Gold GOLD PRO WEEKLY, February 13 - 17, 2023

Sive Morten

Special Consultant to the FPA
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Fundamentals

At first glance, this week we do not have any gold-specific news. But this is only on a first glance. In fact, J. Biden speech in Congress and geopolitical consequences of earthquake in Turkey might become decisive for the gold performance in a long run. Another important conclusion that we could make, based on recent headlines in Twitter, news agencies - more and more analysts start speaking about issues that we've covered last year. They are pitfall in the US debt market, inability of the Fed to keep rates high for a long-term, manipulation of statistics data, especially employment and CPI and many others. This also could make effect soon as common sense based view is becoming more popular.

For example, CPI data. Last week we've said that due to regularly changing algorithm of CPI calculation skews the real inflation numbers down. Economists who have studied this phenomenon, tells that conservative US Inflation now should be around 10% on average, with more realistic level is around 12-15%. ZeroHedge even has released article on this subject, but it is only for Primary subscribers. Now, it is "super core" CPI numbers appeared that excludes everything - energy, food, shelter, old cars etc, which shows inflation below 2%. Obviously if we exclude everything then inflation will be zero. Great solution. Next week, on Tue we will be watching for CPI again, and Reuters poll suggests some uptick, even with this "adjusted" CPI.

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Among other tricks, the aim of the Office of BS is to now use neighborhood level information on housing structure types for a calendar year to effectively manipulate a lower than honest CPI inflation rate. This is rich coming from a CPI scale (red line below) that is already notorious for under-reporting genuine inflation by 50% when compared to the old inflation scale (blue line below) used in the Volcker era. Here is our 15% by the way:

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Effectively, such lies may never be right, but as the official data point of the US Government, they are also never wrong. Such tricks open the door for Powell to even return to more inflationary money printing without risking inflationary headlines simply because the CPI scale is telling us the inflation “data” is improving—despite the fact that consumer expenses are literally burning with a 103-degree fever, night sweats and aching muscles… Just ask yourselves: Does your cost of living seem to be rising by 6.5%, or does that “fever” feel a bit higher than what you’re being told?

As former Finance Minister and European Commission President, Jean-Claud Juncker, famously confessed, “when it becomes serious, you have to lie.”

Concerning inflation in general, many investors additionally are watching for some commodities, especially Copper. Copper is an industrial metal and always rising in a period of economy growth. Moderate inflation in a period of economy boom is a normal and a positive sign. Indeed, if we take a look at copper market is shows upside action. Also, notoriously macro-sensitive stocks such as copper miners have gained about 40% more than the broader S&P500 index since the start of September 2022, including a 10% relative rise in 2023 alone. All this could indicate that the market believes that the worst of the macro news may be behind us:
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But the problem is Copper relation to Gold. Obviously, safe haven gold should lag behind copper during economy boom and Copper/Gold ratio should climb up, which we do not see now. there is evidence to argue that the market upswing since last summer was driven mainly by hopes of a Fed pivot. One example is the performance of gold mining stocks, which showed little variation relative to copper mining stocks in 2022, despite their much lower sensitivity to macro conditions. In other words, copper mining stocks ought to have significantly outperformed gold ones if improving fundamentals had been the main driver of their recent strong performance.

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The same conclusion could be made from expectations of companies' earnings in general. Hard economic data indicates that recession is still on the cards. US earnings expectations continue to be revised lower by analysts, with the growth rate in expected earnings from US companies over the next twelve months having reached zero. There is room for further downside revisions, as earning expectations have not yet reached levels consistent with previous recessions.
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Recent economic data have supplied more evidence that conditions could take a turn for the worse. Last week, the US reported a drop in real spending driven by higher savings, and this week German GDP was reported to have unexpectedly contracted by -0.2%.
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So, it will be even more interesting to see what CPI numbers we will get next week. People have same suspicions concerning job market and particular most recent superb report that seems absolutely amazing. Given the number of layoffs and the general slowing of the economy, the notion that 517,000 jobs were created in January just doesn’t make sense. Turns out that your skepticism is warranted.

Nevertheless, the media ran with the headline numbers and gushed over the employment report. As Ryan McMaken at the Mises Institute pointed out, the words “wow” and “stunner” were frequently used. But as with so many government numbers, you need to look a little more closely. A recent article published by MarketWatch did just that and found that there are five significant reasons to think the big January number was an anomaly and not a sign of a roaring economy.

As reported by MarketWatch, economists at Morgan Stanley determined that three factors boosting job growth were likely temporary and give a false impression about the state of the labor market.

