by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Bill Downey, of Gold Trends.net, LLC, is an Independent Investment Analyst with over twenty years of study. YOU SHOULD NOT TAKE ANY MATERIAL posted on this WEBSITE AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. Do your own due diligence. No one knows tomorrow's price or circumstance. The author intends to portray his thoughts and ideas on the subject which may s be used as a tool for the reader. GoldTrends does not accept responsibility for being incorrect in its speculations on market trend or key turning points that it may discuss since they are at best a calculated analysis based on historical price observations.

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Gold price fake out on FOMC Fed day

29 Oct 2015 10:58 AM | Bill Downey (Administrator)

 

Gold Report ~ Oct 29 2015

Trend

Long Term ~ Bearish- Need a monthly close above 1800 to confirm the bull market final phase underway. Need a monthly close above 1560 to neutralize the trend.

Medium Term ~ Bearish- Need a monthly close above 1255 to remove bearish trend.

Intermediate Term ~ Bullish– Need close above 1188 for bullish TREND to continue. Goes to NEUTRAL if Gold ETF GLD closes below 109.  Very close to going neutral. 

Short Term ~Neutral- Need a close below 1152 to flip short term bearish.

Initial Resistance 1164-1172 2nd tier 1180-1188

Support 1147-1151 2nd tier 1136-1141

"Hawkish" FOMC Statement Confirms "Moderate" Domestic Growth, No Longer Focused "Abroad"

With a 4% probability, it is no surprise that The Fed did not raise rates. Since The FOMC "folded" in September blaming global turmoil, stocks, bonds, and precious metals have soared as China (and EM) chaos has calmed while domestic data has declined. This has led to 'lift-off' expectations extending to April 2016, and so the question today is - how will The Fed convince the world it 'will' raise rates when it really can't...

  • *FED REMOVES LINE THAT GLOBAL DEVELOPMENTS MAY RESTRAIN GROWTH
  • *FED SAYS U.S. ECONOMY `HAS BEEN EXPANDING AT A MODERATE PACE'

A definite hawkish bias but so we are left data-dependent (fundamentals bad, stocks good), and less economically optimistic, but are supposed to believe that December (34%) is still a live meeting (because of some hockey-stick expectation in data) because The Fed needs to raise to show that it can.

For the past 7 years, Fed policies have been on "emergency" conditions.

The economy moved off that condition years ago, but they've kept these policies in place.

Why? It's due to pressure from Wall Street and the financial industry since the policies have led to stock market gains and easy terms to finance stock buybacks and M&A activity.

The Fed this day changed its language, dropping worries about global economic conditions that may negatively affect the U.S. economy. That is considered "hawkish," meaning now they're free to raise interest rates sooner. But Wall Street wasn't buying it, as stocks rallied post the announcement.

Nevertheless, after all this time, the Fed is still finding it difficult to normalize monetary policies. Bulls love and feast on their indecision.

U.S. stocks rallied sharply after an early bout ("the first move's the wrong move") of selling.

On the other hand, overseas markets, especially emerging markets, still experienced selling, as did currency markets and precious metals due to a rise in the dollar. And as stocks rallied, bond markets witnessed modest selling.

The Fed didn’t have to raise rates because everyone else is lowering them

Last week, the ECB President Mario Draghi said that interest rates would move lower in December, descending further into negative territory. Economic weakness across Europe will likely cause the ECB to continue the policy of quantitative easing far beyond September 2016 in an attempt to stimulate the fledgling economy.

And while USA is lifting the debt ceiling, China is once again cutting interest rates as the global economic landscape is turning down hard with just about everything we look at.

Last Friday, the Chinese central bank cut interest rates for the sixth time in 2015. Dovish central banks around the world are responding aggressively to deflationary data and signals in the global economic landscape. This lowers the chances that the U.S. Fed will raise rates as promised in 2015.

Let’s look at the CYCLES chart first today.

Since the pullback gold’s pattern has been a bull flag. The upper and lower lines define the range. In this type of pattern, odds favor a resumption of the uptrend once price breaks above or below the lines. Additional confirmation occurs when the close is beyond the line boundaries. When gold broke above the red 200 day average and ran above the previous high of the last 6 days with a 15 dollar rally to 1182, it looked like gold was going to run away to the upside as it did on October 2nd. But it was a bear trap. Price reversed and moved down 30 dollars to 1150. It’s still possible that the flag pattern will hold. However, if we break 1147 look for a move down to 1133-1141 next. This current cycle turn window is open until Monday so its not out of the question to move lower. The question really is whether we are making a blue cycle low? Let’s look at the next chart.


