pebblewriter

Tag: gold

  • 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?

    continued for members… (more…)

  • Update on Gold: Jun 26, 2013

    It’s been a while since I last updated this page.  The equities markets have kept me working overtime, and I assumed our May 15 forecast had long since jumped the tracks.

    At the time, Gold had plunged 270 to 1321 per ounce in only 4 sessions, bounced at 1321 (the day after our bottom call) to within 13 of our upside target, and was returning for a second bounce — or not.   From that post [Update on Gold: May 15, 2013]:

    Now, at 1373, it has reached a critical juncture that should result in either a sharp rally to 1560 or a plunge to 1141 in the coming month or so..

    GC was closing in on the .786 retracement of the the rise off the 1321 bottom.  Playing the bounce was a low risk trade as long as one used trailing stops.

    Long positions could be played from the .786 (1357) or .886 (1340) as long as stops are watched very carefully and updated frequently.

    The downside case is probably stronger.  If the current plunge continues past 1321, there are only a few key levels of support before things get really nasty:

    • horizontal support at 1302-1309
    • potential Fib targets of 1276 (the 1.272) or 1219 (1.618)
    • Fib support at 1141-1157
    • Fib support at 947

    The bounce came a few days later at the .886 (1336) and despite gaining 84, couldn’t clear the big white channel midline, much less the smaller red channel (white in previous charts) it had been in since last September.

    When the big red channel from 1999 broke down on Jun 20, GC plunged again.  It failed to catch a bid at the first support level, but is approaching the second one this morning: the yellow 1.618 that completes the Crab Pattern at 1219.10.

    This seems like an opportune time to update the forecast, as gold’s price action continues to provide valuable clues as to investors’ expectations about QE, the value of the dollar and inflation.  Are the many calls for gold to fall below $1000 per ounce well-founded?

    Probably not.  We should get a decent bounce beginning at or near 1219 today that could take prices as high as 1320 or so by July 5-8.  A continued rally through the red midline would mean additional gains to 1357-1385 by mid-July.  But, there’s a better chance of a plunge to 1155 instead — and it need not respect the Crab Pattern about to complete, especially if today’s equity rally falters (gold certainly isn’t buying the MORE QE! snake oil.)

    Remember that 1155 is the .618 retracement (in white below) of the huge rally from 681 in 2008 to last September’s 1923 all-time high.  Around July 15, the bottom of the big white channel, the bottom of the red channel, the bottom of the big purple channel (it replaced the red one that failed on Jun 20) and a Fib Fan line all intersect with the .618 at 1155.

    Note, this is the same price target we identified in our April 15 Update on Gold.

    We can speculate about what circumstances might provide a floor.  The prevailing wisdom these days is yet another round of QE — or at least inflation of some variety. With interest rates on the rise, that seems likely enough.  We’ll stick a pin in the idea of a mid-July market calamity that necessitates Fed intervention.

    But, as long as 1155 holds (and, by proxy, the purple channel), gold will regain its luster.  It could rebound to 1525 by as soon as August and as high as 1760 by the end of the year.

    Each of the two significant spikes since the Aug 1999 low of 253 was followed by a retracement of between .382 and .500 of the rise from 253.  In May 2006, GC topped out at 1009 and then retraced just over 38.2% of the rise.  And, in Mar 2008, it retraced to about halfway between the .382 and .500 Fibs at 43%.

    The .382 Fib of the 253 — 1923 rise was 1285, so that ship has sailed.  The .500 is down at 1088.  1155 is about halfway between them (a 46% retracement.)

    A Fibonacci .618 on such a large pattern as this can be expected to provide at least a sizable bounce, but there is no guarantee.  The purple channel isn’t the most convincing fit in the world, and could fail in time as did the red.  If 1155 doesn’t hold, or if it merely provides a bounce, GC could complete a Gartley Pattern at the .786 (946.90) or even a Bat Pattern at the .886  (822) within the next six months.

    GLTA.

     

     

     

     

     

     

     

  • Update on Gold: May 15, 2013

    Our last update [Apr 15] devoted to gold came in the midst of a huge meltdown.  Gold had lost channel support, horizontal support at the psychologically important level of 1500 and was dropping like a rock through 1335.

    Never one to shy away from an opportunity to embarrass myself, I gave my best guess:

    we [should] get a nice bounce between here [1337] and 1309 and a backtest of one of the broken channel lines — say the white midline around 1410 or even the 1450 level.

    GC shed another 14 points to 1321 the very next day, then rebounded strongly to 1404. Another two weeks on, GC nearly reached 1500 before fading once again.

