Sive Morten
Special Consultant to the FPA
- Messages
- 18,685
Fundamentals
Coming week will be tough and major turmoil will come from geopolitics. Gold, as a rule stands in a epicenter of geopolitical events. Here are two "information bombs" that will stir in media on coming week and both of them are really tricky:
First is, Skripal story is getting continuation and it is not very good for UK. It seems that independent laboratory is Swiss has made an analysis and it shows that this was BZ toxic substance that produced and used by NATO forces:
https://www.independent.co.uk/news/...-salisbury-attack-latest-update-a8304841.html
Second, curious attack on Syria. What was that? Yesterday in our EUR research I've made suggestion that this was planned and agreed action among all sides - 70% missiles were put down, nobody hurt. How it is possible with 100+ Tomahawks attack? This questions start to appear in media:
https://www.huffingtonpost.com/entr...syrians-or-the-us_us_5ad15ffce4b077c89ce8c342
https://www.reuters.com/article/us-...trike-the-real-danger-is-russia-idUSKBN1HK2JI
Syria evacuated all planes under Russian umbrella. There could be just two possible conclusions - either indeed, there was some agreement for resolving of economical and political problems, or, if strike was real - this was total fiasco and very bright sign of weakness. But, somehow, I still think that first scenario is more probable. Trump and Putin have raised price for oil and aluminium for EU, Russia has got chance on sanctions to buy back strategical companies with 50% discount that was robbed in so-called" privatization" in 90's. Trump now will accuse those opponents in US, who still search for Russian probe and now they will be responsible for dead way in Russian relationships as they were demanded for loyalty and proves of "Strength" from Trump.
I do not know what vector this topic will move to, but already now you could find articles that start to point reasonable questions - what was that?
Speaking on gold, in general, prices for gold this week rose to their highest levels since Jan. 25, as escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on global equities and the U.S. dollar index.
“We’ve been looking at an uptick for overall gold demand, logically correlated with an increase in volatility, slight downgrade we’re seeing in equities and the Syrian escalations,” said David Meger of High Ridge Futures.
Now, there are two drivers for gold, but in opposite direction. Geopolitical tensions and rising of US national dept stand on the one side:
Concerns that economic growth could stall because of growing U.S. debt levels could help gold later this year, said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
“It will start to slow the economy down and then in turn, people will start to look at gold as alternative investment,” he said.
From another point of view, Fed will continue relatively hawkish policy. As Reuters reports -
Yet gold failed to break out of the tight trading range it’s been hemmed in for the year, between $1,300-$1,370 per ounce. The possibility that the U.S. Federal Reserve will raise interest rates several more times this year is also capping gold’s gains.
“In spite of any geopolitical event, the Fed, and the Fed minutes this week were pretty convincing that three more rate hikes are coming on the table,” said RJO Futures senior market strategist Bob Haberkorn. “That’s going to hang over gold for the rest of the year.”
All Fed policymakers felt the U.S. economy would firm further and inflation would rise in coming months, minutes of the Fed’s March policy meeting released on Wednesday showed.
“The hawkish minutes knocked the wind out of gold’s sails, and we expect to test the downside as we approach the June FOMC,” Standard Chartered Bank’s Suki Cooper wrote in a note this week.
Clash of so strong factors promises appearing of one thing definitely - volatility. In this circumstances forecasting of gold perspective even till the end of this year is really tough task...
COT Report
CFTC data of lat week shows that net long position has dropped, while open interest has increased. This is bearish sigh, which means that new shorts have been opened. Indeed, as gold has failed to pass through key 1370 level, bearish sentiment has increased.
Now we need to take a look at technical issues as well, and try to estimate some key factors that could give early signs of situation changing.
Monthly
On gold market we see a lot similar signs to EUR. As gold also stands inside daily consolidation - price action barely makes impact on monthly time frame. MACD trend stands bullish here. As on EUR - price shows tight standing right under resistance - this is good sign for bulls. Downside reaction was rather small by far, in scale of monthly chart. Now we could recognize a kind of pennant pattern is forming as gold stands in contraction mode.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD. If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be.
Weekly
Last time we've confirmed that bullish scenario is still valid as market holds above 3/8 level after AB-CD retracement down has been completed. Also we've mentioned bullish grabber. Logical conclusion that we've made - 1300 lows is major low to watch for. Until gold will stand above it, it will keep chances to proceed upward action. At the same time, last week gold has made attempt to proceed higher, on a background of geopolitical tensions, but this attempt was not absolutely successful.
Multiple bearish signs have been formed. First is our bearish grabber that has been formed two weeks ago and now we have another one. But, the value of this grabber stands mostly due failure upside breakout of our flag pattern.
In classical technical analysis this calls as "Bullish trap" and usually leads to opposite breakout, at least when gold is driven by only technical and economical factors (which is not the case right now).
