Just when we thought we had gold figured out, it turned a promising rally into dross. Although the so-far $30 dive from an intraday high at 1532.00 may have disappointed bulls, it did not likely scare them. That's because bears have been struggling themselves for a week to do even minor damage to the bullish chart shown. Its 1622.90 target remains viable in theory, but it would appear that the point 'C' low associated with the target is likely to be breached. If the implied downthrust is spiky enough, it could set up an enticing rABC trade, where A= 1496.80 on 9/11 at 9:00 p.m. ET. The implied entry risk would be around $900 per contract, but a cheaper play in GLD may be possible. If there is interest in the chat room and the trade hasn't triggered before the regular session begins, I'll provide further guidance.
Gold's rallies have been generating successively less-overbought peaks on the daily chat (see inset), implying buyers are running out of steam and that distribution is creeping in. We'll adopt a mildly cautious stance for the time being, monitoring price lows on the daily chart for signs of similar divergences, which would be bullish. The 1622.90 rally target given here previously remains valid in theory, but it would be negated if the correction exceeds the 1488.90 low (aka point 'C') recorded on August 13. Bulls got sandbagged when last Wednesday's rally to 1566.20 reversed punitively after poking above a 1565.00 peak notched nine days earlier. That is why the retracement is likely to last for at least a few more days. Caveat emptor for now. _______ UPDATE (Sep 10, 9:28 p.m. ET): A breach of C=1488.90 looks imminent and would negate the 1622.90 target. Ordinarily I'd suggest using a 'counterintuitive set-up to get long after such a breakdown, but my hunch is that the rally won't get very far. We'll spectate for now, but stay tuned to the chat room, since the picture could change.
Gold came under pressure last week because the institutional thieves who tend the markets were busy pumping up shares. Even so, I am going to raise my minimum upside target to 1666.10 because of the healthy look of the monthly chart (see inset). The 1622.60 target of a lesser pattern I'd displayed here earlier remains valid. In fact, the pattern that produced it would trigger a weak mechanical buy if the December contract were to pull back slightly more, touching x=1522.40. I say 'weak' buy because the C-D leg never quite rallied to our sweet spot around 1574 before pulling back; it got no higher than 1565. I am not recommending the trade for that reason, but also because of the implied risk that the futures will breach C=1488.90 before resuming their upward course. How long that will take depends on how much more short-covering DaBoyz can milk from a supposedly imminent -- for about the 50th time -- trade deal with China. We already know that whatever supposed deal is reached, it will be a face-saving nothingburger, and that the broad averages will be an attractive short on the news. Until then, we should be prepared for stocks to waft higher. _______ UPDATE (Sep 5, 10:35 p.m. ET): Today's selloff tripped a mechanical buy at 1522.40, stop 1488.80, but I've suggested paper-trading this one because it has $13k of initial risk on four contracts. Here's the chart; let's see how it goes.
The strong surge that ended the week has brought clarity to the very bullish pattern shown. Its 1622.90 rally target will become a good bet to be reached if and when the futures blow past the 1555.90 midpoint Hidden Pivot. This is slightly lower than the target given here earlier, but it can serve for now as a minimum upside objective. How quickly the December contract gets there will depend on how the stock market does, since the chimpanzees who are paid handsomely to throw other people's money at a tiny universe of institutionally sanctioned stocks can only handle one theme at a time, even with the help of powerful computers. For the foreseeable future, that theme will remain: buy stocks, sell (or ignore) gold and bonds; or, sell stocks, buy gold and bonds.
A rally target at 1559.90 remains valid, but before the futures push toward it they must finish correcting the pattern shown. Sellers appear to be having difficulty pushing down to p=1510.00, the midpoint Hidden Pivot support, and that is mildly bullish. You can attempt bottom-fishing there with a stop-loss as tight as 1.00, or via any rABC pattern which emerges, but the trade is recommended only to scalpers familiar with this vehicle. A decisive breach of the support would likely continue down to at least p2=1495.70, or possible to d=1481.40.
Gold has pushed past a 1515.60 Hidden Pivot target that had been two months in coming, suggesting there is still significant buying power remaining to be spent. However, because I've raised a cautionary note with respect to the mining stocks, we should treat the gold futures a little more cautiously than we have been lately. For now, that means using the 1559.90 pivot shown as a minimum upside objective for the near term. The target is clear and compelling, and so an easy move past it would be signaling a continuation of the uptrend. _______ UPDATE (Aug 13, 8:15 p.m.): Here is the pattern I am using in December Gold at the moment. It will become more authoritative if and when x=1522.40 is touched. The stock market's nutty exuberance this morning dangerously underestimates the risks of Hong Kong. _______ UPDATE (Aug 14, 9:47 p.m.) Next stop: 1555.90, my minimum upside projection at the moment, as well as the midpoint resistance associated with D=1622.90.
