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Long Term-Neutral – Need a monthly close above 1490-1526 in May to regain Bullish status. Medium Term=Bearish Need a close above 1650-1675 to neutralize. Intermediate Term=Bearish –need a close above 1465 to return neutral. Short Term=neutral– lower end of trade range reached (1333-1346) --it takes a close above 1405 to go bullish ---- trading range is incredibly wide. A close below 1333 gives a bear reading. Support and Resistance (NOTE JUNE GOLD NUMBERS)
Initial Resistance 1380-1391 and 2nd tier 1398-1408 Initial Support 1331-1341 and 2nd tier 1355-1362
Gold Hourly Chart
We discussed last night that we would have liked the move to not move up so fast and listed the 1395-1405 area as Tuesday resistance and the high was 1399 at the resistance point for the week and from there we've pulled back to mid channel and at one point down almost 40 dollars from the peak. We don't give a lot of value to inverted head and shoulder patterns, but once in a while they do work, so we've noted on on the hourly chart. Support is the lower red channel lines at 1332-1338 and that rising purple line just above it at 1351-1354. That's the key Bernanke support area (1332-1354). If we can hold that gold might have a chance. Resistance is the spot we hit on Tuesday on a weekly basis at the 1395-1405. Note how we kissed that white channel line twice before the 40 dollar sell off.
Our wide range scenario we discussed last night yielded a total of 40 dollars lower from the top and another 20 higher giving the day a 60 dollar range. On Wednesday the 1350 area (plus or minus 10 bucks) will be an interesting area of potential support daily support. The weekly is the lower red channel that we hit on Monday and MONTHLY support is 1280-1325 with ideal closing of 1310. In summary, this most likely the transition week, and the range will probably remain wide. Gold usually doesn't drift too far on the day before a fed meeting and usually has a sideways bias with a bit of lower undertone as we get near New York. The 1365-1385 area is the most likely price range until the Fed testimony which begins at 10 am and the fed minutes at 2;15 pm NY time (EST).
What Next?
It comes down once again to mid- week Wednesday and Bernanke. No doubt they are most likely trying to end the gold bull market. They are doing so in such a fury that one can only contemplate that they have very low inventory of physical. There is no doubt that hot money has moved on to the yen trade and other investors have tired of gold and have decided to cut out. But we think there is more than meets the eye.
The yen carry trade was orchestrated again to provide hot money and last months massive interest rate cuts are desperate attempts to keep a stalled recovery going and avoiding a deflationary downturn. When we say that we don't mean that inflation never comes back. What we need is a cleansing of the massive over hanging debt load and a return to money changing hands in velocity. That's when the real return comes to the gold bull.
What we have is an academic recovery of skewed indicators that if we ever had a good quarter GDP would be up 10%. It's a joke. But for now this is what we have to work with. The flush out in silver and the reversal on Monday is a good sign that a reversal higher is coming. Let's see what the control boyz do with the Bernanke hanky on Tuesday.
Bottom Line
Odds favor a rebound into the next short term cycle. All trends remain down with the exception that one could count the short term neutral. The 'war' on the metals is not over yet, but the bulls should be ready for a counter insurgence when this next cycle kicks in.
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.