Our OP target still stands untouched, as well as bullish grabber - it also has not been completed as gold has failed to take out 1370 top.
Appearing of long tails every time when gold challenges 1370 area tells about solid resistance in this area. Last week it was 4th attempt to break it. As more attempts will happen as more tired market will be, and chances on deep pullback will increase.
It seems, last week was "attack" stage, and now we should prepare to "defense". Bullish setup probably will hold, but downside continuation looks more probable on coming week, until external driving factors will change this.
Daily
So, on daily market was not able to reach our major 1383 target. This is as COP target of AB-CD pattern as 1.27 extension of butterfly "Sell" which we've talked about last time
In fact, if gold would have touched 1370 and stops above it - 1383 target would be completed already. But this has not happened. Now all eyes on 1330 lows. We have bullish grabber on daily. If gold will be able to hold above this area and keep pattern valid - it will keep chances on upside continuation.
Otherwise, although long term weekly bullish setup will survive, but here, on daily, dropping below 1330 will lead to changing of overall context and could lead to return back to 1300 area:
Intraday
4H trend has turned bearish, our targets around 1368 have not been completed for ~2$. Besides, reversal was rather sharp and market has dropped below neckline of our H&S. All this action definitely is not in favor of bulls, right? Also it is accompanied by clear bearish MACD divergence.
On hourly chart our suggestion was confirmed by price action. Indeed as OP target has been hit, market has formed small Double bottom pattern, which suggests action slightly higher - almost to 5/8 resistance around 1350.
In general, we need to keep an eye on clear patterns here. Drop below 1330 lows will mean that reaction on OP target is over and market is moving to next one - XOP. In this case, it could mean further downside action even on daily chart.
While market will hold above 1330 - it could form, say, upside butterfly. This will keep price charged on upside breakout. So, 1350 Fib resistance could be very useful for bears - any scenario suggest some downside action, either it will be drop or starting of right butterfly wing. And this action could start from this resistance level.
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil. This fact let's us think that gold will be supported within few weeks and could reach higher targets, at least nearest ones around 1370-1385.
Meantime, domination of fundamental factors could lead to fading or ignoring normal market mechanics.
In shorter time frame a lot of bearish signs have appeared last week, which makes background weaker. Trading of a gold market right now is a real challenge, so try to rely only on clear patterns which give you at least some technical reaction in your favor and let you to move stops to breakeven.
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.
Coming week will be tough and major turmoil will come from geopolitics. Gold, as a rule stands in a epicenter of geopolitical events. Here are two "information bombs" that will stir in media on coming week and both of them are really tricky:
First is, Skripal story is getting continuation and it is not very good for UK. It seems that independent laboratory is Swiss has made an analysis and it shows that this was BZ toxic substance that produced and used by NATO forces:
https://www.independent.co.uk/news/...-salisbury-attack-latest-update-a8304841.html
Second, curious attack on Syria. What was that? Yesterday in our EUR research I've made suggestion that this was planned and agreed action among all sides - 70% missiles were put down, nobody hurt. How it is possible with 100+ Tomahawks attack? This questions start to appear in media:
https://www.huffingtonpost.com/entr...syrians-or-the-us_us_5ad15ffce4b077c89ce8c342
https://www.reuters.com/article/us-...trike-the-real-danger-is-russia-idUSKBN1HK2JI
Syria evacuated all planes under Russian umbrella. There could be just two possible conclusions - either indeed, there was some agreement for resolving of economical and political problems, or, if strike was real - this was total fiasco and very bright sign of weakness. But, somehow, I still think that first scenario is more probable. Trump and Putin have raised price for oil and aluminium for EU, Russia has got chance on sanctions to buy back strategical companies with 50% discount that was robbed in so-called" privatization" in 90's. Trump now will accuse those opponents in US, who still search for Russian probe and now they will be responsible for dead way in Russian relationships as they were demanded for loyalty and proves of "Strength" from Trump.
I do not know what vector this topic will move to, but already now you could find articles that start to point reasonable questions - what was that?
Speaking on gold, in general, prices for gold this week rose to their highest levels since Jan. 25, as escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on global equities and the U.S. dollar index.
“We’ve been looking at an uptick for overall gold demand, logically correlated with an increase in volatility, slight downgrade we’re seeing in equities and the Syrian escalations,” said David Meger of High Ridge Futures.
Now, there are two drivers for gold, but in opposite direction. Geopolitical tensions and rising of US national dept stand on the one side:
Concerns that economic growth could stall because of growing U.S. debt levels could help gold later this year, said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
“It will start to slow the economy down and then in turn, people will start to look at gold as alternative investment,” he said.