    Now, at 1373, it has reached a critical juncture that should result in either a sharp rally to 1560 or a plunge to 1141 in the coming month or so.  If that sounds like an impossibly wide margin of error, there is a way to invest without getting fleeced.

    GC has risen via the giant red channel since 1999. The plunge to 1321 took it to the brink of another $200 breakdown.

    It bounced at the channel bottom, though, and made a nice comeback… until May 3, that is.  At that point — having retraced a Fibonacci 61.8% of the damage done by the fall from 1590 — it did another about face.  It’s now only $11 from tagging the .786 retracement (1357) of the rise off the 1321 bottom.

    The Harmonic Pattern could go either way.  The 1487 high on May 3 came at the .618, so a Gartley, Bat, Butterfly or Crab Pattern could result in a climb back to 1532 – 1756.   Though, that would mean a breakout of the falling channel its been in since last September (in white, above.)

    Long positions could be played from the .786 (1357) or .886 (1340) as long as stops are watched very carefully and updated frequently.

    The downside case is probably stronger.  If the current plunge continues past 1321, there are only a few key levels of support before things get really nasty:

    • horizontal support at 1302-1309
    • potential Fib targets of 1276 (the 1.272) or 1219 (1.618)
    • Fib support at 1141-1157
    • Fib support at 947

    I don’t have a dog in this fight.  But, if I did, I’d be watching very closely to see if GC can catch a bounce north of 1300.  If not, it might easily form an inverted cup and handle and continue to be a great shorting opportunity.

    If that should happen, look for the large white channel to influence the drop. The white .618 at 1155 is tantalizingly close to the bottom of the channel in mid-July.

    GLTA.

  • 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…

    continued for members… (more…)

  • Update on Gold: Sep 17, 2012

    Gold nailed our September 6 forecast last week [see: Sep 6 Update on Gold], fulfilling both the Bat Pattern and Butterfly Pattern objectives in the exact time frame we expected — the confluence of the ECB, GCC and FOMC decisions.  Here’s the chart posted on the 6th:

    Since reaching the .886/1.618, prices have stalled out and are due for a pullback.  (Note, I’ve adjusted the red pattern’s Point X.)

    The minimum retracement I expect is to the purple channel line at 1746.  It also marks the yellow channel line that’s several years in the making.   If things get rolling, we could easily test the 1700 levels.

    Good luck to all.

  • Update on Gold: Sep 6, 2012

    Gold continues to rise on expectations of quantitative easing — whether from the ECB or the Fed.  In our last update [see: August 22 Update on Gold] prices had reached our August 15 target of 1655 and had broken out of the descending triangle we’d identified.

    Our target at the time was 1762, which is starting to look a little less far-fetched.  But, we’ve reached a level where we can expect a significant speed bump.

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  • Update on Gold: August 22, 2012

    UPDATE:  August 22, 2012

    Today, gold reached the 1655 target from our August 15 forecast — closing at 1656.20.  Note that this represents a probable breach of the descending triangle upper bound as well as a tag of the Fibonacci .886 level of 1655.70 for a proper Bat Pattern completion.

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  • Update on Gold: Aug 15, 2012

    Gold continues to trace out a large descending triangle.  Interestingly, though, it has now constructed an ascending triangle within the descending triangle (the white dashed lines.)

    Each is roughly 65% of the way from origin to apex — typically the point at which these things break out.  The larger triangle comes at the tail end of a spectacular run up in prices — meaning it is more likely (73% according to Bulkowski) to break upwards.  The smaller pattern could break either way, though a break down for another test of the 1530ish baseline certainly looks logical.

    There is little in the harmonic patterns to suggest one direction over the other.  A completion of any of the potential patterns means a trip outside one or both triangles.  But, the regularity of the travels from one bound to the other suggests playing the swings and/or the breakout.

    A break upward from the small triangle at 1634 would likely result in a run to(at least) the upper bound of the larger triange — currently at 1655.  Likewise, a break of the small triangle’s lower bound (currently at 1592) should be good for a trip down to 1530.

    Since prices most recently tagged the lower bound of the small triangle, I’d be inclined to continue playing the upside at the moment; but, from 1609 to 1633 is only about 1.5%. Stay tuned.

    GLTA.

  • Update on Gold: June 18, 2012

     

    GC soared over $1200/oz since losing 30% in sympathy to the global market meltdown in 2008.  Most of that rise took place in an acceleration channel.

    In the past year, however, the most prominent pattern has been the descending triangle (purple, dashed.)

    Continued…

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