Goldtent TA Paradise

Here’s an example of why it’s so important to question everything you read. The only way to build up confidence in your forecast is to look at multiple scenarios and gather the evidence on both sides of the argument. Following a post I put on Twitter someone stated that gold was ‘going sub $900’. I genuinely want to consider all sides of the discussion, so asked why he thought that. He gave me a link to a chart someone had posted. Here it is…

I noticed it’s a log scale, and immediately thought it odd. My log chart for gold doesn’t look like that. This is a case of someone drawing a chart with thick lines to fit their bearish narrative. Notice how they’ve scribbled the number ‘2’ right on top of the candle. It hides the fact that their line doesn’t touch the top of the candle. It’s so important to look at your chart on an appropriate level of ‘zoom’ and use a thinner line to get it right. Here’s my version…

The implications are very, very different, I’m sure you’ll agree. If the 8 and 16 year cycle low is behind us (which it is), it makes little sense to make a new low in a years time. Sub $900 gold is fundamentally hard to imagine. Mining shares already lost an average of 80% or more. They would be almost worthless if gold fell another $400 or more, with many mines likely to close. I’m not saying that would be impossible, but it is a very, very low likelihood, with the cyclical lows behind us. The stocharstic indicator on this scale has turned down, but as you can see in early 2009 and early 2010, it means very little in isolation. The chart ‘evidence’ he posted is plain wrong, and it goes to show how people are misled on a regular basis.

I’d find it hard to be bullish here, but I could be wrong. On the upside, when Palladium collapsed 90% between 2001 and 2003, gold rose almost 40%. A repeat would take us to around $1800 by 2021. Curiously close to my expectations as it happens.

What happens in the next few weeks will be decisive. Two hugely important trendlines are converging exactly here. Exactly on the curved base. Exactly whilst we are in a bullish descending wedge formation. Exactly whilst we are seeking out an ICL. Exactly as our 8 and 16 year cycles are pointing up. Exactly when the technical indicators are bullish. Exactly when we are on the cusp of the biggest failure in global monetary experiments ever. Exactly as North Korea has confirmed new weapons tests. Exactly as central bank gold buying hits a new high. Exactly as the GSR has hit historical highs, tested long term resistance and failed at that level. Exactly as we see the Dollar trying repeatedly and failing to break through the Fib level around 98.3

One way of looking at it…

Another way of looking at it…

Just the chart…

One reason is that the Dollar Index largest constituent is the Euro. The Euro chart shows a basing pattern at the cyclical low and a bullish descending wedge hitting long term support…

I’m still unsure if the Dollar has a final surge left in it. Repeated failures at 98 (which is also an important Fib level) leave me thinking it probably doesn’t. TRIX (40) has been very reliable and it’s turned down now.

Just a possibility…

I know I’ve been posting these patterns for months, but they’ve continued to build out and are now nearing completion. We have a bearish rising wedge for the dollar, a bullish descending wedge in gold, breakout back-tests in the miners and the ‘gold bowl’ is still holding water. Will it spring a leak with all these patterns failing, or will they do what they’re supposed to do ?

Hold onto your hats !

A downside breach or upside breakout is all that really matters. There are a few ways of drawing this bowl (different angles for the ‘lid), so a variation in support and breakout levels.

EDIT – label should read $1345-$1350 of course.

Very bearish rising wedge in my view. A rapid fall from here means that silver is outperforming gold and likely indicates an overall PM bull market move.

A break above the 98.3 Fib level and out of the wedge is needed to negate this bearish scenario. I would be looking for a fast move to 100 if that were to happen. Unlikely in my view, but I could be wrong of course.

But I’m not getting that sinking feeling at all. I’m of the view (still) that $1220-$1250 will hold support,.

The Dollar chart still suggests that whilst 100 is a possibility (heck, 120+ is possible), the cyclical nature of the Dollar is going to start to weigh it down.

It’s an around the apex move up, or a puke into single figures…

Unlike gold, silver has violated very long term support. It hasn’t collapsed yet, which is encouraging. It suggests to me that this may be the mother of all false breakdowns. If not we’ll see silver trading below $10 very soon. Otherwise, I believe we can look forward to a rapid return to $21.