  • Unusually warm weather
  • An end to California’s higher education strike bringing people off the unemployment rolls.
  • A very strong upward seasonal adjustment.
The season adjustments are interesting to look at. A lot of businesses release seasonal workers in January after the holiday season. The BLS adjusts for this with season adjustments that “smooth out” the employment data over the course of the year. In effect, the BLS makes up numbers to adjust the data. According to the Cato Institute, without seasonal adjustment, the 517,000 job gain in seasonally adjusted payrolls turns into an unadjusted 2,505,000 job loss.

There is another factor that few people seem to be talking about. Most of these new jobs are part-time. McMaken points out that since September, month-to-month employment growth in full-time jobs has been negative. Meanwhile, growth in part-time jobs has been positive.

A switch from full-time-driven employment to part-time-driven employment usually indicates that a recession is coming. We saw it happen in 1981, 1990, 2001, 2008, 2020. Now it’s happened again in 2023.”

The fact people are moving from full-time to part-time work, and more people are taking on extra part-time jobs to make ends meet does not scream “strong economy.” In fact, it’s the opposite. This reveals an economy with a rotting foundation.

Finally, MarketWatch highlights a Philadelphia Federal Reserve report called the Quarterly Census of Employment and Wages that casts more doubt on the BLS numbers. In a nutshell, the QCEW estimates that the BLS data overstated the number of jobs created by roughly 1 million jobs in Q2.

Standard Chartered head of North American macro strategy Steve Englander told MarketWatch he found the QCEW data “quite reliable,” and his own analysis found that the headline job numbers may have been over-reported by as much as 1.1 million.

And now, let's think about it in terms of gold price action. In fact, recent collapse that we saw two weeks ago was triggered by this "slightly adjusted" employment report. And then we have second coming question. If data is not quite correct, how reliable the action is. Because all chain of conclusions might be wrong - strong job market - Fed rate hike - low inflation and so on. If job market is not as strong, then Fed is not as hawkish, then evident signs of recession as not as far away etc.

Finally, we have some global signs of slowdown. For example, The Shanghai Containerized Freight Index (SCFI) issued after Chinese New Year 2023 saw the index fall into the triple digits, closing at US$995 for the week ending 10 February 2023.
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According to Chris Bryant opinion, a Bloomberg columnist, Maersk foresees global container demand for the year to fall by 2.5%. It is also foreseeing the contract rates to fall and settle in line with the spot market. (It must already be seen that the long-term rates on Xeneta took a 13% dive, the previous month to register the fifth straight month of consecutive losses.) This could be a big hit in terms of the overall yield. Rightly so, even the guidance numbers for the logistics giant stipulate the same. Its operating profit numbers for 2023 are seen somewhere between US$2-5 Billion for 2023, just about 6-15% of its 2022 numbers at US$31 billion. In fact, they are just a tad better than the 2019 numbers of US$1.7 billion. We just talked about Chinese economy yesterday. In terms of global trading, China and the US are the same, they are two sides of the same medal. And one can't show growth without another one. China shows clear signs of economy decrease, and recent piking just accelerates mutual negative effect.

Now ZeroHedge also has released an article, where speaks that the US is already in recession. We said this in the mid of 2022 when we've changed the style of weekly reports and start digging fundamentals more closely. In fact, the US stands in recession since the late 2021. As ZeroHedge writes, the US, with its 125% debt-to-GDP and 7% deficit-to-GDP ratios, was, and already is, in a recession heading into 2023, despite official efforts in DC to re-define the very definition of a recession.

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In fact, the manufacturing figures have not been this bad since 2008 and 2020, which, if I recall, were pretty bad vintage years for markets—”saved” only by money printing at warp speed.This, of course, raises the ever-charged question of whether Powell will be forced to return to more desperate mouse-click money creation—i.e., “quantitative easing.” For now, of course, the current Fed is going the other direction, “tightening” rather than “easing” reserve assets to the tune of -$95B per month into a perfect debt storm.
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In case, however, we still need more recessionary evidence, the dramatic 6 month decline in the Conference Board’s index of leading indicators serves as yet another neon-flashing warning that the recession—if not under our bow—is certainly right off our bow. Furthermore, and despite Powell’s belief that his office can manage a recession with the precision of a home thermostat, his faith in what he lately described as a “softish landing” is almost as farcical as his prior attempt to describe inflation as “transitory.”

