Sive Morten
Special Consultant to the FPA
- Messages
- 18,760
Fundamentals
It is not much to say on previous short week. Most significant moment was, I think, that even with Cyprus turmoil gold wasn’t be able to creep higher. Although it is not all clear yet, many investors and economists think that EU will be hit by mass money outflow and this process still somewhere ahead. But even in panic period demand for gold was moderate and was not able to trigger any significant trend up, even in short-term.
As a result, during first quarter of 2013 major gold ETF have lost around 7.2% of physical holdings that is around 70.7 mln. Oz. Largest SPDR Fund that we track regularly has lost around 12 % of physical holdings.
Previously we’ve suggested that when starting panic will calm down a bit, investors will return back to the core of fundamental situation – US “faster than expected” improving in economy and fears that Fed will reduce or even stop its liquidity taps During previous 4 years investors have put in gold approximately $240 Bln and they have chance to go back on markets, at least part of them. As we’ve said – market looks heavy, even with Cyprus turmoil in gold favor. That’s being said – fundamentally picture has not changed much. With reducing demand from jewelry industry and Central Banks downward trend probably will continue in short-term perspective. European outflows not necessary will be invested in gold, but could come on stock market, for example.
In latest CFTC report we see simultaneous contraction as net position as open interest, although, as you can see long position has been contracted stronger. In general this is typical situation for period of market’s contraction, i.e. retracement. Indeed on previous week market has stand in small tight consolidation.
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Other charts as SDPR Holdings in relation to Open Interest and Price also care little new.
Monthly
There were so few changes here, so I can’t add anything really interesting. Trend holds bearish. March action looks not very impressive; in fact it is inside small action compares to February.
Previous action and February month showed solid bearish power. Market stands at oversold and has turned to some shallow bounce up. Market has not reached yet major support 1530-1535 area and yearly pivot support 1. Also take a look that all price action holds almost for 2 year in a range of black candle of September 2011. It’s high and low levels now become extremely important, because it could be really significant move after breakout of the low. Harmonic swings also point on 1530 area. So, next target here is 1530, while we still should keep in mind really big picture and possible retracement even to 1200+ area. But now we’re mostly interested in how far to upside this retracement will be…
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Weekly
Medium term analysis still the same - trend is bearish on weekly chart. Market, as we’ve said, is recovering from monthly oversold by bouncing up from 0.88 support and 1.618 weekly AB-CD target – rather strong support area. Passed week has become another gradual, medium-size upward action. Since action was really moderate, we will not totally refuse an idea of a bit longer in time retracement. That’s why previously I’ve said that we can’t exclude appearing some reversal pattern that will not be as fast as just single leg retracement or AB-CD retracement, pattern that could include another small leg down. Such pattern as butterfly “buy” for example. If this will be the case – price will reach major 1530 area and simultaneously clear out current lows - that is very typical for gold market. This is first observation.
In shorter term though we’ve got unexpected assistance here. Take a look – this is small but still bearish engulfing pattern on weekly time frame right at first resistance level. Although harmonic swing points on deeper move up, but as it happened previously - retracement was a bit smaller (previous one for instance). So it could become a starting point of downward move or become a BC leg of weekly AB-CD. What is even more important now we know when to expect upward continuation - only if market will take out the highs of the pattern and erase it. Until this will happen I will not think about long entry here.
Second significant moment is new Pivots. In fact, they coincide with previous consolidation where market stood in June 2012. Thus, any breakout of pivot support or resistance in April will confirm the trend and will not be just a breakout of simple support or resistance line.
Daily
In the beginning I would like to discuss the shape of price action here. I don’t know what about you guys, but my tongue refuses to call it as “bull trend” and price action that is typical to it. When nominal trend has turned bullish initially price action remains absolutely bearish and later has turned to flat upward action that is more typical for retracement. I dare to suggest that here, in fact, we see some sort of bearish dynamic pressure. Now it is very difficult to treat it as upward AB=CD action. I better treat it as rectangle that carries inside potential for Butterfly “Buy” pattern. If we will look at this from that point of view and not forget about engulfing on weekly – it is difficult to find reasons enter long here. If even suggest that engulfing will fail (and butterfly) – in this case market will be too close to 1635 resistance and it will not make sense to enter long there.
