Gold: View of Major Top Over the Last Month Remains
Gold near term outlook:
In the May 26th email once again affirmed the bearish view (important
top at the May 2nd high at $1304) and rolling over of the multi-month
topping/channel. The market has indeed continued lower since, currently
consolidating from the May 30th low at $1200.
Though starting to get
oversold after the tumble over the last month, there is still no
confirmation of even a short term low "pattern-wise" (5 waves up for
example), technicals remains negative (see sell mode on the daily macd)
while a more major top is still seen in place (see longer term below),
and in turn argues further downside.
Further support below that recent
$1200 low is seen at the base of the bearish channel from the high
(currently at $1187/90) and $1273/76 (50% retracement from the Dec 2015
low at $1046).
Nearby resistance is seen at the recent $1220/23 high),
the broken base of the bullish channel since Feb (currently at $1230/33)
and the ceiling of the bearish channel from the high (currently at
$1238/41). Bottom line : despite approaching oversold, there is still no confirmation of even a short term low so far.
Strategy/position:
Still short from the Apr 29th sell at $1279 and for now, would continue to stop on a close $3 above the ceiling of the bearish channel from the high. However, will want to get more aggressive on increasing signs of a shorter term bottom (slowing downside momentum, 5 waves up on very short term chart) to maintain a good risk/reward in the position.
Long term outlook:
No change in the view of an important top at that May 2nd high at
$1304 (at least a few months), and as the market has indeed finally
"rolled over".
Note that the upmove from Dec to that May high lasted
about 5 months (has only been declining for 1 month so far, argues at
least another few months of downside), long term technicals have turned
negative (see sell mode on the weekly macd) and the US$ index is still
seen completing a more major bottom (though scope for a few weeks of
consolidating/bottoming, see email from yesterday, inverse
relationship). Additionally as been discussing, this pullback in gold
may be "deep" as there is scope for deep declines across a number of
correlated markets.
This includes silver which is still seen completing
a major top at that May 2nd high at $18.00 and with scope for declines
all the way back to its Dec 2015 low at $13.60 and even below (note that
the 3 wave upmove argues a large correction, see 3rd chart below, deep
decline in silver would argue a deep pullback in gold). Bottom
line : important top still seen in place at the May 2nd high at $1304
and with another few months of downside (and likely deep pullback)
favored.
Strategy/position:
Also switched the longer term bias to the bearish side on Apr 29th at $1279.
Current:
Nearer term : short from the Apr 29th sell at $1279, stop on close $3 above multi-week bearish channel.
Last : short Mar 14 at $1240, stopped Mar 16 back above t-line from Feb ($1247, closed $1263).
Longer term: bear bias on Apr 29th at $1279, potential for significant downside over next few months.
Last : bull bias Mar 4th at $1261 to neutral Mar 16 at $1263.
