Sive Morten
Special Consultant to the FPA
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Fundamentals
On previous week situation on gold market is mostly twisting around NFP release and US GDP earlier in this week. As Reuters reports - gold initially fell to a two-week low at $1,280 an ounce as encouraging U.S. gross domestic product and factory activity data earlier in the week reduced the metal's appeal as an investment hedge. But on Friday Gold rose following a sharp rebound from earlier lows, after mixed signals from the U.S. non-farm payrolls report suggested that the Federal Reserve could be more cautious about drawing down its economic stimulus program. It jumped about $30 or 2 percent from its session low after government data showed U.S. employers slowed their pace of hiring in July but the jobless rate fell anyway, easing fears that the U.S. central bank might imminently reduce its $85billion monthly bond buyback stimulus. All in all this is not hardly impact our expectation on gold market as our long-term strategy assumes upward recovery on gold market in medium-term perspective. Probably this recovery could start in August and could last till the end of the year or even till Feb 2014. That’s should be the second stage of our 3-stage plan. We’ve discussed this in details in previous research, and currently I do not see yet any signs that could drastically impact on it and vanish it.
Now let’s take a look what other analysts think about current situation:
On chart, gold is likely to running into strong technical resistance at $1,320 an ounce near its 50-day average, analysts said. Mark Arbeter, chief technical strategist at S&P Capital IQ, said that there could be a small pullback before a rally to over $1,450 an ounce, citing favorable futures positioning by speculators and overly bearish sentiment. Our analysis suggests reaching of 1500-1550$ within 5-7 months.
At the same time there are some signs that bearish pressure becomes weaker. First is – Gold ETF outflows, they have become shyer. Thus, on previous week SDPR fund reports on outflows again, but they were just 0.7%, compares to what we see previously – 3% or even 9% per week.
Second, CFTC data shows that growth in speculative short positions, or better to say contraction of longs was not supported by open interest. This is significant.
Thus, now we can just confirm that past week in general stands with our long-term expectations. Although overall long-term bearish sentiment still holds, but in nearest months we could get significant upward bounce on gold market and we have to be ready to use it. Also this is a sentiment tricks and we’ve pointed on them in details – market could turn, when everybody bearish.
Monthly
Well, situation changes slowly here. We keep in mind Volatility breakout pattern and know that there will be 3-leg downward action. This means that current bounce will be just retracement probably. Second, currently we know that market at support – Fib support, target of rectangle breakout, completion of harmonic swing down and monthly deep oversold. Market has formed shy upward candle here that currently does not look like as challenge on solid retracement up yet. Thus, unfortunately monthly chart does not give us much assistance. One bullish pattern that probably could be seen here is bullish DiNapoli “Stretch” pattern, since market stands at deep oversold right at Fib support. Thus, this is not the time to take long-term short position, but time to think about their close and searching for bullish patterns on lower time frames – weekly and daily. Target of this pattern is a middle between Oscillator Predictor Bands – right around 1550$ area.
Weekly
As we’ve said above – we need some signs or pattern, or even as former as latter together that could point on upward reversal and give us confidence with it. But current signs here are very weak. I suspect that this may be due high bearish depression that market was hit since the beginning of the year and that somehow could explain very shy and blur bullish signs. Weekly chart gives us some moments to think about. First is it reinforces current support by Agreement. Market has hit 1.618 extension target as well from AB=CD pattern that is based on all-times high. Thus, support level currently is really solid. Second, take a look – within current move down since September 2012 market never breaks the harmonic swing of retracement. Only once it has shown double swing – that was in April by the way, right after miserable plunge, and….now. Market pips to pips stands at the top of double harmonic swing, and it should be exceeded to confirm markets’ bullish ambitions. Next moment is August pivot – gold already has tested it and price stands above it. This is good bullish issue. At the same time placement of MPS1 is very favorable for us, since it almost coincides with lows of morning star pattern. If market will pass through it – this could mean that bearish trend is continue. Trend has turned bullish here, by the way, and market is not at overbought. And yes, also we have a butterfly “buy” that in fact launch current bounce up, right?
But despite all these nice and important bullish moments, we do not have the major one yet. I’m speaking about greater upward swing and breaking the tendency of lower-lows and lower highs. But this will happen only if market will exceed 1420 area and MPR1.