The simple math and reality of even centralized and central-bank distorted markets is quite simple: These markets rise and fall on liquidity. Once the monetary “grease” required to maintain the MMT fantasy of mouse-click money as a debt solution “tightens” too tight or runs too dry, the entire house of cards of the post-2008 fairytale comes to a hard rather than “softish” end. Again, we saw the first signs of this collapse in the “tightening” backdrop of 2022. Last time, in 2008 Fed has closed QT after ~800 Bln bonds sell-off. Now we've passed the half way by far with around 550 Bln been sold.
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This critical “liquidity” won’t be coming from economic growth, rising tax receipts, a robust Main Street or a fairly-priced market. Instead, and as expected, it now comes from out of thin air… Unless Powell puts his finger on the Eccles-based mouse-clicker to create more fiat money (highly inflationary), US and global credit markets will simply continue their race to the ocean floor (highly deflationary or at least dis-inflationary).

As credit markets sink and bond yields and rates rise, this also means that equity markets, who have been sickly addicted to years of central-bank repressed low rates and cheap debt, will merely join those bonds on the bottom of the dark ocean floor. In short, bonds (and hence risk parity portfolios) won’t save you. Rather than hedge stocks, they are now correlated to the same.

In fact, it was during those October market lows that the queen of toxic liquidity, former Fed-Chair-turned-Treasury-Secretary (imagine that?) Janet Yellen, was suddenly ringing the bell for more magical money—i.e., “liquidity.” Specifically, Yellen was wondering who would be buying Uncle Sam’s IOU’s without more mouse-click money from the Eccles Building? The answer was simple: No one.

Instead, foreign central banks were and are selling rather than buying America’s bonds. Just ask the Japanese…Is Yellen, contrary to Powell, silently suggesting that QT has backfired? Is Yellen, unlike Powell, realizing that there are no buyers for our increasingly issued yet unloved USTs but the Fed itself?

Perhaps these tensions within the Treasury market provide the hidden clues as to why the USD has been sliding rather than rising from the DXY’s October highs?
After all, a weaker USD means less forced need for foreign nations to dump their UST reserves to come up with the money to buy their own dying bonds and strengthen their own dying currencies as a direct response to Powell’s (and originally, Yellen’s) strong USD policy. In short, perhaps our Treasury Secretary now wants to stop the bleeding in her Treasury market…

Meanwhile, however, you have the math-challenged but psychologically tragic Jay Powell wanting to save his legacy as a Paul Volcker rather than as an Arthur Burns.
Like a child wanting to be John Wayne rather than Daffy Duck, Powell and his rate-hiked strong USD refuses to see the $31T debt pile in front of him which makes it impossible to be a reborn Volcker, who in 1980 faced a much smaller debt pile of $900B. In short, Powell’s America of 2023, unlike Volcker’s America of 1980, can’t stomach rising rates or a strong USD.

Yellen or Powell, QT or QE, strong Dollar or weak Dollar, the global financial system is nevertheless doomed. We either tighten the bond and hence stock markets into a free fall and economic disaster, or we loosen and ease liquidity into an inflationary nightmare. Pick your poison—depression or hyperinflation. Or perhaps both…namely stagflation. Either way, of course, Powell, and the American economy, is now doomed. And he has only Greenspan, Bernanke, Yellen, himself and years of mouse-click fantasy to blame.

This leads to the best we can hope for from the very “experts” who have brought the global economy toward a mathematically unavoidable cliff are now empty words and twisted math, as per above. Such disloyalty from our financial generals on the eve of an unprecedented strategic and tactical economic defeat of their own making reminds me of officers sitting miles from the trenches as investors go “over-the-top” toward a row of cannons pointed straight at their trusting chests.

Gold was a far more loyal asset than stocks and bonds in the turbulent times of 2022; and given that 2023 portends to be even worse, we can expect better loyalty from this so-called “barbarous relic” of the past. With inflation ripping and war blazing, many still argue that gold did not do enough.

Hmmm…

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But gold in every currency but the USD (see above) would beg to differ. Furthermore, and as argued so many ways and times, that USD strength will not hold, as gold’s price moves this year have already tracked. Gold’s future strength and rise is thus easy to foresee, as gold doesn’t rise, currencies just fall. It’s really that simple.

Based upon the foregoing, each of us must therefore ask ourselves where to find his or her safe haven in a time of extended war, dishonest math, re-defined recessions, dying bonds, debased currencies and gyrating equity markets trending noticeably south. Traditionally, of course, the risk-free-return of sovereign bonds in general and USTs in particular was understood as the safest bet.

Based, however, upon 1) the non-traditional, and complete distortion/destruction of the global bond markets due to years of criminally negligent monetary policies from Tokyo to DC and 2) the genuine rather than reported real (i.e., inflation-adjusted) return on Uncle Sam’s IOUs, it becomes increasingly clear that their “risk-free-return” is little more than return-free-risk.

