Technicals | May 06 2013
Bottom Line 02/05/13
Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Technical Discussion
The dust has settled here a little since we last looked in on Gold which was via the bigger picture weekly chart. And again we are viewing another market here which is a make or break point in time in regards to its longer term bullish aspirations. As you know we have been forwarding the larger cycle Wave patterns as being very bullish for some time now. And by that we mean a higher degree 5-wave move off the lows established back in 2001. And since the 2011 highs were locked in as a Wave-[3], the higher degree Wave-[4] is what we have been proposing as unfolding. And due to the degree of the move is the reason why we have always been forwarding the notion that this corrective phase was going to be quite long winded.
Yet it was also important that symmetry be maintained, and depth to the move be typical. Ideally a 38.2% retracement down to 1481 is what we were looking for in regards to this depth. Be it shallower via support around 1540 would have been an even better bullish omen. Yet it wasn't to be. And as soon as support was broken down from, within three single trading sessions, Gold plummeted from 1565 down to 1322 on some massive volume. So technical damage has certainly been witnessed here. And from the point of view of Gold's partner in crime Silver, as we talked about last night, all patterns large and small have now turned corrective and not larger cycle corrective. And even though this has not been confirmed with Gold just yet, it has certainly put the metal on notice and forwards the notion that what we have been witnessing over the past 18 months or so, has in fact been a topping out pattern with a major high locked in back in 2011. Still open for debate of course, yet based on events over the past few weeks, something that needs to remain well and truly on the table.
Back to what we know. The Wave-[4] at present depth is still valid and as such we continue to run with it. Every market has its own personality and therefore needs to be treated individually. Just because Silver has turned corrective for example, due to its core ruling breaks, doesn't mean we just follow suit with Gold. Gold depth down to 1322 is pretty much to the tick on the 50.0% retracement of the higher degree Wave-[3]. And it has to be stated that in the world of Elliott Wave, this is not unusual for Wave-[4]'s. Maybe Gold has overshot the runway a bit due to stop loss trigger, fear and panic. Or maybe from an Elliott point of view, it has just travelled to the lower end of what is still considered typical for this particular stage of the trend. One thing is for certain though. Any convicted break below the recent 1322 lows from here, and we will be putting our own analysis to bed and heading back to the drawing board. Shorter term, we now need to focus on whether the positive impulsive price reaction off the 1322 lows is a dead cat bounce, or something more positive. And this is where our Fibonacci retracement points off this immediate move are now ultra critical. They come in at 1404 and 1385 respectively. And if Gold is to have any form of longer term bullish aspirations left in it, then these levels just have to hold. Its as simple as that !
Trading Strategy
In between reviews, and as highlighted in our Global Position status Area, we have run with an aggressive long position on gold at 1405 with stops now placed at 1370. Its low risk yet as mentioned obviously a very aggressive stance. Especially considering what the Bears have been up to over the past few weeks. Yet I'm always on the alert when massive volume comes in at the latter stages of a trend. Price has obviously been correcting for over 18 months now, and there is scope that within the recent price capitulation, there have been buyers present. Some one with deep pockets has put a stop to the bearish rout in amongst all that volume. It is now just a matter of seeing whether they have the motive to stick around. A famous Buffet saying is when everyone is afraid be brave, and when everyone is brave be afraid. There are not too many pundits out there at the moment being brave with precious metals !!
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