Gold

I've tried to provide a longer-term perspective on gold in several recent touts, but the focus returns today to a 1059.70 downside target (see inset) that is both clear and compelling. The futures are therefore implicitly a short from around these levels, but if and when the target is reached, you can bottom-fish there aggressively, particularly if you've been short on the way down. More immediately, the hourly chart is bullish, with a minor Hidden Pivot target at 1107.10 that was narrowly missed on Friday but which remains valid nonetheless. Conditions for a 'mechanical' bid would be attractive if the futures were to exceed p2=1100.10 by perhaps 2.00 points and then pull back to it. A 1098.10 stop-loss would apply. _______ UPDATE (August 3, 9:44 p.m. EDT): For the umpteenth time, a minor rally in gold has failed to reach a modest target -- in this case, 1107.10. This will shift our focus to two bearish targets not far below: 1059.70, noted above; and more immediately,  1067.60, the target of the pattern shown.  The fact that the point 'B' low is NOT sausage lends authority, if not to say precise predictability, to the downtrend.  Position accordingly.

I've been bearish on gold for so long that my successively lower targets have become almost perfunctory. Lately, I've focused on a 'Hidden Pivot' target at $817, the attainment of which would presumably wash out the last of the die-hard bulls, clearing the way for a resumption of the long-term bull market. Now, however, I am obliged to consider an alternative possibility -- i.e., an explosive move without the washout.  Although I lack the imagination to envision such world-shaking news as might cause this to occur, I credit a relatively recent Rick's Picks subscriber, Michael Gibbons, for jarring me awake. Gibbons is a market-timer of legend himself, with a high-end service that offers precise, timely trading guidance for 30 vehicles, including commodities, index futures, ETFs, stocks and options.  His take on gold, based on the latest Commitment of Traders (COT) report, is that a potentially major move may be close at hand. It turns out that commercial traders have been drastically reducing their short-gold positions, presumably in anticipation of a trend change. Although the commercials are never net-long gold contracts, they are significantly less short than they've been in quite a while. And that is good news for gold investors, since, as Michael points out, these guys are seldom wrong at important turning points. The last time they had it exactly right was in May, when they were loaded for bear, so to speak, a day ahead of gold's steep plunge from a rally spike to 1232 on May 18.  The August Comex contract has fallen $160 since, or about 13%. Over that time, commercial traders have covered a substantial portion of the short positions they held a few months ago. That could explain why gold has remained relatively buoyant during the last two weeks, hovering above a correction target

The bearish target at 1059.70 (see chart) seems clear and compelling to me -- so much so as to beg the question of why the futures have been thrashing around for the last two weeks just above it. Is this a bullish consolidation? A bearish distribution? Regardless, it is happening in an odd place relative to some clear Hidden Pivot support and resistance levels. My hunch is that the chop is distribution, and that we will see August Gold fall to at least 1059.70 before bulls can mount a decent rally. However, I am not married to this scenario and will be watching the lesser charts closely for the subtlest sign of an upward lurch out-of-nowhere. So far, any such effusion has been stymied precisely by the 1100.75 midpoint resistance shown in the small inset chart. However, were that resistance to be brushed aside on Thursday, I'd infer more upside over the very near term to at least 1113.80, the D target of the pattern shown. A move exceeding the 'external' peak at 1131.70 in the upper-left quadrant of the chart would be even more impressive, hinting of strength sufficient to carry into next week and beyond.

Gold began the day with a promising rally, but it ultimately went nowhere. Instead, a second-wind thrust failed, giving way to the correction pattern shown. It pointed to a minimum 1089.10, a Hidden Pivot support that you can bottom-fish with a 1089.20 bid and a stop-loss as tight as 1088.90.  If it's hit, rinse and repeat at 1085.00, the D target of the downtrending pattern. The hourly chart remains bullish, by the way, with short-term upside potential to 1115.70.  (a=1076.40 on July 24 at 8:00 a.m. EDT). That's a Hidden Pivot, and a move to it would become an odds-on bet if the futures exceed 1101.70 by at least 3.50 points. ______ UPDATE (July 28, 8:32 p.m. EDT): The 1115.70 target is still viable in theory, although the energy needed to reach it was undetectable during yesterday's dirge. If the futures should surprise with a push above p=1101.70, night owls can use this as a trigger to get long. A 'mechanical' trade on a pullback to p would require a stop-loss at 1099.30.

