Gold: View of Major Top Over the Last Month Remains

Gold: View of Major Top Over the Last Month Remains

2 June 2016, 17:39
Roberto Jacobs
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Gold: View of Major Top Over the Last Month Remains

Gold near term outlook:

In the May 26th email once again affirmed the bearish view (important top at the May 2nd high at $1304) and rolling over of the multi-month topping/channel.  The market has indeed continued lower since, currently consolidating from the May 30th low at $1200. 

Though starting to get oversold after the tumble over the last month, there is still no confirmation of even a short term low "pattern-wise" (5 waves up for example), technicals remains negative (see sell mode on the daily macd) while a more major top is still seen in place (see longer term below), and in turn argues further downside. 

Further support below that recent $1200 low is seen at the base of the bearish channel from the high (currently at $1187/90) and $1273/76 (50% retracement from the Dec 2015 low at $1046). 

Nearby resistance is seen at the recent $1220/23 high), the broken base of the bullish channel since Feb (currently at $1230/33) and the ceiling of the bearish channel from the high (currently at $1238/41). Bottom line : despite approaching oversold, there is still no confirmation of even a short term low so far.


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Strategy/position: 

Still short from the Apr 29th sell at $1279 and for now, would continue to stop on a close $3 above the ceiling of the bearish channel from the high.  However, will want to get more aggressive on increasing signs of a shorter term bottom (slowing downside momentum, 5 waves up on very short term chart) to maintain a good risk/reward in the position.    

Long term outlook:

No change in the view of an important top at that May 2nd high at $1304 (at least a few months), and as the market has indeed finally "rolled over". 

Note that the upmove from Dec to that May high lasted about 5 months (has only been declining for 1 month so far, argues at least another few months of downside), long term technicals have turned negative (see sell mode on the weekly macd) and the US$ index is still seen completing a more major bottom (though scope for a few weeks of consolidating/bottoming, see email from yesterday, inverse relationship).  Additionally as been discussing, this pullback in gold may be "deep" as there is scope for deep declines across a number of correlated markets. 

This includes silver which is still seen completing a major top at that May 2nd high at $18.00 and with scope for declines all the way back to its Dec 2015 low at $13.60 and even below (note that the 3 wave upmove argues a large correction, see 3rd chart below, deep decline in silver would argue a deep pullback in gold).  Bottom line : important top still seen in place at the May 2nd high at $1304 and with another few months of downside (and likely deep pullback) favored.


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Strategy/position:

Also switched the longer term bias to the bearish side on Apr 29th at $1279.

Current:

Nearer term : short from the Apr 29th sell at $1279, stop on close $3 above multi-week bearish channel.                                                                    

Last             : short Mar 14 at $1240, stopped Mar 16 back above t-line from Feb ($1247, closed $1263).   

Longer term: bear bias on Apr 29th at $1279, potential for significant downside over next few months.             

Last             : bull bias Mar 4th at $1261 to neutral Mar 16 at $1263.


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