Assuming the short-squeeze bounce in the broad averages and FAANGs is about to get legs -- a possibility I've raised in today's The Morning Line -- bullion will be under pressure. The institutional chimpanzees who build and dismantle portfolios can only follow simple instructions that have a single theme. One such theme unfortunately is that when one is buying stocks, one is necessarily selling bullion. Adding to my newfound caution in gold (and silver) is that today's rally hit a Hidden Pivot target at 1515.60 that has been two months in coming. The slight overshoot is ostensibly bullish and would become still moreso if gold closes above today's high (1522.70) for the next two days. In any event, we'll see what surprises crop up before we draw any strong conclusions. _______ UPDATE (Aug 8, 10:34 p.m.): Gold held its own today with stocks on a mini-rampage. This seems bullish, but let's see how things play out ahead of the weekend. _______ UPDATE (Aug 11): Gold got little boost when the Dow was trading almost 300 points lower on Friday, so we should be prepared for bullion to turn weak if the broad averages reverse and rally. First, let's see how things open Sunday evening.
Shifting to the December contract yields a 1515.60 target equivalent to one at 1504.00 we'd been using for the June. The rally has been labored, implying there can be no guarantees the target will be reached. Regardless, the 'mechanical' buy signal from two weeks ago, and then again last Wednesday, was valid, even if only a handful of Rick's Picks subscribers reported getting aboard. Yet another pullback to the green line would offer a third opportunity to profit, but I won't recommend the trade because it is taking the futures too long to complete the big pattern's C-D leg. Prospects for a successful belated entry would improve, however, if the futures were to pull back from the secondary pivot (shown in the chart as a pink line at 1486.00). Stay tuned to the chat room if you care. _______ UPDATE (Aug 5, 8:59 p.m.): Bulls have got the futures up nearly $10 tonight. This usually sets up gold for a smackdown before the regular-session opening. But if something has indeed changed, don't be surprised if the good guys hold onto tonight's gains and even add a little. _______ UPDATE (Aug 6, 10:15 p.m.): The smackdown did happen -- around 1:00 a.m. -- but bulls recouped the loss intraday and are bludgeoning the bad guys Tuesday night with a so-far 18-point gain. The rally targets a minimum 1506.00, or 1511.80 if any higher. Let's hope the bad guys get bloodied badly enough that they'll stop disrespecting gold at hours of the day when they imagine it defenseless.
For years, gold's corrections have been brutal, and that is why many erstwhile bulls have not rushed to buy this rally. They have instead been waiting for a nasty pullback in order to load up at bargain prices. But Mr Market has not obliged. Instead, retracements have been shallow and rallies steep. The latter have often occurred after-hours, but in one recent instance via a trampoline bounce early in the day. By playing hard-to-get, gold is showing the most encouraging signs we have seen in a long, long while. This evening the August Comex futures have uncorked a 25-pointer, impaling a midpoint Hidden Pivot resistance at 1444.40 that is tied to a 1504.00 target first identified here weeks ago. That is my minimum upside objective at the moment and it should be yours as well if you trade this vehicle. If you want to see how some pros are boldly trading the move so far using GDX call options, stop by the Rick's Picks Trading Room. You can access it by taking a free two-week trial subscription. Simply provide your name and email address at the top of the home page and you will have instant access to the entire site. No credit card is necessary. _______ UPDATE (Jul 30, 10:17 p.m.): Gold would need to fall $45 to invalidate the 1504 rally target noted above (click here for the chart). Stranger things have happened, but even that would not negate the bullish look of the daily chart. In any event, we'll avoid the fray ahead of the Fed's "momentous" announcement concerning an expected 25-basis-point easing._______ UPDATE (Jul 31, 10:07 p.m.): The moderate selloff tripped a 'mechanical' buy signal at 1409.08, stop 1384.70. The trade is somewhat riskier than we should prefer, since the pullback from the top of the
August Gold pulled a Pearl Harbor on bears and skeptics Tuesday, reversing early morning weakness with a surprisingly sharp rally. I'd expected another two weeks of corrective action myself after bullion's impressive run-up in June. However, the chart (inset) shows the futures to be bound most immediately for at least 1446.90. If so, that would be a new recovery high and an encouraging sign that even bigger things lie ahead. Specifically, a 1504.00 target would be in play if the August contract closes for two consecutive days above 1444.40 or trades more than $12 above that price intraday. Please note as well that a $150 plunge from around 1460 would not be the disaster it might seem at the time; rather, it would set up a textbook buying opportunity according to the proprietary rules Rick's Picks subscribers follow for 'mechanical' trades. ______ UPDATE (Jul 7, 5:05 p.m. ET): Last week's surge peaked just shy of the 1444.40 midpoint resistance, implying that bulls have run out of steam for the moment. Here's a chart that shows it. The futures will still need to close above 1440,.00 for two straight days, or trade more than $12 above this Hidden Pivot intraday, in order to clinch a follow-through to 1504.00. In the meantime, there is no 'mechanical buy' set-up to use on the daily chart, since the rally topped well below our sweet spot before the pullback. _______ UPDATE (Jul 10, 9:29 p.m.): The futures are in the third week of the correction I'd forecast above, seemingly eager to break out of a 60-point consolidation range. The pivot at 1444.40 remains crucial to the completion of this task.
