Gold Ripe For Pullback?

[rodden]

Quote from Cutten:

Generally in a bull market the odds favor buying, rather than selling short. You may catch a correction, but without a major reversal signal, the odds play is to look for dips to buy, not rallies to short.

True, but Gold is in a rising wedge - albeit a pretty big wedge with a long way to go to the apex - but it's still a bearish formation. And, except for the ever-diving Dollar, the fundamentals at the moment are weak. Who knows when the USD will pull out of its swan dive? It could reverse, or at least pause, at any moment, in spite of the fact that the USD itself has bad fundamentals. The Fed has many ways to manipulate the USD.

Probably, at this point, the best thing to do is go with the obvious and stick with a winner, but Gold has always been a treacherous instrument.

There are so many hidden factors moving gold. For instance, do we know how Barrick's messy derivatives situation is going to affect the market?

And Gold is small, in terms of capital, but politically significant; the Fed and friends may squelch it at any time to avert currency commotion.

The activation of ETF's in the U.S. might boost Gold - but then, maybe ETF anticipation has already been factored in.

Even as I write this, though, Gold may be getting ready to bust through the top of its wedge to morph the whole thing into a channel, and head on up to 500.0 and beyond.

Who knows? I certainly don't. I covered my ABX shorts this morning for a small gain, but I'm stuck short PDG for a not-so-small paper loss. Monday will tell us something. If Gold is strong Monday, I'll take my lumps and sit back and watch for a while.

 

[illiquid]

I don't really see the "rising wedge" that makes you bearish; the daily chart and weekly chart both look almost identical in nature: ascending triangle breakouts, with a retest of the horizontal and subsequent trend up. Oh well, you say tomato, I say, er, tomato . . .

 

[rodden]

Quote from illiquid:

I don't really see the "rising wedge" that makes you bearish; the daily chart and weekly chart both look almost identical in nature: ascending triangle breakouts, with a retest of the horizontal and subsequent trend up. Oh well, you say tomato, I say, er, tomato . . .

I see what you mean. If your reading is right this thing is a monster! I would be downright overjoyed if you are correct; I could eat my losses and load up with Toronto penny golds.. and retire in six months (not joking).

But I still see the big picture as a resumption of the uptrend after the big collapse 390.0-320.0 . It's had a lot of peaks since then and at least one was likely to be around the old high. The wedge I see is early April 321.0 to now...but yes, you might well be right. If Spot hits 410.0+ next week..well then...maybe on to minimum 465.0!

On the other hand there's still room in your interpretation for a neat little shake-out to 385.0 .

We'll see. Good luck.

 

[hollywood]

Over the next 7 weeks,the gold index(XAU)will move up and peak on Jan 23,04.I think gold may test its '96 high of $421,but would not be surprized to see gold pushed to $440-450 by Jan.23.In the following 2 to 4 weeks I'm looking for a consolidation period .If the dollar is still falling by March,Iwould expect gold to continue its current trend,albeit a slow and steady one.

 

[Cutten]

The old high around $420 is clear resistance.

Normally after breaching a key psychological level like $400, I would expect a run higher and then a top to be made for long enough so that stops accumulate under the previous level ($400 in this case). I would then expect the market to go back below that level, taking out those stops and getting weak longs out, before making its major move upwards.

As Hollywood says, the seasonals favour some kind of scenario of this type. However, $420 is now so close that it may be reached well before late January. So his scenario of a top around $440-450 may be more likely - this would require blowing through the $420 level and developing excessive bullish sentiment, prior to a reversal. This would then set up perfectly for a retracement back down to just below $400 - clean out all the weak longs who bought on the breakout above $420, and set us up for a move from $400 to $500 in 2004.

For those sitting on long-term bull market positions, this doesn't really matter, but for someone looking to add to those positions, it may be of some use. On a pullback below $400 from either $420 or higher, I would look to buy more.

 

[rodden]

Quote from illiquid:

I don't really see the "rising wedge" that makes you bearish; the daily chart and weekly chart both look almost identical in nature: ascending triangle breakouts, with a retest of the horizontal and subsequent trend up. Oh well, you say tomato, I say, er, tomato . . .

After further consideration of the Dec. contract daily chart I believe I perceive a plausible alternative to either your ascending triangle or my wedge (or tightening channel).

Do I see a rather neat symmetrical triangle described by 391.0/Feb, 321.0/Apr, 377.0/(May-Jun), 342.5/Jul - or am I hallucinating again? Said triangle could be seen as having been beautifully confirmed by subsequent successive hi/lo's up to the breakout at the end of August. Subsequently, we have a rise to the old high (your ascending triangle 2nd hi) , followed by a reaction to the apex, followed in turn by a resumption of the uptrend.

If Gold stops at approx 408.0 Mon-Tues and corrects from there, I believe my original wedge idea would be confirmed - at least as boundaries to the fulfillment of the symmetrical triangle breakout projection to 440.0+ . The target's ETA for this scenario would be mid-June '04.

If Gold plows right through 412.0 early next week, I'll dump my wedge/channel idea and look for a more rapid climb to 440.0 .

So, wuddya think - am I seeing something here, or just seeing things?

 

[rodden]

Quote from Cutten:

The old high around $420 is clear resistance.