Friday's rebound looked ever-so-slightly promising, since it followed a moderate selloff that did not quite achieve its 'D' target, 1064.00.  Now, if bulls can push this erstwhile cinder block above the two peaks shown (the higher of which lies at 1108.80), it would generate an impulse leg with enough vigor, perhaps, to power a rally into week's end. The burden of proof will remain on bulls nonetheless, and it should be noted that the last such impulse leg, in mid-June, sputtered out almost immediately, giving way to a $125 decline.  Traders can position with a bid at 1090.90, but I'd suggest using 'camouflage' to initiate the trade rather than using a 'mechanical' entry, since the latter tactic would require a 4.50-point stop-loss.  When trading gold futures, our goal with 'camouflage' is to pare theoretical risk at entry down to 0.40-0.70 per contract.

Gold took a brutal pummeling on Monday -- catalyzed by an unusually large sale in Asia, if reports were to be believed. The liquidation spiked the futures down to 1080.00, well in excess of the 1125.00 support where I'd said real trouble would begin. That is where a crucial midpoint pivot comes in on the monthly chart, and its decisive breach yesterday makes it far more likely that the August contract will now head down to at least 971.30, or even 817.50. More immediately, there will be a potentially tradable test of support at p=1090.90, a red line on the chart where night owls should consider bottom-fishing. The same goes for two other pivots shown, respectively, at 1077.40 and 1064.00, my worst case for the near term.  There are a couple of remaining spots where you could look for a bounce: 1084.50 and 1067.80. If the first works precisely it would imply that 1067.80, rather than 1064.00, is where bulls will regain control, at least temporarily. ________ UPDATE (July 22, 11:31 a.m.): The 1090.90 pivot caught the overnight low within 1.10, generating a bounce of nearly $7. The futures have subsequently relapsed and are facing immediate jeopardy down to 1079.10, the p2 pivot of the pattern that produced p=1090.90.  _______ UPDATE (7:45 p.m.): A small change: The futures face immediate jeopardy to 1077.25, but any lower would put a target at 1064.00 in play. _______ UPDATE (July 23, 10:55 p.m.): A nasty bar about 30 minutes ago crashed the 1077.25 support, shortening the odds of a finishing stroke to at least 1064.00. The futures would need to climb above 1089.60 overnight to get out of short-term jeopardy.

Sellers effortlessly demolished the sturdy-looking Hidden Pivot support at 1135.00 that we'd been using as a minimum downside target. This augurs more weakness over the near term, presumably to the 1125.20 target shown. (I moved 'A' up to the next peak to come up with this target.) A tradable bounce is very likely, since, as you may recall, it coincides with a very major Hidden Pivot support that comes from the monthly chart. I've drum-rolled that target before, since its decisive breach would portend more slippage to a least  971.30, and possibly to 817.50, the number I've used as a worst-case low for the bear market begun in the fall of 2011. ______ UPDATE (July 20, 12:10 a.m. EDT): It is late Sunday night, and gold futures are falling like a brick.  In the process, they have continued to trash significant Hidden Pivot supports with the greatest of ease, suggesting that sellers are not yet done. Among the supports demolished was a major one at 1125.20 that I've been drum-rolling for months. (Note: This is not the 1125.20 pivot identified above, which is a coincident target of a downtrend of much smaller degree.)   Because 1125.20 has been decisively exceeded, my minimum downside target is now the pivot mentioned above, 971.30.  If you're looking for a glimmer of hope, it would lie in the fact that Sunday night's crushing selloff has rebounded from a low that did not quite achieve the 1067.60 target shown. Although the target will remain theoretically viable unless 1232.80 is exceeded to the upside, it would take a print today at 1146.80 to even hint that anything so encouraging is likely.

On the hourly chart, August Gold hasn't created even a modest bullish impulse leg in more than a week. It would take a print at 1168.60 to do so Sunday night, but so far, the high of a feeble rally has done no better than 1163.90.  Still worse is that the peak was achieved on a bull-trap opening that receded quickly enough to have left at least a small overhang of supply. Considering the particularly ho-hum news thus far concerning Greece, we shouldn't get our expectations very high for gold over the next 12 hours. Perhaps the evening news will bring fresh worries sufficient to impact bullion prices? Meanwhile, as a minimum downside projection, continue to use the 1135.00 target first broached here three weeks ago.

Although yesterday's rally sold off in the final hours, it left intact a modest impulse leg that could propel this vehicle to a modest 1165.60 on Thursday. Key resistance lies at the 1159.70 midpoint pivot of the pattern shown, and this will remain the case unless the 1153.80 point 'C' of the pattern is breached to the downside. Your best bet for a bull trade would be to get long on a pullback to 1159.70 after it has been exceeded by perhaps 1.60-2.00. The pullback should require at least 3-4 bars, and you'll need a stop-loss at 1158.60. _______ UPDATE (July 10, 12:48 a.m. EDT): Yesterday's hiccup did nothing to change the bearish picture. My short-term outlook would turn faintly bullish, however, on a rally today exceeding 1170.00, since that would create a weak bullish impulse leg on the hourly chart.