Cycles Continued 

Because of the big move up and down yesterday, it is possible that what we really saw was a top in gold. The chart below shows that it is not out of the question for yesterday to have been the peak in the cycle and for it to resume its downtrend for another two weeks. We won’t know for sure until next week which cycle placement is the correct one.

 

Gold short term

For a while on Wednesday it looked like the 1st target of 1155-1158 had held and we were heading higher. But a 30 dollar intra day reversal squelched that. We are now arriving at the 2nd target of 1146-1152. Thus if gold is really turning back up for two weeks, this is where it should bottom. However we can’t rule out a move to the 1133 area just yet. Resistance now will be the 1168-1172 area and then 1180-1188. Gold will try and hold 1147-1151 on Thursday. If it can’t then the 50 day average at 1141 (NOT SHOWN ON THIS CHART) will become support. On Friday the 1133-1136 area will become support if we can’t hold the 50 day. In summary, we expect 1147-1151 to hold on Thursday and if we keep going lower on Friday then 1133-1141 should be the low for this week.


HUI

Medium Term – Bearish – but nearing neutral.

Medium Term Moving averages – 144 – 156

Intermediate Term Moving averages – 131.75 -128.11—Bullish (4 weeks and since about 113 on HUI)

A few updates ago we favored the gold stocks finding resistance at the solid 2008 Crash Low Line and discussed that the most likely course would be a pullback attempt potentially to the moving averages where first support would be encountered and would present potentially a buy point for a trade. The moving averages currently stand at the 128 (red) up to 132 (blue). (scroll under chart for more commentary)

The low on Wednesday was the red moving average and the price did close below the blue. Thus the intermediate bullish trend is close to going out of bull and into Neutral. Neutral is not bearish but it’s a caution. The next support if the moving averages fail is the line from a GAP down in price that was formed on July 20th when the gold stocks accelerated to the downside after it had broken below the 2008 crash line low and the September high near 121.

Prices traded sideways beginning on August 5th. Towards the middle to end of August we discussed that the trend was still down but in order to continue the trend lower we needed a close below 103. On September 11th, gold stocks made a new bear market low some 40 days after gold made its summer low in late July. The closing price that day was 103.10---just 10 cents from where the next reversal point was located on the gold stocks. From Sept 11th to October 1st, gold continued in its sideways chop but never closed below 103. October 2nd was the NFP (non farm payroll day) and gold stocks took off higher with gold. At that time we stated a move above 123 would favor a test of the solid white 2008 crash line near 140 from which a pullback would be favored. On October 14th, 15th and 16th, the HUI tested the 139 area and a pullback has been in play since then. Today’s pop was right back to the crash line and it reversed and closed at the moving averages.

On a short term basis it is difficult to ascertain whether we made a cycle high and are ready to move lower into mid November, or if the gold stocks will make their low this week and propel higher.

On a medium and long term basis nothing has changed yet as the HUI MUST GET ABOVE THE 2008 crash line (both solid and dotted 140-150) and make that support. Then it must conquer the 2015 downtrend line (both dotted and solid yellow) and give TWO MONTHLY CLOSES ABOVE that line in order to take the medium term trend OUT OF BEARISH mode and move it to NEUTRAL.

Why two monthly closes ?

It just so happens that the medium term moving averages (not shown on the above chart) are near the 160 area in the HUI which is basically where that solid yellow downtrend line resides. Two monthly closes above the moving averages takes us out of bearish mode to neutral and once the blue moving average closes above the red average along with price, the medium term trend will turn bullish and odds will favor the low in gold stocks is in place. There has not been 2 consecutive closes above the averages since MARCH of 2012. Both April and May of that year finished lower and that was when the HUI gold stocks gave their first medium term sell signal.

On the medium we have more work to do before the trend moves out of bearish mode to neutral. That doesn’t mean the low is not in……….it means we need more evidence for a longer term signal.

Gold Medium Term

Long Term Trend ~ Bearish since Oct 2013 @ 1361

Long term Moving averages 1279 – 1372

Medium Term Trend ~bearish – (note prices are ATTEMPTING TO OVERCOME THE MOVNG AVERAGES. A close above 1222 at end of the month brings trend from BEARISH to NEUTRAL.