Conversely it has become easier to enter short, since now we know that our invalidation point is the highs of engulfing pattern, but honestly speaking, it is better to have stop above K-resistance and daily overbought, because if treat current action as rectangle – it could be W&R of upper border. This approach is mostly focused on medium term perspective still, and as from butterfly as from rectangle downward breakout point of view has nice risk/reward ratio. The major problem is that risk could be significant in absolute value, not in relation to potential profit.
4-hour
Here actually, we can repeat the same analysis that we’ve done on Friday with small add-ons. The major idea here is current price action around K-support area. Market has completed AB=CD, reasonable respect has followed then and market shown nice bounce up that would have to be upward continuation if... yes, if that was true bullish development. But this has not happened. Instead of that market starts to storm support and has tested it 3 times already. With each challenge this support becomes weaker. Trend has turned bearish. Still here we have complicating factor – appearing of WPS1 and MPP right below K-area. Yes, this will be additional support, but this will be very helpful indicator either. If market will move below WPS1 and MPP – it will make all clear about sentiment. The same is true for upward action – moving above the highs will erase bearish patterns that we have or expect to see. By thoughts in this way, looks like safer is to take bearish position, at least if we want to take any. I have a doubts about bullish one, due the reasons that we’ve discussed above, at least you will find solution how to enter long with relatively tight stop and confidence with upward action.
Personally for me, bearish perspective in general looks prefferable, mostly due daily analysis. The problem here is when to enter.
1-hour
On monthly chart we probably can stick with our Thursday’s analysis. Since market now just ping-pong from support and can’t re-establish upward move this lets us to suggest that price will hardly move above previous highs, until this will be change in sentiment. That’s why for taking short position will be enough probably to place stop somewhere above WPR1. Nice entry level is 1601 – 5/8 resistance and WPP. Besides, if market will move above WPP – this already will tell us that something is wrong with bearish sentiment.
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Conclusion:
Fundamental picture has not changed much, sentiment on gold market is moderately bearish and downward move should continue in long-term perspective, although it probably will be a bit slower.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why we still expect some deeper upward bounce on daily time frame.
Short term price action is not encouraging from bullish point of view, as well as technically it is difficult to find acceptable way to take long position. Although we do not have clear short-term patterns either, but it seems that bearish position is safer and it will be easier to control it by using pivot points on coming week.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
It is not much to say on previous short week. Most significant moment was, I think, that even with Cyprus turmoil gold wasn’t be able to creep higher. Although it is not all clear yet, many investors and economists think that EU will be hit by mass money outflow and this process still somewhere ahead. But even in panic period demand for gold was moderate and was not able to trigger any significant trend up, even in short-term.
As a result, during first quarter of 2013 major gold ETF have lost around 7.2% of physical holdings that is around 70.7 mln. Oz. Largest SPDR Fund that we track regularly has lost around 12 % of physical holdings.
Previously we’ve suggested that when starting panic will calm down a bit, investors will return back to the core of fundamental situation – US “faster than expected” improving in economy and fears that Fed will reduce or even stop its liquidity taps During previous 4 years investors have put in gold approximately $240 Bln and they have chance to go back on markets, at least part of them. As we’ve said – market looks heavy, even with Cyprus turmoil in gold favor. That’s being said – fundamentally picture has not changed much. With reducing demand from jewelry industry and Central Banks downward trend probably will continue in short-term perspective. European outflows not necessary will be invested in gold, but could come on stock market, for example.
In latest CFTC report we see simultaneous contraction as net position as open interest, although, as you can see long position has been contracted stronger. In general this is typical situation for period of market’s contraction, i.e. retracement. Indeed on previous week market has stand in small tight consolidation.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Other charts as SDPR Holdings in relation to Open Interest and Price also care little new.
Monthly
There were so few changes here, so I can’t add anything really interesting. Trend holds bearish. March action looks not very impressive; in fact it is inside small action compares to February.
