Gold

Last Wednesday, gold embarked on yet another rally that seems bound to disappoint. This one was a 60-pointer, and it came nearly precisely from the D target of the bearish pattern shown in the inset. An attempt to follow through bogged down at week's end, leaving the futures with no net gain over the initial, impulsive thrust.  That said, we'll give bulls the benefit of the doubt nonetheless, predicated on a thrust through the 1686.50 midpoint Hidden Pivot of this pattern, which projects to as high as 1750.70. Thereafter, a pullback to the green line from our sweet spot between p and p2 should be bought 'mechanically' provided you know how to hold the entry risk down to less than $250 per contract. In the unexpected event that the rally exceeds D=1750.70, that would be the most bullish sign we've seen in a long while. It would bring into play a larger reverse pattern (a=1802.10 on 2/3/22) that projects to at least 1766.90, or 1911.50 at the outside.  The foregoing notwithstanding, my gut feeling is that gold is about to relapse, eclipsing last week's low at 1622.20. Not far below it is a voodoo number where I'd try bottom-fishing, but I'll say no more about it until such time as the futures get there.

December Gold ended the week breaching, then closing beneath, a 1660.90 midpoint support associated with a 'D' target at 1497.20. Before we sink into despair, let's use the lesser pattern shown in the inset to leverage a less severe outcome. The chart shows immediate downside potential to 1641.00, or to 1620.00 if any lower. Both are worth bottom-fishing provided you can set up the trade with initial risk of less than $150 or so per contract. There is also a possibility that Friday's 1646.60 low will prove to be an important bottom, although I doubt it. A 1685.10 print by mid-week would change my mind, but let's not hold our breath. _______ UPDATE (Sep 28, 8:17 a.m.): The gold trade I posted in the chat room last night canceled itself when the prospective 'c' anchor dropped more than a desirable few ticks beneath D=1628.70. The eventual low at 1622.20 was easily tradeable and came at 3:30 a.m. from this pattern, one that I should not have missed.  I do not think sellers are done. Here is a quite bearish pattern with a 1597.50 target and a midpoint support that was breached last night. The pattern is gnarly enough that it should work well for any purpose, whether bottom-fishing or getting short 'mechanically'.

Pardon me for not getting excited about Friday's impulsive thrust, but scores of failed rallies have taken the thrill out of gold's occasional, meaningless flights of fancy. We should make the futures earn our trust every step of the way, meaning in this case we shouldn't even assume D=1704.10 will be reached via this presumptive bear rally. Let buyers push this sack of cement decisively past our minimum upside objective first, p=1692.00, and then we can raise our expectations just a little. This pattern should work well for 'mechanical' buying, but don't pass up an opportunity to take a partial profit on a modest, one-level move. Incidentally, gold ended the week at the scariest precipice on this chart -- i.e., the 1660.90 midpoint Hidden Pivot of a pattern projecting to as low as 1497.20. If the support doesn't hold, the futures should be presumed bound for at least 1619.90, a secondary D target derived from A2 on the chart.

The last time gold slipped into a discomfort zone was the third week in July, just before it trampolined from the tiny space between two important lows on the weekly chart (see inset). It is probably fixing to do something at least as irksome now, presumably by bouncing with equal or greater ferocity from somewhere beneath the breakdown line shown in the chart. My hunch is that this will not occur following a merely marginal penetration of the line, but rather from either p2=1671.10 or D=1619.90 of this pattern. Use the former for now as a minimum downside target. And yes, just in case, we should allow for the vexatious possibility that, with no breakdown at all, the low is already in. We cannot be fooled about this if we monitor impulse legs on the lesser charts for the next couple of weeks. ______ UPDATE (Sep 12, 10:09 p.m.): My distrust of this rally is so intense that we'll need to judge it strictly by-the-book. That means we  can at least withhold our enthusiasm until such time as the 1757.90 'external' peak created August 28 on the way down is exceeded. _______ UPDATE (Sep 13, 7:03 p.m.): Gold is looking so atrocious that a reversal from near 1700, where three lows have occurred since July 21, seems assured. Anything in the range 1699.60-1703.10 will be in the discomfort zone and therefore opportune for bottom-fishing with a tight reverse-pattern.  ______ UPDATE (Sep 15, 4:14 p.m.): It's getting ugly. Sellers drove gold through the round number 1700.00 with such ease that it became resistance before it even had a chance to be tested as support. Shifting to the weekly chart yields a new downside target at 1619.90, a Hidden Pivot that can be used as a minimum downside projection if p2=1671.10 doesn't hold.

