We favored gold to move higher to month end due to cycles. However we stated that any close below 1199 favored a cycle inversion/rotation. And cycles did inverted after the 1199 breach and they have rotated back to Red Cycle lows.
Our long term experience is that blue cycle lows are bullish for price and red Cycle lows produce bounces, but lower prices overall. In other words, a bear trend. One of the FEW exceptions I’ve ever seen was the May 31st low of this year at 1199. There are odds in markets, but there are no absolutes.
The chart below shows what the situation looks like. Odds favor gold makes a low between today and Monday from where a two week bounce should take place and then we’ll see. A close below 1152-1162 will favor a move to 1122 first.
The intermediate and medium term cycles are also looking for a turn point here. Last year’s low was about a month early on the Bradley Siderograph. Odds favor the intermediate term is getting ready to make a low between now and January.
Sentiment in gold is reaching an extreme point where a trend change attempt also seems close by.
While not a MEASURE in itself of Sentiment, the Bullish Percent Index (BPI) is a breadth indicator based on the number of stocks on Point & Figure buy signals within an index. This gold indicator is flashing an extreme reading and is yet another indicator to watch. It needs to turn UP in order to add to the potential turn point arriving in gold.
Intermediate term using ETF GLD
Gold ETF GLD– Moving Averages 116-118 (Bearish)
Our last update had the intermediate term in bearish mode and while at the 114 area, we stated any NEW LOW (this week) would lead to a test of the lower support line near the 112 area and gold could shed 50 dollars. That’s about what we’ve gotten in gold.
As you can see by the chart, GLD has fallen below our latest support line and now needs a close back above it on Friday to not trigger yet another level lower. If gold closes below 1062
Resistance is now at 116-118 and at the 121-122 area. Support is 112 ON FRIDAY CLOSE BASIS. A close below 110 in GLD and price would trace down to the 104-106.50 where that support line resides.
Summary – The trend remains bearish (as it was the last update) but a short term low is due in cycles. ANY GOLD CLOSE BELOW 1062 could delay the cycle. What we want to see is a close back above that trend line at 113 that GLD just failed at. If that develops, then a bounce to the next resistance line at 115-116 will be favored for next week. Either way, odds favor it comes down to the NFP report on Friday morning as to whether GLD can hold and close back at the line we’ve highlighted at PIVOT.
Gold Medium Term– Bullish
Moving Averages 1287-1287 (NEUTRAL)
Our last update went from medium term bullish to Neutral and since that trend change at around 1272, gold has tanked. Price remains in NEUTRAL mode but with the red moving average on the verge of crossing above blue on this weeks close means any CLOSE BELOW 1262 GOLD next week means the trend goes back to bearish and will target 1083-1129 as the next support.
Summary – As we’ve said since July on our website and on Twitter---UNTIL GOLD CONQUERS the 2011 downtrend line, the medium term correction can continue even into year end and the BULL MARKET TURN from 2015 remains UNCONFIRMED. Its reality right now and we need to understand that its stronger evidence than just someone’s opinion.
Medium term Cycle lows are favored in the November to January period, so we’re entering that time zone. Once this cycle low is in place, 2017 still looks higher for gold. From a medium term perspective, odds favor the LOW for this correction won’t be complete until we reach support lines in the 1083-1129. A Friday close below 1179-1180 (the 2013 low) and the doors to SUB $1000 becomes a potential.