Sive Morten
Special Consultant to the FPA
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Fundamentals
There are two moments of passed week that we can discuss. First is Friday’s gold rally that was triggered by weak NFP data – only 88K jobs were created. This makes investors think that there will not be any tapering off of QE III in nearest perspective. Still to take objective view it is necessary to point that this jump up was at moderate trading volume – just 200 K contracts that is in a line with 30 day MA. It makes us think that current splash up has more technical issue rather that carries solid changes in fundamental sentiment. That is also confirmed by most recent COT report – we again see increasing of OI at decreasing of net long position, although numbers are shallow.
Second moment that confirms overall medium-term bearish context is Silver. Take a look at the chart, traders have turned to net short for the first time within last 6 years. Silver is not the same as gold of cause, since it has more industrial application, but here we can clearly see the tendency that is just starts to appear on gold – reducing of net long position simultaneously with growth of OI. The most recent survey of technical analysts by Reuters indicates bearish sentiment and expectation of further downward continuation. Particularly this community of analysts has predicted the top on September 2011.
So, past week is a bit poor for events and no drastical conclusion could be done here. Medium term bear trend still holds, and current jump up will be more interesting from technical point of view and on lower time frames.
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Monthly
Downward action was a bit faster than expected on previous week and market rather quick has dropped to major support 1530-1535 area and yearly pivot support 1 although has not quite reached it for few bucks. Price has tested monthly oversold again. Initially I thought that market should show another small move down and reach 1530-1535 level, but current recovery is rather fast, so I’m not sure with it now. May be the retracement that we’ve waited for two weeks is in progress now.
Looking at really big picture we see 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. Market hardly will pass through it at oversold condition but if it will happen a bit later retracement could reach as far as 1200+ area. But now we’re mostly interested in how far to upside current retracement will be… From the monthly perspective we should stick with current lows and if you would like to enter long – do this against them.
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Weekly
Weekly time frame gives us some objects to think about. It seems that market is not ready for downward continuation. Technically we know the reason of that – oversold on monthly time frame. Recent price action is also suggests that some further upward action is possible. Take a look – now market has no reasons to move lower, except real bearish trend continuation. We know that gold likes W&R and here we’ve got another one – clear out significant low area. Simultaneously price has hit WPS1. If market has touched 1530-1535 I would sure and say that price will show upward continuation, but here the risk of the move to 1530-1535 area still holds and we have to take it into consideration.
Daily
Price action on Friday due NFP release was rather fast. Thus, while I’m thinking where to enter long and should we wait, as we’ve said, another small move down before upward action will happen – explosive move up has happened. Theoretically, market has reached minimum target of butterfly pattern – 3/8 resistance of its swing and actually butterfly pattern has worked and completed. But should we expect upward continuation? I feel that answer is positive by two reasons. First one we have discussed many times – we at monthly oversold, counter reaction on lower time frames should be stronger. Second we have new bullish pattern here – solid morning star and it just has been completed. Its appearing suggests that market should continue move up. We will be able to talk about its failure only if market will take out its lows. Market is not at oversold and overbought here, hence we probably should be focused on reasonable retracement on lower time frames to step in. Finally, gold likes to make deep retracements and here upward action has not reached even 5/8 resistance from most recent swing down.
1-hour
Trend is bullish on hourly chart. Since this is first solid upward move after bearish trend market probably will show reasonable retracement. New WPP stands too close to recent price action so we hardly can rely on it and use as potential retracement beacon. At my taste K-support area around 1560-1565 is more suitable for that purpose.
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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 support area, weekly targets and formed reversal Butterfly “Buy” on daily. Thus, we still expect some deeper upward bounce on daily time frame.
In short-term perspective market has given us nice patterns that we can use to control overall situation. First of all this is daily morning star. Although theoretically daily butterfly has reached minimum target and should be treated as completed, nevertheless oversold condition on monthly chart as well as some other reasons tell us that may be price is not done yet with upward retracement. Most probable destination point of it is K-resistance at 1635-1640 area.
In the beginning of the week some pullback is probable, but we would like to see market will hold above 1560 area to confirm our expectations of further upward retracement.
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.
There are two moments of passed week that we can discuss. First is Friday’s gold rally that was triggered by weak NFP data – only 88K jobs were created. This makes investors think that there will not be any tapering off of QE III in nearest perspective. Still to take objective view it is necessary to point that this jump up was at moderate trading volume – just 200 K contracts that is in a line with 30 day MA. It makes us think that current splash up has more technical issue rather that carries solid changes in fundamental sentiment. That is also confirmed by most recent COT report – we again see increasing of OI at decreasing of net long position, although numbers are shallow.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Monthly
Downward action was a bit faster than expected on previous week and market rather quick has dropped to major support 1530-1535 area and yearly pivot support 1 although has not quite reached it for few bucks. Price has tested monthly oversold again. Initially I thought that market should show another small move down and reach 1530-1535 level, but current recovery is rather fast, so I’m not sure with it now. May be the retracement that we’ve waited for two weeks is in progress now.
Looking at really big picture we see 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. Market hardly will pass through it at oversold condition but if it will happen a bit later retracement could reach as far as 1200+ area. But now we’re mostly interested in how far to upside current retracement will be… From the monthly perspective we should stick with current lows and if you would like to enter long – do this against them.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Weekly
Weekly time frame gives us some objects to think about. It seems that market is not ready for downward continuation. Technically we know the reason of that – oversold on monthly time frame. Recent price action is also suggests that some further upward action is possible. Take a look – now market has no reasons to move lower, except real bearish trend continuation. We know that gold likes W&R and here we’ve got another one – clear out significant low area. Simultaneously price has hit WPS1. If market has touched 1530-1535 I would sure and say that price will show upward continuation, but here the risk of the move to 1530-1535 area still holds and we have to take it into consideration.
Daily
Price action on Friday due NFP release was rather fast. Thus, while I’m thinking where to enter long and should we wait, as we’ve said, another small move down before upward action will happen – explosive move up has happened. Theoretically, market has reached minimum target of butterfly pattern – 3/8 resistance of its swing and actually butterfly pattern has worked and completed. But should we expect upward continuation? I feel that answer is positive by two reasons. First one we have discussed many times – we at monthly oversold, counter reaction on lower time frames should be stronger. Second we have new bullish pattern here – solid morning star and it just has been completed. Its appearing suggests that market should continue move up. We will be able to talk about its failure only if market will take out its lows. Market is not at oversold and overbought here, hence we probably should be focused on reasonable retracement on lower time frames to step in. Finally, gold likes to make deep retracements and here upward action has not reached even 5/8 resistance from most recent swing down.
1-hour
Trend is bullish on hourly chart. Since this is first solid upward move after bearish trend market probably will show reasonable retracement. New WPP stands too close to recent price action so we hardly can rely on it and use as potential retracement beacon. At my taste K-support area around 1560-1565 is more suitable for that purpose.
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 support area, weekly targets and formed reversal Butterfly “Buy” on daily. Thus, we still expect some deeper upward bounce on daily time frame.
In short-term perspective market has given us nice patterns that we can use to control overall situation. First of all this is daily morning star. Although theoretically daily butterfly has reached minimum target and should be treated as completed, nevertheless oversold condition on monthly chart as well as some other reasons tell us that may be price is not done yet with upward retracement. Most probable destination point of it is K-resistance at 1635-1640 area.
In the beginning of the week some pullback is probable, but we would like to see market will hold above 1560 area to confirm our expectations of further upward retracement.
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.