The futures did nothing last week to earn the somewhat ambitious bullish pattern shown. The 1985.40 target is theoretically viable because the green line was tagged, but the follow-through failed to reach p=1840.80, which is what we should expect at a minimum if this brick is going to have a shot at 1985.40. The selloffs have lacked vigor as well, so don't be surprised if the Decembe contract spends the next 2-3 weeks screwing the pooch. My moderate bias calls for a marginal breakdown below C=1696.1. _______ UPDATE (Sep 3, 10:38 a.m.): The 'C' low at 1696.10 held, albeit barely, but I do not trust a bounce coming from such an obvious place. Brace for a relapse, and don't get your hopes too high unless this dog vaults p=1840.80 (see inset). _______ UPDATE (Sep 7, 9:35 pm.): I'll lower the bar for this dog, stipulating that it must leap to 1758.00 to turn the hourly chart unambiguously bullish. That would exceded a key 'external' peak recorded on August 29. _______ UPDATE (Sep 8, 10:36 p.m.): The lowered bar (see previous update) was too high, since today's mere head-fake created a bullish impulse leg that cannot be ignored. Depending on how buyers handle p=1729.60, we'll be able to judge the odds of further upside to D=1745.50 or higher.

I've scaled back my pattern and rally target to reflect gold's disppointing performance over the last two weeks, The impulse leg was a dubious qualifier to begin with, and the follow-through leg couldn't even reach p2=1841.30, let alone re-energize itself with a push above an 'external' peak. That said, the pattern could still generate a so-so 'mechanical' buy at x=1744.60 for a one-level ride to p=1792.90. If you elect the trade, just be sure to use a 'camouflage' set-up on a small-degree chart to cut the nearly $10,000 of implied entry risk on four contratcs down to more like $800. The 1889.70 target is a longshot at this point, never mind the 1985.40 target of the larger 'reverse' pattern shown here earlier.

Gold has been huffing and puffing for two weeks without making much headway. That's not saying it can't still pop through p=1840.80 with brio, but we'll need to see it happen before we get excited. Thereupon, p2=1913.10 would become out minimum upside objective, with a shot at 1985.40 for the bull cycle begun three weeks ago from 1696. As always, a decisive penetration of any of the three Hidden Pivot levels implies a continuation of the trend to the next. The pattern looks likely to produce winning 'mechanical' buys if gold hits an air pocket as it seems wont to do whenever bulls get too interested. _______ UPDATE (Aug 17, 11:06 p.m.): Maybe the D=1772.2 downside target shown in this chart will provide a respite for buils, however brief and unsatisfying? ______ UPDATE (Aug 18, 9:32 p.m.): It provide no respite whatsoever when the 'hidden' support gave way like wet tissue. But none of us could have been surprised, since gold, in its tedious bottoming process, seems to delight in disappointing bulls about 90% of the time. This may be an even more dismal spell than usual, given the dollar's bullish breakout (see my DXY update elsewhere  on this page.  

At the current pace, this anemic uptrend will reach the D target at 1985.40 by next June. Something's got to give, obviously, since no bull market can survive such torpor. We may be spared waiting, however, if the futures pop to p=1840.80 sooner rather than later. A decisive move past that Hidden Pivot would imply the December contract is no worse than an even-odds bet to continue to at least p2=1913.10, if not necessarily to D.  In the meantime, Friday's downdraft tripped a so-so 'mechanical' buy at x- 1789.50, stop 1769.90 (daily, A= 1727.00 on 7/27). I didn't recommend the trade because getting long ahead of a weekend is almost always unappealing.

The picture shown makes much better visual sense than the tortuous, gutless pattern I posted here earlier. (It had an erroneous target to begin with.) The new graph will enable us to use p=1840.80 as a minimum upside projection, and D=1985.40 as a best-case objective for the next 6-8 weeks. Depending on how the uptrend interacts with p=1840.80, I may move 'A' down to the marquee low at 1793.50 to produce a slightly higher target. There are no guarantees that the rally will achieve 1840.8, since the chart lacks sufficient information as yet to determine this.  At a gut level, though, it looks safe to use 1840.8 as a minimum upside projection.