In early trading yesterday, gold moved in a narrow range in anticipation of Ben Bernanke's testimony to Congress. On the release of the statement, the price initially fell $10, before finding support and powering higher, moving $36 higher to hit a high of 1620.
The market then fell back a little, closing at 1615 and this morning is consolidating yesterday's big gains. The market is currently trading around 1609.
We mentioned a couple of days ago that, due to the extreme oversold market and overwhelming pessimism towards gold, there was a reasonable chance of an upside surprise following Bernanke's testimony.
Even though nothing new was said, the fact that the market had priced in gold negative news to such an extent meant that a rally resulted anyway.
This powerful rally suggests that the correction is over, however we want to see follow through buying today to confirm the move.
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 1621 for bullish & close below 1542 for bearish
Support and Resistance
(APRILGOLD – SUBTRACT ONE DOLLAR FOR APRIL GOLD)
Initial Resistance 1619-1627 and 2nd tier 1638-1648
Initial Support 1596-1606 and 2nd tier 1575-1585
Gold Hourly Chart
The big move forecasted by the Got Gold report had its first technical move as gold reached the next higher purple line resistance at 1620 pretty much right on the spot and the pullback so far is trying to hold the gold trend line near 1610. The short term cycle window closes on Thursday and it looks like it has chosen the upside. Up until today the pattern was basically somewhat choppy and overlapping and was suggesting that we could get one more dip going into Thursday. Any move above 1622-1627 would pretty much eliminate that potential and be suggestive of the 1635-1650 area. The one thing we will mention is that most of the choppy and overlap conditions we’ve seen during this correction have ended with a spike high. So we won’t completely rule out the potential that one more dip isn’t possible. We got our support listed last night (1675-1683) with a 1683.70 low but our 1604-1606 resistance (which held all night up until the Bernanke talk) was blown out of the water as gold went to the next higher resistance level.
The chart shows direct touch of the purple trend line and now a pullback finds first support in the 1598-1606 area for Wednesday and then the 1577-1585 area. Resistance is 1618-1622 and then 1627-1628. Above that will favor the next red lines at 1637, 1650 and 1660. In summary, the unbalanced COT report allows for wild swings as discussed last night and unfortunately it can result on both sides. The funds were caught and they did some mass covering today as over 60K contracts were bought at the ASK price between 9AM and 10AM New York time. And that leaves us with one final note. The entire rally took place in about an hour in panic short covering. That also is a sign of a counter trend move and the type of action that occurs during choppy and overlapping conditions and bear market moves.
What next?
While gold did drop 19 dollars from high to low on Tuesday morning the reversal up in one hour moved 34 dollars from low to high. While it was a welcome sight after a five month correction there were some things that we need to keep in mind. 1st was that the entire move was in one hour and it came with over 60K contracts being bought at the ASK price between 9 and 10 am in NY. While it was a nice move, it was more typical of a counter trend move. Bullish patterns don’t usually make their move in 60 minutes and then do nothing for the remainder of the day and that was the one thing that was a disappointment. With the Got Gold report that we published portions of the likely hood that the funds were covering is high. Thus we move into Wednesday with a bullish bias but ONLY if we exceed the 1622-1627 area will the odds become greater that the short term cycle has kicked in. Thus we’ll be watching 1617-1622 closely on the upside and that should be first resistance on Wednesday and potentially the high for the day. We say potential because as we discussed last night, the possibility of a DRAMATIC move and wild swings is in play over the next two weeks and this first day delivered. If we get above 1627 we’ll favor a move toward 1650 and a rally into at least the 5th of March and more likely around the 10th. On the downside look for 1598-1606 as 1st support and then the 1577-1585 area if needed. Exceeding 1622-1627 will add a lot of confirmation that the new cycle is in play. With the COT imbalance the Got Gold report also concluded that not only dramatic moves can take place but wild swings as well so let’s not be over zealous just yet and keep aware of potential volatile conditions are possible.
BOTTOM LINE
if the cycles play out a two week move higher is favored and gold got a great start just 24 hours after the ideal turn day. Above 1622-1627 and it adds a lot of upside potential for the rally. In the event that we turn down hard, we’ll look for support at the lower red channel lines on the hourly chart. The lower dotted trend line on the daily cycle chart near 1685 should also offer support should a downdraft take place.
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GOLD CURRENT TRADE
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GOLD CURRENT TRADE
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Long 1 April Mini Gold at 1588 on 25/02/2013
Stop lose at 1583
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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