Previous action and February month showed solid bearish power. Market stands at oversold and has turned to some shallow bounce up. Market has not reached yet major support 1530-1535 area and yearly pivot support 1. Also take a look that all price action holds almost for 2 year in a range of black candle of September 2011. It’s high and low levels now become extremely important, because it could be really significant move after breakout of the low. Harmonic swings also point on 1530 area. So, next target here is 1530, while we still should keep in mind really big picture and possible retracement even to 1200+ area. But now we’re mostly interested in how far to upside this retracement will be…
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Weekly
Medium term analysis still the same - trend is bearish on weekly chart. Market, as we’ve said, is recovering from monthly oversold by bouncing up from 0.88 support and 1.618 weekly AB-CD target – rather strong support area. Passed week has become another gradual, medium-size upward action. Since action was really moderate, we will not totally refuse an idea of a bit longer in time retracement. That’s why previously I’ve said that we can’t exclude appearing some reversal pattern that will not be as fast as just single leg retracement or AB-CD retracement, pattern that could include another small leg down. Such pattern as butterfly “buy” for example. If this will be the case – price will reach major 1530 area and simultaneously clear out current lows - that is very typical for gold market. This is first observation.
In shorter term though we’ve got unexpected assistance here. Take a look – this is small but still bearish engulfing pattern on weekly time frame right at first resistance level. Although harmonic swing points on deeper move up, but as it happened previously - retracement was a bit smaller (previous one for instance). So it could become a starting point of downward move or become a BC leg of weekly AB-CD. What is even more important now we know when to expect upward continuation - only if market will take out the highs of the pattern and erase it. Until this will happen I will not think about long entry here.
Second significant moment is new Pivots. In fact, they coincide with previous consolidation where market stood in June 2012. Thus, any breakout of pivot support or resistance in April will confirm the trend and will not be just a breakout of simple support or resistance line.
Daily
In the beginning I would like to discuss the shape of price action here. I don’t know what about you guys, but my tongue refuses to call it as “bull trend” and price action that is typical to it. When nominal trend has turned bullish initially price action remains absolutely bearish and later has turned to flat upward action that is more typical for retracement. I dare to suggest that here, in fact, we see some sort of bearish dynamic pressure. Now it is very difficult to treat it as upward AB=CD action. I better treat it as rectangle that carries inside potential for Butterfly “Buy” pattern. If we will look at this from that point of view and not forget about engulfing on weekly – it is difficult to find reasons enter long here. If even suggest that engulfing will fail (and butterfly) – in this case market will be too close to 1635 resistance and it will not make sense to enter long there.
Conversely it has become easier to enter short, since now we know that our invalidation point is the highs of engulfing pattern, but honestly speaking, it is better to have stop above K-resistance and daily overbought, because if treat current action as rectangle – it could be W&R of upper border. This approach is mostly focused on medium term perspective still, and as from butterfly as from rectangle downward breakout point of view has nice risk/reward ratio. The major problem is that risk could be significant in absolute value, not in relation to potential profit.
4-hour
Here actually, we can repeat the same analysis that we’ve done on Friday with small add-ons. The major idea here is current price action around K-support area. Market has completed AB=CD, reasonable respect has followed then and market shown nice bounce up that would have to be upward continuation if... yes, if that was true bullish development. But this has not happened. Instead of that market starts to storm support and has tested it 3 times already. With each challenge this support becomes weaker. Trend has turned bearish. Still here we have complicating factor – appearing of WPS1 and MPP right below K-area. Yes, this will be additional support, but this will be very helpful indicator either. If market will move below WPS1 and MPP – it will make all clear about sentiment. The same is true for upward action – moving above the highs will erase bearish patterns that we have or expect to see. By thoughts in this way, looks like safer is to take bearish position, at least if we want to take any. I have a doubts about bullish one, due the reasons that we’ve discussed above, at least you will find solution how to enter long with relatively tight stop and confidence with upward action.
Personally for me, bearish perspective in general looks prefferable, mostly due daily analysis. The problem here is when to enter.
1-hour
On monthly chart we probably can stick with our Thursday’s analysis. Since market now just ping-pong from support and can’t re-establish upward move this lets us to suggest that price will hardly move above previous highs, until this will be change in sentiment. That’s why for taking short position will be enough probably to place stop somewhere above WPR1. Nice entry level is 1601 – 5/8 resistance and WPP. Besides, if market will move above WPP – this already will tell us that something is wrong with bearish sentiment.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Conclusion:
Fundamental picture has not changed much, sentiment on gold market is moderately bearish and downward move should continue in long-term perspective, although it probably will be a bit slower.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why we still expect some deeper upward bounce on daily time frame.
Short term price action is not encouraging from bullish point of view, as well as technically it is difficult to find acceptable way to take long position. Although we do not have clear short-term patterns either, but it seems that bearish position is safer and it will be easier to control it by using pivot points on coming week.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
