David Banister- www.MarketTrendForecast.com
Back in late June I penned a piece and wrote about GOLD bottoming in its bear market cycle at the 61% Fibonacci pivot around 1181 spot pricing. That has so far been working out, and as I said “they just rang a
bell at the bottom”. Well, now we need to get updated some 8 weeks later after this massive Gold rally which has put Gold in a technically overbought condition. Recently at my forecast service I discussed 1415 as a key line in the sand for the GOLD rally, to see if it could take that Fibonacci level out off the 1179 spot lows. It did briefly, hitting 1434 which is where roughly the A wave equals the C wave from the 1179 lows. Anytime you see what looks like a clear cut A B C pattern after a big decline, a few warning bells should go off for a short to intermediate term top. The warning signals we see are numerous, so they are worth noting: 1. The rally to the 34 week moving average line abruptly halted just $3 short of it and reversed hard to the downside.
2. We surmised that
this last stretch of Gold Trading over 1415 was probably Syrian concerned based mostly.
3. Gold has since dropped in a few days to 1371 spot lows (Labor Day low volume overnight lows, but still…)
4. The entire rally still has characteristics of a potential ABC Wave 4 correcting so far just under 38% Fibonacci retracement of the 1923 highs to 1179 lows, a common wave 4 movement. So we would continue now to be in a “Show me the money” state of mind near term, with concern that if that indeed was a wave 4 up, that a wave 5 to the downside, or at minimum a complex Wave D (Following ABC rally) would work off quite a bit of this $255 point rally. Downside targets are as low as 1271-1277 spot pricing which were our prior pivot lows of a lesser wave degree. Note on the chart the RSI levels are at nosebleed territory and this on a weekly chart no less. On daily views the MACD indicator is close to rolling over and giving a sell signal as well, and with the Monday action maybe it will once charts are updated on Tuesday this week. IN the meantime, the SP 500 index has dropped pretty hard and we have returned to only 38% Bulls down from 55% at the recent highs, and NYSE short interest is at screaming highs… indicating this market correction is getting closer to bottoming and therefore GOLD may see money come out. Just some things to think about to keep yourself balanced in your views. Consider joining us for daily updates on the SP 500 and Gold at www.markettrendforecast.com