Sive Morten
Special Consultant to the FPA
- Messages
- 18,732
Fundamentals
Gold rose more than 1 percent on Friday, its biggest daily gain in nearly a month, after data showing brisk U.S. employment growth in March unleashed heavy short-covering by bullion investors who had feared the job figures would sharply exceed Wall Street's expectations. In a brisk turnaround from heavy selling in the days before the release of the data, prices were up 1 percent for the week, the first increase in three weeks. The Labor Department said U.S. nonfarm payrolls increased by 192,000 jobs last month, slightly below economists' estimate of 200,000. Some in the bullion market had expected an even stronger jobs report.
"Everyone had been saying the job number was going to be so much better, but the economy didn't improve the way investors had expected, and that's why the short-sellers are covering their positions," said Miguel Perez-Santalla, vice president at BullionVault in New York. Analysts said the figure eased fears of an early interest rate increase by the Federal Reserve, lifting assets particularly sensitive to interest rate changes such as gold and U.S. Treasury bonds.
Bullion rose as other financial markets were volatile, with U.S. equities, as measured by the S&P 500 index, sliding more than 1 percent after initial gains, and U.S. Treasury yields falling. "The (jobs) numbers are OK but they are not the boost that the policymakers had been hoping for, so the Fed will have to keep interest rates low for a considerable period of time, and that's what's been supporting gold," said Axel Merk, chief investment officer at California-based Merk Funds, a firm with more than $400 million in currency mutual fund assets.
Earlier, gold prices drew some support after Iraq's central bank said its gold reserves had reached 90 tonnes after it bought 60 tonnes over the past two months. In physical market news, banks in China have been importing less gold over the past month as demand waned after the festival season, while cheaper prices at home due to a softer yuan also curbed overseas purchases of the precious metal, banking sources and traders said.
Monthly
Situation on monthly gold is very tricky. In fact, guys, we will have to separate our trading plan for short-term charts and long-term ones. The point is short-term gold lives on its own life, if we can say that, and forms it’s own short term patterns that hardly impact on big picture. While long-term gold now shows time bomb and you do not know whether it will explode or not. I’m speaking about bearish grabber here. This pattern is so important right now, because it could turn upside down situation on long-term gold. Thus, our approach will be based on simple rule. Until lower time frames patterns will not contradict with higher time frame setups we will trade them as usual. Otherwise we will skip them.
Taking into consideration all issues that we have now on gold market – I would not rush with reversal conclusions and treat current move down as retracement by far. Yes, we have bearish grabber and it has appeared right at Yearly Pivot Point – this is not best combination to have on your back when previously you thought above upward action. Grabber potentially strong pattern that could lead price back to 1180 lows again, but grabbers do not work every time. Also I’m concerned on recent upward action - market has not reached neckline of potential Double Bottom pattern and has not reached AB=CD upward target around 1430. The question what will it be – another gold’s trick and pitfall? Or, we will get some triangle instead of Double Bottom? Difficult to say by far.
But we can say one thing. If gold is really bullish, and it stands above 0.618 target already – there is no reasons for too extended retracement to downside.
Long term upside target stands around yearly PR1. We know that gold likes to re-test previously broken lows and consolidations. 1540 area is monthly overbought, YPR1 and low border of broken long-term rectangle. As market was strongly oversold, very often it has tendency to reach overbought. Market is a impulse substance and reaction equals to counter reacion.
So our long-term analysis is the same. As another application of significantly oversold we’ve suggested retracement up. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. Market right now is forming something like double bottom.
That’s being said – nearest target here is 1430 resistance level, while taking in consideration golds’ habits, geopolitical tension and technical issues, now we treat probability of reaching 1540 level as very high. In nearest future we have to keep close eye on current retracement down. Appearing of bearish grabber will force us to postpone upward expectations until it will not be resolved – either hits target or will be vanished. It means that currently is not perfect moment for taking any long-term position and better to focus on lower time frames until situation on monthly will not be resolved.
Weekly
Trend is bullish here, market is not at overbought. Finally guys, we’ve got completion of B&B “Buy” setup – thrust up, price has reached significant fib support level with on 2nd close below 3x3 DMA.
Target of this pattern is 5/8 resistance of whole back move – 1348 area. This pattern does not contradict with monthly grabber. Yes, it assumes upward action, but its target stands inside the body of the grabber and from this point of view does not break its nature.
Another thought on this B&B… It will become an indicator of bullishness of the market. Current retracement down - 50-61.8% quite enough distance for retracement of any bullish market. If this is really just a retracement, market should use this B&B as a jumping-off place for upward continuation. And if price will not stop at 1350 but will move higher – that will be the early warning about monthly grabber’s failure.
