pebblewriter

Tag: GC

  • Update on Gold & Silver: Nov 30, 2020

    We noted back on July 9 [see: Moment of Truth] that GC had reached our long-held 1823.60 target well ahead of schedule.

    From a charting standpoint, it should reverse here at its .886 Fib retracement. From a fundamental standpoint, of course, the fiscal picture suggests plenty of additional upside. Remember, it broke out of two different rising channels in order to reach this price level well ahead of schedule. We have to wonder whether a reversal in GC would, as would normally be the case, result in a rally in the long-suffering DXY.

    We were still bearish on DXY, so the potential for a reversal in GC seemed limited.

    As it turned out, the fundamental picture won out. Though it took it about 9 sessions, it finally pushed above its .886 retracement, and then its former all-time highs – breaking out of rising channels in an explosion up to 2089.20.

    We got a (quite violent) backtest of 1823 as expected, followed by six weeks of sideways consolidation while pretty much everybody waited for Congress to approve another round of stimulus. Unfortunately for GC, the stimulus never came.

    Since then, GC has been settling lower in a falling channel which pointed to a rendezvous with the 200-DMA – which was breached on Friday. This is a significant breakdown which implies a troubled path forward. But, there are other factors at work.

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  • Update on Gold: Apr 8, 2020

    In our last formal update on gold in January [see: Jan 2 Update on Gold] with GC trading at 1529, I noted that although DXY had held up well, gold should benefit from loose Fed policy – but could see a backtest of its SMA200 based on the oil/gas meltdown we expected.

    I am partial, though, to the Fed putting the damper on inflation in January (reported in Feb) and setting up a backtest of the SMA200 or even the neckline which would set up another leg up to 1710-1735 in Oct 2021 or Jan 2022. Note that this would tie in nicely with the idea of an oil/gas meltdown in 2023.

    We certainly got all those things, but the timing was just a tad off.

    Long time members will remember I’ve been writing about gold’s potential Inverted Head & Shoulders Pattern for years. This post from September 2017 comes to mind.

    As I stated in that last update, I think TPTB will do whatever it takes to keep that giant IH&S targeting 1721 from playing out. The only thing I can see outweighing their efforts would be a true black swan event such as open warfare on the Korean Peninsula.

    Sure enough, every time GC got close to that neckline (the dashed yellow line above), it was smacked down by as much as 18%. It has happened 9 times since July 2016.  It was nice for trading purposes, but frustrating to the many gold bugs out there.

    While rising oil and gas prices were helpful to Aramco’s share offering in 2019, they disrupted the delicate balance between inflation and interest rates and sent a clear signal that it was finally time for GC to break out — which it finally did last June.

    Since then, it’s been a matter of waiting for the rising price channel to reach our upside targets. It might have been a long wait if not for the coronavirus. We managed to avoid war with North Korea, but this smaller, deadlier enemy was plenty Black Swan enough for the Fed.

    A few trillion in QE later, GC has reached our 1735 target — well ahead of schedule and after a very dramatic SMA200 backtest.

    Is the run over, or is there more to come?

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  • Update on Gold: Jan 2, 2020

    In our Aug 28, 2019 Update on Gold I noted that although GC had just reached our 1560 target, ZN had also reached our 132’100 target.  The picture was further muddled by the fact that DXY and GC had been moving in unison – an unusual occurrence, to say the least.

    ZN’s resistance could put the brakes on, meaning rates would rise and GC would theoretically fall.  But…I expect ZN’s pullback to be modest — possibly only 3-4% — suggesting GC’s pullback would also be fairly modest.

    As it turned out, GC and ZN both reversed.  Although DXY made a half-hearted effort to break out, it was limited to 1.5% and GC’s reversal was limited to 1446.

    DXY’s rally stopped making any sense at all once FOMC members began hinting at additional rate cuts. When the Fed resumed QE (QE-not as we like to call it), the market knew what to do: DXY has been steadily selling off and GC has climbed back to within $30 of its August highs.

    Does this mean more upside ahead?

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  • Gold: Following the Yellow Brick Road

    I’m not a gold bug.  I’ve always thought the price is pretty heavily manipulated (long before it hit the headlines) and I guess I’ve avoided it on principle.  Looking back at my forecasts over the past year or so, that was probably a mistake.

    Since our December 14, 2015 forecast, GC has gained about 19% — not shabby.  However, if one heeded the forecasts offered with each subsequent update, the net return would have been over 80%.

    I’ve said many times, lately, that forecasting stocks has become a lot tougher than forecasting the various drivers of stock prices.  In the case of gold, it is obviously affected by the value of the US dollar, which is an important component of USDJPY — a key driver of equity algos.