Conclusion on weekly time frame – context is moderately bullish, but too unstable and weak. But this is very often happens, when market has just started the reversing procedure. Let’s see what will happen next…
Daily
Daily chart shows not much information. As we’ve found out already, from the weekly point of view – our major point is 1180 lows. Until market holds above this level – chances on upward move holds. That is rather solid room till this level. In short term perspective all that we have on daily time frame – hammer pattern at Fib support and tested MPP. We’ve estimated on weekly chart that context is moderately bullish, but here I do not see any strong patterns that we can rely on with 100% confidence. Actually, we could get compounded retracement as downward in shape or AB=CD to 1245, for example and then we could get compounded AB=CD move up from 1245, where current move up from 1180 to 1345 was an AB leg. And whole these really solid swings will not drastically change picture on weekly time frame. Thus, current action may be useful for some short-term trading, but not yet very useful for medium-term perspective. The fact that trend has turned bearish should not deceive us, since market stands very close to MACDP line and could shift it back again – actually I can’t exclude that we could get 2-days bullish stop grabber here, if market will close above MACDP line on Monday. That at least could be something on daily time frame…
4-hour
Here we have single not quite pleasant moment. I’m speaking about leaving untouched two singifcant 1.618 targets. First one is based on AB=CD from the top and second one is most recent AB-CD. Both of them stand around major 3/8 retracement. And both of them stands below our major short-term point in red circle – invalidation level for daily hammer pattern, and take a look – 4-hour huge morning star, we could probably call it as marubozo morning star
. If this pattern will work – we will get move to WPR1 – 1340, but if it will fail, most probable action is to 5/8 daily support around 1245. Gold again will open close to WPP and this could give us assitance as with EUR. WPS1 stands also right at invalidation point of short-term pattern. Upward white candle is important per se, since it is big and when market erases such candles this tells something and very often becomes the starting point of downward continuation. But here, as I’ve said – that could be some kind of W&R (but not quite), when market will hit 1.618’s and turn to the upside again. Gold has such habits, you know...
1-hour
But here market shows that upward action is more probable after some solid retracement down. Take a look here we have a challenge for short-term upward reversal, since most recent move up is greater than previous move down – that is what we’re waiting for on weekly, by the way. Usually when such reversal occurs, market still stands under pressure of bearish momentum and before continuation as a rule shows deep retracement, in a shape of some AB=CD. Looks like it will be 50% retracement at minimum or even 5/8, since gold likes it. Then move up should continue probably... The target is 1340, as we’ve specified higher, thus, if we will get chance to enter even at 1300$, that will be not bad trade, probably, we’ll see.
And here is again as on EUR – we do not want to get fast action down, but the one as it stands now. Gradual and moderate candles with flat pace, some clear looking AB=CD down that could give us an Agreement with some Fib support level.
Conclusion:
Technically and fundamentally gold market stands in long-term bearish motion, but there are more and more factors start to appear that make downward action as not as cloudless as it was recently. Also we’ve got VOB pattern that gives us forecast for long-term price behavior and promise compounded downward move in shape of some AB-CD. Now major question in big picture – is when and how BC up leg will start. WE have some suspicions that it has started already, but we feel some lack of confirmation still, since signs are too shy. As a result, we do not know just yet – is current move up is just a minor bounce or something bigger. Fundamentally some supportive factors have appeared, and this could shift to greater retracement.
Most recent action shows that upward move could continue in the beginning of the next week. The major point to watch is 1283 low – it should hold to keep chances on possible upward continuation intact.
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.
On previous week situation on gold market is mostly twisting around NFP release and US GDP earlier in this week. As Reuters reports - gold initially fell to a two-week low at $1,280 an ounce as encouraging U.S. gross domestic product and factory activity data earlier in the week reduced the metal's appeal as an investment hedge. But on Friday Gold rose following a sharp rebound from earlier lows, after mixed signals from the U.S. non-farm payrolls report suggested that the Federal Reserve could be more cautious about drawing down its economic stimulus program. It jumped about $30 or 2 percent from its session low after government data showed U.S. employers slowed their pace of hiring in July but the jobless rate fell anyway, easing fears that the U.S. central bank might imminently reduce its $85billion monthly bond buyback stimulus. All in all this is not hardly impact our expectation on gold market as our long-term strategy assumes upward recovery on gold market in medium-term perspective. Probably this recovery could start in August and could last till the end of the year or even till Feb 2014. That’s should be the second stage of our 3-stage plan. We’ve discussed this in details in previous research, and currently I do not see yet any signs that could drastically impact on it and vanish it.
Now let’s take a look what other analysts think about current situation:
On chart, gold is likely to running into strong technical resistance at $1,320 an ounce near its 50-day average, analysts said. Mark Arbeter, chief technical strategist at S&P Capital IQ, said that there could be a small pullback before a rally to over $1,450 an ounce, citing favorable futures positioning by speculators and overly bearish sentiment. Our analysis suggests reaching of 1500-1550$ within 5-7 months.
At the same time there are some signs that bearish pressure becomes weaker. First is – Gold ETF outflows, they have become shyer. Thus, on previous week SDPR fund reports on outflows again, but they were just 0.7%, compares to what we see previously – 3% or even 9% per week.
Second, CFTC data shows that growth in speculative short positions, or better to say contraction of longs was not supported by open interest. This is significant.
Monthly
Well, situation changes slowly here. We keep in mind Volatility breakout pattern and know that there will be 3-leg downward action. This means that current bounce will be just retracement probably. Second, currently we know that market at support – Fib support, target of rectangle breakout, completion of harmonic swing down and monthly deep oversold. Market has formed shy upward candle here that currently does not look like as challenge on solid retracement up yet. Thus, unfortunately monthly chart does not give us much assistance. One bullish pattern that probably could be seen here is bullish DiNapoli “Stretch” pattern, since market stands at deep oversold right at Fib support. Thus, this is not the time to take long-term short position, but time to think about their close and searching for bullish patterns on lower time frames – weekly and daily. Target of this pattern is a middle between Oscillator Predictor Bands – right around 1550$ area.