Meantime, let’s watch for bullish patterns on daily and intraday charts finally.
Daily
On daily chart we have another one setup for DiNapoli pattern. Actually as we’ve said on weekly chart – “we need bullish patterns” to step into weekly B&B “Buy”. One pattern that we could get here is DRPO “Buy”. And the half of this pattern has been completed already – we have thrust down and first close above 3x3 DMA (green line). Now we need to get close below and then close above again – second penetration of 3x3 DMA(that’s why it calls Double Repo).
Right now we should also keep an eye on 2 issues. First on is – 3/8 Fib resistance, market should not touch it during first penetration. Perfect DRPO pattern suggests no touching of significant resistance levels. Second moment – MACD Predictor. I do not have it on this chart, but right now price stands very close to it. If we will get bearish grabber then second bottom of DRPO will be lower, probably, than the first one.
4-hour
Here market has completed our short-term Friday analysis and hit the target around 1300 area. Since this upward action is a reversal swing, i.e. first swing with higher high that breaks previous downward tendency, we have to be ready for deep retracement down. Probably market will try to hit 1.618 AB-CD extension as it stands very close to it right now, prior retracement will start. But anyway, retracement down will be deep probably. This is just how markets work. Deep means 50-61,8%, but, guys, taking into consideration potential DRPO on daily, we could even get move to WPS1.
1-hour
On hourly chart we’ve pointed possible action how market could reached 1308 target of AB=CD. Market could form small butterfly that has the same target. Simultaneously this could be another DRPO “Sell” that will trigger downward deep retracement. I hope guys, that you’re not too tired from DRPO’s...
Conclusion:
Since gold market stands in strong geopolitical and fundamental storm – price is flirting with very significant crucial level of YPP that potentially could lead to appearing of drastical moments. For example, bearish stop grabber could drastically shift force balance. That’s why it is better to avoid taking any long-term position on gold right now.
Our medium-term trading plan suggests taking long position. Our reason for this is potential B&B “Buy” on weekly chart that could lead market as far as 1350 area. This pattern does not contradict monthly grabber, since 1350 target stands inside of its swing.
In short-term setup, intraday traders could be interested with possible downward action from ~1308 area to 1288 or even 1284 WPS1. Keep an eye on daily bearish grabber. If we will get it, then we should be ready even for new shy lows around 1275 and getting DRPO “Buy” on daily chart.
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.
Gold rose more than 1 percent on Friday, its biggest daily gain in nearly a month, after data showing brisk U.S. employment growth in March unleashed heavy short-covering by bullion investors who had feared the job figures would sharply exceed Wall Street's expectations. In a brisk turnaround from heavy selling in the days before the release of the data, prices were up 1 percent for the week, the first increase in three weeks. The Labor Department said U.S. nonfarm payrolls increased by 192,000 jobs last month, slightly below economists' estimate of 200,000. Some in the bullion market had expected an even stronger jobs report.
"Everyone had been saying the job number was going to be so much better, but the economy didn't improve the way investors had expected, and that's why the short-sellers are covering their positions," said Miguel Perez-Santalla, vice president at BullionVault in New York. Analysts said the figure eased fears of an early interest rate increase by the Federal Reserve, lifting assets particularly sensitive to interest rate changes such as gold and U.S. Treasury bonds.
Bullion rose as other financial markets were volatile, with U.S. equities, as measured by the S&P 500 index, sliding more than 1 percent after initial gains, and U.S. Treasury yields falling. "The (jobs) numbers are OK but they are not the boost that the policymakers had been hoping for, so the Fed will have to keep interest rates low for a considerable period of time, and that's what's been supporting gold," said Axel Merk, chief investment officer at California-based Merk Funds, a firm with more than $400 million in currency mutual fund assets.
Earlier, gold prices drew some support after Iraq's central bank said its gold reserves had reached 90 tonnes after it bought 60 tonnes over the past two months. In physical market news, banks in China have been importing less gold over the past month as demand waned after the festival season, while cheaper prices at home due to a softer yuan also curbed overseas purchases of the precious metal, banking sources and traders said.
Monthly
Situation on monthly gold is very tricky. In fact, guys, we will have to separate our trading plan for short-term charts and long-term ones. The point is short-term gold lives on its own life, if we can say that, and forms it’s own short term patterns that hardly impact on big picture. While long-term gold now shows time bomb and you do not know whether it will explode or not. I’m speaking about bearish grabber here. This pattern is so important right now, because it could turn upside down situation on long-term gold. Thus, our approach will be based on simple rule. Until lower time frames patterns will not contradict with higher time frame setups we will trade them as usual. Otherwise we will skip them.