Normally after breaching a key psychological level like $400, I would expect a run higher and then a top to be made for long enough so that stops accumulate under the previous level ($400 in this case). I would then expect the market to go back below that level, taking out those stops and getting weak longs out, before making its major move upwards.

As Hollywood says, the seasonals favour some kind of scenario of this type. However, $420 is now so close that it may be reached well before late January. So his scenario of a top around $440-450 may be more likely - this would require blowing through the $420 level and developing excessive bullish sentiment, prior to a reversal. This would then set up perfectly for a retracement back down to just below $400 - clean out all the weak longs who bought on the breakout above $420, and set us up for a move from $400 to $500 in 2004.

For those sitting on long-term bull market positions, this doesn't really matter, but for someone looking to add to those positions, it may be of some use. On a pullback below $400 from either $420 or higher, I would look to buy more.

Widespread anticipation of 420.0 resistance may well lower the resistance level to 410.0- . The extended longs must be very nervous right now, especially after the recent massive rollover; they've already been disappointed and may be losing resolve. Comex Gold is busy here, but the net long position is dwindling; this is an ambiguous but noteworthy development - it may be signaling a near-term sell-off. If an attempt is made on 420.0 early next week and it fails, you may see a clean-out down to the low 380.0's .

Also, check out the chart for $CRB - it may have double-topped Thursday.

And take a gander at those U.S. Dollar index components - Yen, Pound, and Canadian Dollar - all looking a little high right now. The Canadian Dollar looks ripe for correction, and the Pound is scraping its tops-line.

It's not inconceivable that USD will rally by default next week; if it does, Gold will have a tough time moving ahead.

I'd appreciate your critique of my ramblings.

Yours respectfully....

 

[rodden]

Quote from hollywood:

Over the next 7 weeks,the gold index(XAU)will move up and peak on Jan 23,04.I think gold may test its '96 high of $421,but would not be surprised to see gold pushed to $440-450 by Jan.23.In the following 2 to 4 weeks I'm looking for a consolidation period .If the dollar is still falling by March,Iwould expect gold to continue its current trend,albeit a slow and steady one.

Please consider my posts of 10:30 and 11:01 this morning, addressed to ILLIQUID and CUTTEN respectively; informed critique is always appreciated.

Thanx for your input.

 

[hollywood]

I agree with you Rodden.I do believe that that we will test the 400 level and perhaps lower.I've been charting gold and the gold index for two years.Thats the reason I'm convinced the gold index will peak on friday Jan.23,04.You could set your watch to the 4 month cycle of the index.However,over the past 6 months ,the consolidation period at these peaks has shrunk from a two month to a two week time frame,because of strengthening fundamentals for gold.The best performing fund sector 4 of the last 7 weeks have been gold oriented which indicates to me ,a healthy dose of institutional buying is whats propelling this sector higher. The increasing interest may limit the Jan.23 peak to just a mild selloff,which may only last a few days to a week.Anyway you look at it,I believe gold will be trading 10 to 15% higher at the end of 2004.$450-$475.

 

[rodden]

Quote from hollywood:

I agree with you Rodden.I do believe that that we will test the 400 level and perhaps lower.I've been charting gold and the gold index for two years.Thats the reason I'm convinced the gold index will peak on friday Jan.23,04.You could set your watch to the 4 month cycle of the index.However,over the past 6 months ,the consolidation period at these peaks has shrunk from a two month to a two week time frame,because of strengthening fundamentals for gold.The best performing fund sector 4 of the last 7 weeks have been gold oriented which indicates to me ,a healthy dose of institutional buying is whats propelling this sector higher. The increasing interest may limit the Jan.23 peak to just a mild selloff,which may only last a few days to a week.Anyway you look at it,I believe gold will be trading 10 to 15% higher at the end of 2004.$450-$475.

No doubt that a lot of that Large Speculator long position is solid institutional investment, but even these guys will hesitate if things look dicey.

Did you check out the charts for Dec. contracts re. the Euro, Yen, Pound and Canadian Dollar? Don't those USD components look a tad ripe to you? Euro looks good for a little more upside (maybe 123.0), the rest look fragile right here. The Canadian Dollar looks pretty good to correct to .742 or so, and the Pound is especially unsupported at these levels. This could translate into a USD correction as early as late next week. If the Euro corrects to its support around 118.2, Gold should correct moderately .

Also, everybody's in a panic about the USD right now; everybody KNOWS it's going down - and you know what that usually means.


I don't think a near-term Gold correction, even as low as the 380.0's, would do the trend any harm; it would be good to get the shake-out out of the way before ETF's are activated in the U.S. . If Gold is going up when ETF's come in, well - nothing succeeds like success.

I think the next few days will tell us a lot about what's going to happen near-to-medium term. If Gold plows through 410.0 tomorrow the uptrend will be accelerating and I'll adjust my short-term outlook.

Also, physical buyers appeared Friday @ 400.0+ ; this is new and indicates strengthening fundamentals.

And how about the Russell 2000 and the S&P 500 - claustrophobic or what? How much tighter can these ranges get before something gives?

I think your 1-yr projection for Gold looks good - but maybe a little conservative. But time will tell.

Thanx and good luck.