Weekly
As we’ve said above – we need some signs or pattern, or even as former as latter together that could point on upward reversal and give us confidence with it. But current signs here are very weak. I suspect that this may be due high bearish depression that market was hit since the beginning of the year and that somehow could explain very shy and blur bullish signs. Weekly chart gives us some moments to think about. First is it reinforces current support by Agreement. Market has hit 1.618 extension target as well from AB=CD pattern that is based on all-times high. Thus, support level currently is really solid. Second, take a look – within current move down since September 2012 market never breaks the harmonic swing of retracement. Only once it has shown double swing – that was in April by the way, right after miserable plunge, and….now. Market pips to pips stands at the top of double harmonic swing, and it should be exceeded to confirm markets’ bullish ambitions. Next moment is August pivot – gold already has tested it and price stands above it. This is good bullish issue. At the same time placement of MPS1 is very favorable for us, since it almost coincides with lows of morning star pattern. If market will pass through it – this could mean that bearish trend is continue. Trend has turned bullish here, by the way, and market is not at overbought. And yes, also we have a butterfly “buy” that in fact launch current bounce up, right?
But despite all these nice and important bullish moments, we do not have the major one yet. I’m speaking about greater upward swing and breaking the tendency of lower-lows and lower highs. But this will happen only if market will exceed 1420 area and MPR1.
Conclusion on weekly time frame – context is moderately bullish, but too unstable and weak. But this is very often happens, when market has just started the reversing procedure. Let’s see what will happen next…
Daily
Daily chart shows not much information. As we’ve found out already, from the weekly point of view – our major point is 1180 lows. Until market holds above this level – chances on upward move holds. That is rather solid room till this level. In short term perspective all that we have on daily time frame – hammer pattern at Fib support and tested MPP. We’ve estimated on weekly chart that context is moderately bullish, but here I do not see any strong patterns that we can rely on with 100% confidence. Actually, we could get compounded retracement as downward in shape or AB=CD to 1245, for example and then we could get compounded AB=CD move up from 1245, where current move up from 1180 to 1345 was an AB leg. And whole these really solid swings will not drastically change picture on weekly time frame. Thus, current action may be useful for some short-term trading, but not yet very useful for medium-term perspective. The fact that trend has turned bearish should not deceive us, since market stands very close to MACDP line and could shift it back again – actually I can’t exclude that we could get 2-days bullish stop grabber here, if market will close above MACDP line on Monday. That at least could be something on daily time frame…
4-hour
Here we have single not quite pleasant moment. I’m speaking about leaving untouched two singifcant 1.618 targets. First one is based on AB=CD from the top and second one is most recent AB-CD. Both of them stand around major 3/8 retracement. And both of them stands below our major short-term point in red circle – invalidation level for daily hammer pattern, and take a look – 4-hour huge morning star, we could probably call it as marubozo morning star
. If this pattern will work – we will get move to WPR1 – 1340, but if it will fail, most probable action is to 5/8 daily support around 1245. Gold again will open close to WPP and this could give us assitance as with EUR. WPS1 stands also right at invalidation point of short-term pattern. Upward white candle is important per se, since it is big and when market erases such candles this tells something and very often becomes the starting point of downward continuation. But here, as I’ve said – that could be some kind of W&R (but not quite), when market will hit 1.618’s and turn to the upside again. Gold has such habits, you know...
1-hour
But here market shows that upward action is more probable after some solid retracement down. Take a look here we have a challenge for short-term upward reversal, since most recent move up is greater than previous move down – that is what we’re waiting for on weekly, by the way. Usually when such reversal occurs, market still stands under pressure of bearish momentum and before continuation as a rule shows deep retracement, in a shape of some AB=CD. Looks like it will be 50% retracement at minimum or even 5/8, since gold likes it. Then move up should continue probably... The target is 1340, as we’ve specified higher, thus, if we will get chance to enter even at 1300$, that will be not bad trade, probably, we’ll see.
And here is again as on EUR – we do not want to get fast action down, but the one as it stands now. Gradual and moderate candles with flat pace, some clear looking AB=CD down that could give us an Agreement with some Fib support level.
Conclusion:
Technically and fundamentally gold market stands in long-term bearish motion, but there are more and more factors start to appear that make downward action as not as cloudless as it was recently. Also we’ve got VOB pattern that gives us forecast for long-term price behavior and promise compounded downward move in shape of some AB-CD. Now major question in big picture – is when and how BC up leg will start. WE have some suspicions that it has started already, but we feel some lack of confirmation still, since signs are too shy. As a result, we do not know just yet – is current move up is just a minor bounce or something bigger. Fundamentally some supportive factors have appeared, and this could shift to greater retracement.
Most recent action shows that upward move could continue in the beginning of the next week. The major point to watch is 1283 low – it should hold to keep chances on possible upward continuation intact.
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.