Taking into consideration all issues that we have now on gold market – I would not rush with reversal conclusions and treat current move down as retracement by far. Yes, we have bearish grabber and it has appeared right at Yearly Pivot Point – this is not best combination to have on your back when previously you thought above upward action. Grabber potentially strong pattern that could lead price back to 1180 lows again, but grabbers do not work every time. Also I’m concerned on recent upward action - market has not reached neckline of potential Double Bottom pattern and has not reached AB=CD upward target around 1430. The question what will it be – another gold’s trick and pitfall? Or, we will get some triangle instead of Double Bottom? Difficult to say by far.
But we can say one thing. If gold is really bullish, and it stands above 0.618 target already – there is no reasons for too extended retracement to downside.
Long term upside target stands around yearly PR1. We know that gold likes to re-test previously broken lows and consolidations. 1540 area is monthly overbought, YPR1 and low border of broken long-term rectangle. As market was strongly oversold, very often it has tendency to reach overbought. Market is a impulse substance and reaction equals to counter reacion.
So our long-term analysis is the same. As another application of significantly oversold we’ve suggested retracement up. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. Market right now is forming something like double bottom.
That’s being said – nearest target here is 1430 resistance level, while taking in consideration golds’ habits, geopolitical tension and technical issues, now we treat probability of reaching 1540 level as very high. In nearest future we have to keep close eye on current retracement down. Appearing of bearish grabber will force us to postpone upward expectations until it will not be resolved – either hits target or will be vanished. It means that currently is not perfect moment for taking any long-term position and better to focus on lower time frames until situation on monthly will not be resolved.
Weekly
Trend is bullish here, market is not at overbought. Finally guys, we’ve got completion of B&B “Buy” setup – thrust up, price has reached significant fib support level with on 2nd close below 3x3 DMA.
Target of this pattern is 5/8 resistance of whole back move – 1348 area. This pattern does not contradict with monthly grabber. Yes, it assumes upward action, but its target stands inside the body of the grabber and from this point of view does not break its nature.
Another thought on this B&B… It will become an indicator of bullishness of the market. Current retracement down - 50-61.8% quite enough distance for retracement of any bullish market. If this is really just a retracement, market should use this B&B as a jumping-off place for upward continuation. And if price will not stop at 1350 but will move higher – that will be the early warning about monthly grabber’s failure.
Meantime, let’s watch for bullish patterns on daily and intraday charts finally.
Daily
On daily chart we have another one setup for DiNapoli pattern. Actually as we’ve said on weekly chart – “we need bullish patterns” to step into weekly B&B “Buy”. One pattern that we could get here is DRPO “Buy”. And the half of this pattern has been completed already – we have thrust down and first close above 3x3 DMA (green line). Now we need to get close below and then close above again – second penetration of 3x3 DMA(that’s why it calls Double Repo).
Right now we should also keep an eye on 2 issues. First on is – 3/8 Fib resistance, market should not touch it during first penetration. Perfect DRPO pattern suggests no touching of significant resistance levels. Second moment – MACD Predictor. I do not have it on this chart, but right now price stands very close to it. If we will get bearish grabber then second bottom of DRPO will be lower, probably, than the first one.
4-hour
Here market has completed our short-term Friday analysis and hit the target around 1300 area. Since this upward action is a reversal swing, i.e. first swing with higher high that breaks previous downward tendency, we have to be ready for deep retracement down. Probably market will try to hit 1.618 AB-CD extension as it stands very close to it right now, prior retracement will start. But anyway, retracement down will be deep probably. This is just how markets work. Deep means 50-61,8%, but, guys, taking into consideration potential DRPO on daily, we could even get move to WPS1.
1-hour
On hourly chart we’ve pointed possible action how market could reached 1308 target of AB=CD. Market could form small butterfly that has the same target. Simultaneously this could be another DRPO “Sell” that will trigger downward deep retracement. I hope guys, that you’re not too tired from DRPO’s...
Conclusion:
Since gold market stands in strong geopolitical and fundamental storm – price is flirting with very significant crucial level of YPP that potentially could lead to appearing of drastical moments. For example, bearish stop grabber could drastically shift force balance. That’s why it is better to avoid taking any long-term position on gold right now.
Our medium-term trading plan suggests taking long position. Our reason for this is potential B&B “Buy” on weekly chart that could lead market as far as 1350 area. This pattern does not contradict monthly grabber, since 1350 target stands inside of its swing.
In short-term setup, intraday traders could be interested with possible downward action from ~1308 area to 1288 or even 1284 WPS1. Keep an eye on daily bearish grabber. If we will get it, then we should be ready even for new shy lows around 1275 and getting DRPO “Buy” on daily chart.
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.