Certainly looks plausible…

Gold

Silver

GDX

GDXJ

HUI

There are lots of very long term support and resistance levels converging in the near future. A break either way will be decisive.

Discuss 😉

I’ve been posting this chart on and off for quite a long time now, but I still think it’s on our side (if you’re a PM bull). Based on cycle timing, we may see a short-lived drop, but it’s highly likely that the long term trend will be up here.

If the Dollar Index rises 2% that takes us to DXY 100 and solid resistance. A corresponding 2% fall in gold would take us to, wait for it…drumroll please…(taking $1280 as your starting price)…$1254.40 – that’s within a couple of Dollars of where we find our .236 Fib retracement, 200 day moving average and (very soon) our curved base support. Is it just me, or is it all coming together ?

Resistance at the 100 level. It does seem to have significant pull, but does it have the time ?

Either way, I remain Dollar bearish/PM bullish in terms of the final outcome.

Gold in World Currency Unit is forming a bullish ‘descending wedge’…

At the same time, HUI price action is best encapsulated by using a logarithmic scale. This shows that we are contained in a wedge pattern which is likely to lead to a ‘logarithmic’ style response when the pattern breaks out.

I said yesterday that the Dollar will resolve this move to the downside, and I’m going to stand by that. I’m not saying it’s impossible for a big Dollar breakout to occur, just that I don’t think it will happen. It’s just my view, but I can back it up with some reasoned thinking. First and foremost, in the background you have the supercycles. We are in the upward portion of golds 16 year cycle and the downward portion of the Dollars. That’s not enough though. We’re fast approaching a major inflexion point. I said recently it’s ’98 or bust’ for the dollar, and we have now pushed through that. Interestingly gold doesn’t seem to be paying attention. I am though. I’m watching all of the downside support levels that I’ve mentioned over recent weeks. I use goldprice.org for my charting and the default moving average is labelled as MA(9). That means 9 ‘periods’. On a monthly chart, that’s 9 months, but each month is just over 20 trading days, so it’s more or less the 200 day moving average. The MA, 0.236 Fib retracement (taking the 2016 top as the ‘1’ level and $1050 as the ‘zero’ level), and curved base ALL converge in the same area. One support is important, but 2, 3 or more make it hugely important. We may or may not test the $1250 area (I think we need to). We have $1220 as ‘final support’ for any spike lows. FOMC may well be the trigger. It’s going to scare the hell out of me if/when it happens though. Here’s my gold chart which says it all really…

The Dollar is attempting a hugely important breakout (see UUP chart below). I believe it will fail, and drop hard. I have to credit Dave Farber on Twitter for alerting me to this bearish rising wedge. It pushes up into the resistance zone just as gold is testing the support levels above. The next few days/weeks are not for the faint-hearted.

I’m seeing an ever increasing number of Bullish Dollar predictions now. In an effort to maintain balance, here’s another way of looking at my view of things…

A move above 98 will give me some cause for concern though. A breakdown of the Dollar cycle would be interesting to see, and may well cause big problems for PMs, but It would take a convincing, sustained move above 98, and a corresponding move below $1220 in gold for me to think it likely. At this point I’m considering it a low probability outcome (but certainly not impossible). These sine waves/cycles are very powerful though, and not just a figment of a chartists imagination. They are very real, and there for a reason.

The point to note here is that in a bull market you fall down to the MA(50), then get a very low stoch reading and bounce off it…

In the example below you’ll see that failure occurs when you approach the MA(50) with a high stoch reading.

So we are currently approaching from above (back-testing), with a very low stoch reading. This ought to be the ideal set up to advance upwards. As always watch for failure at this and other key points to give invalidation. So far, nothing to worry about.

There is a ton of bearish sentiment, which is absolutely perfect. The charts are looking superb. It goes without saying that if the curved base fails, we need to get defensive fast, and if the long term support just above $1220 goes, the bears will have it. I just can’t see it though. This is what I’m seeing in gold and silver…

Stocharstic in the green buy zone now. On the last 10 occasions this occured (every time since 2013) we have a 100% success rate – gold and silver turn round and make impressive gains. The timing is just perfect if you look at the gold chart – a bullish wedge has formed beneath the all important breakout level. If we advance by the average of the last 10 occasions (approx. $175), that will take us well above $1400, and deliver victory to the bulls with a huge technical breakout.