    Thus, GC — like USDJPY, WTI and VIX — is one of those things that’s been relatively easy to forecast even though I’ve devoted only the occasional hour or two to its study.  Before we touch on today’s forecast, let’s take a look at the past year’s periodic forecasts.The numbers in the above chart correspond to the posts below.

    1. Dec 14, 2015 (GC: 1060):
      “If DX plunges further, as I expect it will, GC’s 4th bounce could be a doozy: 1150-1180 for starters, and 1286 after that.”  GC reached 1180 by Feb 8, topped out at 1287.80 on Mar 11.
    2. Mar 4, 2016 (GC: 1280):
      “I’d be very cautious in chasing GC at this point…acts like it’s reversing between here and 1286…take the gains…it could easily backtest the .618 at 1207.60.”  GC reached 1286 the next week, then reversed to backtest 1206.
    3. April 8, 2016 (GC: 1240):
      “If [gold] breaks above the purple midline [at 1270] then 1379-1380 is the next logical target…”   Gold reached 1377.50 three months later.
    4. July 7, 2016 (GC: 1361):
      “Our target range from April 8 was 1379-1380.  Yesterday’s 1377.50 was probably close enough.  If it can’t make new highs today, the next stop is the neckline at 1307..”  GC, which peaked at 1377.50 on Jul 6, dropped 5% to 1310 over the next 2 weeks.
    5. Aug 26, 2016 (GC: 1324):
      “…[there’s a] huge IH&S Pattern, the neckline of which is the former high at 1307ish.  If TPTB are serious about discrediting GC anytime soon it’ll involve getting it back below that [1307] support.”  GC tumbled to 1307, testing it three times before breaking down to 1243 on Oct 7.
    6. Oct 7, 2016 (GC: 1254): “…GC tagged its SMA200 and the bottom of a pretty good looking channel earlier — usually good for a bounce.”  GC bottomed the next day at 1243, bounced for a month, reached 1339 on Nov 9.
    7. Nov 14, 2016 (GC: 1227): …GC’s channel finally broke down two days ago and has potential to 1083 — a 12% drop from here.  What better way to finish the year out?  GC plunged 103 (8.4%) over the next month.
    8. Dec 5, 2016 (GC: 1175): If the .618 [1172.40] breaks down, then the next support isn’t until the red TL at 1130, followed by the .886 at 1083.50… GC reached 1130 on Dec 15.
    9. Dec 15, 2016 (GC: 1129): “GC is currently testing an important internal TL of support… a potentially important test…that could produce a bounce to the purple midline [at 1230] or the SMA200 — currently at 1278.”  GC reached the SMA200 at 1264.60 on Feb 27.

    After tagging its 200-day average in February, gold tumbled about 67, back below a key channel midline.  But, it is right back in the swing of things, having nearly reached the SMA200 a second time just yesterday.

    With all the discussion about what the Fed will or won’t do for the rest of the year, what’s next?

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  • Update on Gold: April 15, 2013

    Gold continued to melt down today, shedding another $126 and continuing the plunge that started on Friday with the critical loss of the LT channel we discussed last week, the horizontal support at 1520-1535, and the psychologically important 1500 level.

    Gold had a nice bounce from 1539 to 1590 after reaching the bottom of the channel and the horizontal support of several prior bounces on Apr 4.  In a dramatic demonstration of what can happen when channel support is lost, it has since shed almost $270/oz.

    The red channel below represents my best shot at the new operative channel.  It supports the idea of a bounce at the Jan 2011 low of 1309 — 3rd on our list of potential bounce spots during today’s onslaught.

    The next best available channel is well below the current one, but supports the idea of a bounce at 1379 or 1359 — the Bat Pattern and Crab Pattern completions shown in the first chart above.  If those levels should fail to hold, the next major support levels are 1309 and 1155.

    We got good bounces earlier today at the first two: the Fib retracements at 1359 and 1379  But, along came the CME with announcements of increased margins and that was the end of that.

    Please note, I am not a gold bug.  I don’t advocate the purchase of gold. I shy away from most assets that increase exponentially in price — especially those backed with the kind of religious fervor as is gold.

    The time may come when inflation is taking hold and it makes sense to switch everything you own into the metal… but, we’re not there yet.  It’s a crowded trade, and IMO, today’s price action underscores the risk.

    So, the following is offered in the same spirit as my picks for NCAA champion, Best Picture, and  Westminster Best in Show (the affenpinscher, really!?)