From another point of view, Fed will continue relatively hawkish policy. As Reuters reports -
Yet gold failed to break out of the tight trading range it’s been hemmed in for the year, between $1,300-$1,370 per ounce. The possibility that the U.S. Federal Reserve will raise interest rates several more times this year is also capping gold’s gains.
“In spite of any geopolitical event, the Fed, and the Fed minutes this week were pretty convincing that three more rate hikes are coming on the table,” said RJO Futures senior market strategist Bob Haberkorn. “That’s going to hang over gold for the rest of the year.”
All Fed policymakers felt the U.S. economy would firm further and inflation would rise in coming months, minutes of the Fed’s March policy meeting released on Wednesday showed.
“The hawkish minutes knocked the wind out of gold’s sails, and we expect to test the downside as we approach the June FOMC,” Standard Chartered Bank’s Suki Cooper wrote in a note this week.
Clash of so strong factors promises appearing of one thing definitely - volatility. In this circumstances forecasting of gold perspective even till the end of this year is really tough task...
COT Report
CFTC data of lat week shows that net long position has dropped, while open interest has increased. This is bearish sigh, which means that new shorts have been opened. Indeed, as gold has failed to pass through key 1370 level, bearish sentiment has increased.
Now we need to take a look at technical issues as well, and try to estimate some key factors that could give early signs of situation changing.
Monthly
On gold market we see a lot similar signs to EUR. As gold also stands inside daily consolidation - price action barely makes impact on monthly time frame. MACD trend stands bullish here. As on EUR - price shows tight standing right under resistance - this is good sign for bulls. Downside reaction was rather small by far, in scale of monthly chart. Now we could recognize a kind of pennant pattern is forming as gold stands in contraction mode.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD. If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be.
Weekly
Last time we've confirmed that bullish scenario is still valid as market holds above 3/8 level after AB-CD retracement down has been completed. Also we've mentioned bullish grabber. Logical conclusion that we've made - 1300 lows is major low to watch for. Until gold will stand above it, it will keep chances to proceed upward action. At the same time, last week gold has made attempt to proceed higher, on a background of geopolitical tensions, but this attempt was not absolutely successful.
Multiple bearish signs have been formed. First is our bearish grabber that has been formed two weeks ago and now we have another one. But, the value of this grabber stands mostly due failure upside breakout of our flag pattern.
In classical technical analysis this calls as "Bullish trap" and usually leads to opposite breakout, at least when gold is driven by only technical and economical factors (which is not the case right now).
Our OP target still stands untouched, as well as bullish grabber - it also has not been completed as gold has failed to take out 1370 top.
Appearing of long tails every time when gold challenges 1370 area tells about solid resistance in this area. Last week it was 4th attempt to break it. As more attempts will happen as more tired market will be, and chances on deep pullback will increase.
It seems, last week was "attack" stage, and now we should prepare to "defense". Bullish setup probably will hold, but downside continuation looks more probable on coming week, until external driving factors will change this.
Daily
So, on daily market was not able to reach our major 1383 target. This is as COP target of AB-CD pattern as 1.27 extension of butterfly "Sell" which we've talked about last time
In fact, if gold would have touched 1370 and stops above it - 1383 target would be completed already. But this has not happened. Now all eyes on 1330 lows. We have bullish grabber on daily. If gold will be able to hold above this area and keep pattern valid - it will keep chances on upside continuation.
Otherwise, although long term weekly bullish setup will survive, but here, on daily, dropping below 1330 will lead to changing of overall context and could lead to return back to 1300 area:
Intraday
4H trend has turned bearish, our targets around 1368 have not been completed for ~2$. Besides, reversal was rather sharp and market has dropped below neckline of our H&S. All this action definitely is not in favor of bulls, right? Also it is accompanied by clear bearish MACD divergence.
On hourly chart our suggestion was confirmed by price action. Indeed as OP target has been hit, market has formed small Double bottom pattern, which suggests action slightly higher - almost to 5/8 resistance around 1350.
In general, we need to keep an eye on clear patterns here. Drop below 1330 lows will mean that reaction on OP target is over and market is moving to next one - XOP. In this case, it could mean further downside action even on daily chart.
While market will hold above 1330 - it could form, say, upside butterfly. This will keep price charged on upside breakout. So, 1350 Fib resistance could be very useful for bears - any scenario suggest some downside action, either it will be drop or starting of right butterfly wing. And this action could start from this resistance level.
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil. This fact let's us think that gold will be supported within few weeks and could reach higher targets, at least nearest ones around 1370-1385.
Meantime, domination of fundamental factors could lead to fading or ignoring normal market mechanics.
In shorter time frame a lot of bearish signs have appeared last week, which makes background weaker. Trading of a gold market right now is a real challenge, so try to rely only on clear patterns which give you at least some technical reaction in your favor and let you to move stops to breakeven.
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.
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