Moving Averages 1162-1177

This commentary on the medium term below has been running since we reached the lows in July-August;

Gold continues supporting at the 1080 price area and the 50% retracement of the entire bull market. Support remains that white line we bounced off on the lows and the three red lines under price. Until we crack below that level it is possible for gold to continue its quest higher at the moment. On a weekly basis, the 1172-1188 area is the resistance zone with 1211-1225 and 1258 as key reversal points. The dual yellow downtrend line is also key. As long as we are below that area, the downtrend on a medium term is still intact for now. On the downside, any weekly close below 1072 suggests the downtrend has resumed. Until then, it’s possible for gold to continue higher.

New Commentary

As you can see by the chart, the most significant event is that this rally peak was up against the dual yellow downtrend line established at the April 2013 crash line and the medium term moving averages (Blue Bull 1162 and Red Bear 1177. The Red bearish average (1177) is still above the Blue bullish average (1162). The TRUE trend reversal comes when we get the BLUE average above the Red. Look how long the Red average has been above the blue. (Note; the Red average IS NOT a 13 week average of WEEKLY PRICE CLOSINGS!!!) When the BLUE average is above the red, its bullish.

We have been calling for a low to develop in gold between Oct 2015 and June 2016. We are now in the window to turn the trend. Now price has to perform in order to complete the bottom. Until we get two monthly closes above the moving averages and that dual yellow downtrend line, we still think there is a chance of one MORE LOW. Finally, keep in mind as we said, gold has retraced 50% of the rally from 1999-2001. That is the same retracement we saw at the 1975 low in gold.

GOLD ETF GLD

Intermediate term Trend (Neutral)

Moving Averages 111.60-110.98

Today’s reversal lower ended 20 cents below the red moving average and it becomes while the gold stock intermediate term trend remained bullish by a hair, GLD went to Neutral by a hair. Because it was an FOMC day, we should view it with a grain of salt. A close below today’s low would definitely have the trend out of bullish to neutral. Support is that horizontal white line near 109. We’ll need a close above today’s high to re-instate the bullish trend.

Normally we would expect the moving averages to hold and provide a bottom but the one thing to be careful of is FOMC weeks can be very unreliable.

If GLD starts moving higher the key resistance will be today’s high and then that uptrend line near 114.50 In summary, today was a FOMC clear the stops on both sides day for gold. Lets see what the last two days of the week bring.

GDX

Intermediate term Trend moving averages 16.11-15.76 –Bullish (but only by a hair).

On our last update we discussed intermediate term had turned bullish and the next resistance was that green channel line near 16.40. We have now reached that level twice and now we’re at the moving averages. If we lose the averages, then 14.50 will become the next short term support point. If we break above the white and green 2008 crash line, then we should see 18 as the next target.

This pullback to the moving averages is usually a buy opportunity but the reversal on Wednesday could be signaling lower. Any position taken here for a trade should run a tight stop. The bottom line with GDX is we must get above the 2008 green line and then the green line just under 18.00. If we can do that then 20.50 to 23.00 becomes the target. The two green lines are the resistance for this ETF.

What next?

Gold held our closing support into Wednesday, and the pop up after the FOMC meeting got above the bullish flag on the daily chart but it was a bear trap and price reversed in a 30 dollar selloff that brought price back to the bottom of the flag pattern. The pattern is not invalid yet as it needs to close below the lower flag line. A close below 1146 will favor a test of the 50 day average in a range of 1136-1141. Monthly and lower channel support is 1118-1122.

Today’s scenario really loused up things as its possible we saw the high for the blue cycle and we move lower. However, The cycle turn (Oct 27th – plus or minus 72 hours) could still be moving lower and once again inverting the rotation to a blue cycle low. We’re not going to know for sure until next week. The other thing to keep in mind is that this week is a Martin Armstrong Panic Cycle week. We saw that today with a 15 dollar rally higher and then a 30 dollar move lower. It is still not out of the question to reverse again as the BULL FLAG on the chart below has not yet been broken.

Bottom Line

Same as we have said since September;

The low in gold is approaching and its not out of the question that we saw it at 1072 in July. But the oods are not good enough for us to proclaim it yet. If things work out we can have one final low that takes place between now and June 2016. But the 50% total retracement that took place when we hit 1080 in gold has satisfied the bear market requirement and like we said ----its not out of the question that we’ve seen it. Lets give it a bit more. When gold closes monthly above 1222 and 1258 the odds will greatly increase that the low is in.

 

 


Technical Analysis :: Gold & Silver

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