up. It’s only been a day so it’s too early to say such, especially with a TWO day Fed meeting in front of us that begins tomorrow. With the cycles due to bottom it’s possible for one more hard dip and then a two week rally but depending on what he says and how it goes, it’s also possible for price to avoid the dip. Unlike the last drop, China is back and so is the physical market buyer so it won’t be as easy this time around.
BOTTOM LINE
If the cycles play out a two week move higher is favored. The window closes after the 28th and so if we do get one more dip to support lines, it would highly favor a low to be put in place. With the Fed meeting beginning on Tuesday, gold should be contained either at 1598.50 or 1604-1606.
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GOLD CURRENT TRADE
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Long 1 April Mini Gold at 1588 on 25/02/2013GOLD CURRENT TRADE
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Stop lose at 1553
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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.
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