    There’s another channel (below, in purple) that kinda sorta supports the first, but shows the potential downside in the event that 1300 can’t handle the pressure.

    It’s speculative, for sure.  But, I like the fact that it crosses the white .618 at a key point in time, so I’ll leave it up for now.What’s interesting to me is the Fibonacci Fans that can be drawn on this chart.  The ones from 681 low (yellow) have done a pretty decent job of guiding the bounces on the way down.

    And, the ones from the 1923 high (red) have done well at halting several attempts at a breakout.

    I could almost believe we’ve seen the worst of the drop, but I wonder about this potential channel…

    …and, the daily RSI — which suggests at least a little more potential downside any way you slice it.  The bottom of the purple and red channels probably correlates to 1309, while the bottom of the gray channel represents something much more ominous.

    So, where do we go from here?

    I believe we’ll get a nice bounce here to backtest of one of the broken channel lines — say the white midline around 1410 or even the 1450 level.  But, it probably wouldn’t happen anytime soon.  After that, the downside risk is to 1155 or so.

    Of course, if the FBI were to announce irrefutable proof that the North Koreans were behind the Boston bombing, or the Iranians launched a Rahd SAM at an F/A-18, or [insert your favorite catastrophe here], it’s a whole new ball game.

    GLTA.

  • Charts I’m Watching: Apr 15, 2013

    The big story this morning is the meltdown taking place in the commodities complex.  Gold is especially taking it on the chin, continuing the plunge that started on Friday with the critical loss of the LT channel we discussed last week, the horizontal support at 1520-1535, and the psychologically important 1500 level.

    Recall gold had a nice bounce on Apr 4 at 1539, the bottom of the channel and the horizontal support of several prior bounces.  In a dramatic demonstration of what happens when channel support is lost, it has since shed 205/oz.

    The next best available channel is well below the current one, but supports the idea of a bounce at 1379 or 1359 — the Bat Pattern and Crab Pattern completions shown in the first chart above.

    If those levels should fail to hold, the next major support levels are 1309 and 1155.

    We’ll discuss oil and other commodities later, but first let’s catch up with equities.  Recall that we shorted at 1597 last Thursday [CIW Apr 11 – 11:30 update] after tagging the TL connecting the 2000 and 2007 highs.  As we discussed Friday, we were expecting a bounce at the 2007 previous high of 1576.09 in order to maintain the bullish case.

    The technical elephant in the room is the previous 1576.09 high — now just 5 points below… Unless 1576 is taken out, any correction will be viewed as a backtest of an important, previously exceeded level of resistance.

    This morning, we came very close — reaching 1576.87 so far.

    I’ll take a long position here at 1576 just to see where it takes us.   Tight stops (1573ish) are in order, as the next support is down between 1553-1561.

    We discussed last week about core versus interim positions.  I see this as a make or break moment for SPX, as a plunge below 1576 really damages the bullish case.  A plunge below 1553 does very serious damage.

    So, I’m comfortable in closing out my short position from 1597.  That doesn’t mean I believe the market will go up from here.  The jury is out.  But, by placing tight stops below my long position, I can manage the risk of being wrong.

    SPX doesn’t have to reverse strongly for a hold here to be effective.  The bottom of the big purple channel (from 1343) isn’t far below at 1564.  But, it’s rising quickly.  It’ll be up to1576 by Apr 22.  So, if SPX can merely go sideways for a week or so, it’ll have a channel bottom bounce available to drive it higher.

    UPDATE:  11:40 AM

    Gold just reached the bottom of our target range from this morning: the Crab Pattern completion at 1359.  It should reverse here.  But, again, a failure to hold could easily send prices down to 1309.

    It’s interesting to see what the US dollar has done during this sell-off.  Instead of reflecting a risk-off posture and rallying strongly, it has continued to drift mostly sideways to lower.

    UPDATE:  11:55 AM

    SPX just broke down through 1576, so I’ll play along on the downside here with an objective of 1564 — the bottom of the purple channel.  But, a push down to 1561.60 — the .618 of the 1539-1597 rally — looks very doable given the current downside momentum.

    UPDATE:  1:10 PM

    SPX just hit our 1564 objective.  I’ll take profits here and try a long position, but I think there’s at least a 50:50 shot at a (probably) intra-day push lower to 1559-1561.  I’ll leave stops pretty tight here and be happy to go along if it plays out that way.

    The view from 30,000 feet coming up…

    UPDATE:  2:03 PM

    Just got stopped out at 1564, so it’s back to the short side.  Lots of near-term targets, starting with 1561.60, coming up in a few…

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