Listen up, since, technically speaking, something important happened yesterday in Gold. For one, the futures reversed sharply with the broad averages falling. When was the last time that occurred? Even more significant from our perspective is that the reversal created a bullish impulse leg on the not-exactly-chopped-liver 180-minute chart (see inset). From a Hidden Pivot standpoint, this is the most positive sign we’ve seen in gold since a similar rally, one that ultimately failed, occurred in late February.
While it is true that the rally has launched from a too-obvious place, just above mid-April’s savagely oversold 1321 bottom, that doesn’t necessarily make it meaningless or a tease. In fact, it will allow us to set aside, at least for the time being, two worrisome correction targets that I’ve been drum-rolling at, respectively, 1218.60 and 1190.40. Realize that no matter how accurately we can sometimes predict key highs and lows, we never pretend to have a crystal ball. Rather, we simply take what the charts give us and interpret the action with coldly mechanical detachment. In that regard, it is fair to say that the bullishly impulsive move now unfolding on the 180-minute chart has the potential to end gold’s long bear market. At the very least, it implies the beginning of a rally that could carry into summer. Our confidence about this would naturally increase if the first ABCD rally pattern to unfold blows past the still-undetermined midpoint pivot with the greatest of ease.
For traders, initiating a long position should come most easily at the ‘x’ entry point of the big pattern; or for those eager to get aboard as early as possible, at the p or D Hidden Pivot of the retracement leg. We’ll be using camouflage to do so in either case, of course, since using the larger pattern for entry at x would subject us to theoretical entry risk of slightly more than $1500 per contract. Our goal would be to cut that down to no more than $40-$60. The signal could come as early as today, although I’m inclined to look for the kind of pullback to ‘C’ that might take a day or two longer. (Note the long k-A segment here.) In any event, you should be ready to pounce if this very promising impulse leg generates a C-D leg with a buy signal. I’ve sketched out a hypothetical continuation of the pattern so that you can see exactly what I’m talking about.