That is why more informed investors, willing to take the extra minutes to understand simple bond history and math soon discover that yes, even the 0% yield of gold with its naturally-derived/constrained stock to flow ratio (i.e., a nearly “finite” annual production of barely 2%) and infinite duration does a far better job of preserving wealth than bonds of finite duration and seemingly infinite issuance…

Sounds familiar, right? This is opinion of Matthew Piepenburg from Gold Switzerland, All these points we've discussed in details. We do not know the scale of data manipulation, it could reach absolutely astronomic levels, which makes us to think about gold even more. At least in some part of portfolio, at least for saving wealth and long-term investing. In current situation it is necessary.

To be continued...
 
Long-term political issues

We see two major political issues this week - J. Biden speech to Congress and earthquake in Turkey. Let's start from the latter first. This awful catastrophe significantly decrease Turkey geopolitical positions in a region and makes it impossible to play a dominant role in the region. Turkey's temporal weakness supposedly could be used by US/UK to get control over Bosphorus and push it in adoption of Finland/Sweden NATO membership. The relationships of Turkey and US bloc were becoming worse and worse, since Turkey has bought Russian C-400 air defense system and loss chances to get F-35 planes. Only month ago Turkey blamed US/UK with terrorist attack when few blasts sounded in the capital. It was the moment when Turkey evidently hints on who stands behind this attack. NATO cooperation with Turkey is coming to the dead way. While NATO wants to set the course for the Turkey, the latter wants to be an independence player at least in the region, which US can't let to happen. Don't forget that Turkey will take election as soon as in May and Erdogan positions now are arguable.

It was right in time information about some seismic US weapon appeared. It is not as important whether it is true or not (although we have big doubts about it), but the consequences are more important. As we've said in our Telegram channel, it is very suitable situation to cut Turkey power in the region. Since piking with the US now has long history already and fruits of NATO membership seems phantom, taking in consideration recent Turkey's blaming of the US, we suggest that the Turks will want to leave NATO and it will not be easy for Erdogan to get loyalty from the West, especially with the impending elections.

The deep state will be activated with high degree of certainty (as it was during 2016 Coup attempt, when only Putin intruding has helped to hold situation under control and save Erdogan) to try withdraw Erdogan if Putin cannot back him up for dearly. With the control over Bosphorus, NATO/American fleet will register in the Black Sea Ukrainian ports (Odessa / Nikolaev), and then Russian fleet can't pass the Bosphorus without a fight.

️In short, Erdogan has to either postpone elections and friendship with Russia, or take a defeat in the elections, leading to confusion and division of Turkey in parts. ️But then we won’t get a piece. Expel of Turkey from NATO will open road for Sweden and Finland to blockade "North Russian sea path" and wide NATO Arctic presence. Also it will be a step to a naval blockade of China. Here we are not even speaking on Iran, Turkey/Russia Gas Hub, Turkey-Greece conflict and other stuff which just makes overall situation tougher. If our suggestion will be correct even partially, the degree of geopolitical confrontation raises and hardly gold will be forgotten.

Second is J. Biden speech. It is very important from domestic political struggle understanding. Now it is opinion exists that recent J. Biden statements indirectly hints that US political elite and establishment has made choice in favor of AUKUS+ project. Biden said "I am not ready" yet to announce that I will go for the next presidential term.
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In his speech, Biden spoke about the fact that new jobs are being created in the United States, about the successful fight against inflation and called for support for his proposals to raise taxes for the richest Americans. At the same time, the word "crisis" was pronounced so often that no one had any special illusions.

But about the new presidential term should be said separately. Many perceived such a statement as, in fact, a refusal. Maybe this is not true, but there is a hypothesis that this is not an accident and not a mistake. The fact is that everyone in the United States understands that the model of financial capitalism in the Bretton Woods edition has exhausted its potential. While there was no alternative model, the supporters of this liberal model had a chance of retaining power.

But somewhere about six months ago (we wrote about this in our reviews), a plan appeared, a kind of perfected Trump's plan to "Make America Great Again" (that is, the re-industrialization of the United States). The essence of the changes stands in three positions. First, industrialization should be done not on the scale of the USA, but on the scale of the AUKUS association. Second, it was recognized that to achieve this it is necessary to bring down the Bretton Woods financial model (which sucks money out of the real sector like a sponge). Third, it seems it should not be Trump who does it.

Initially this adapted plan was proposed by Republicans, but gradually it won the minds of the entire American establishment, with the exception of the most frostbitten members of Biden's team and direct beneficiaries of international financial institutions. But, apparently, not so long ago, almost everyone recognized him, and he has already become more or less public. Well, it's time to remove Biden. And it is possible that the statement made is just from this series. However, we will see soon.

One more important circumstance can be noted, which explains a lot in the somewhat hysterical behavior of the authorities of the EU countries (first of all, Germany) and the entire EU. If we are talking about the implementation of the "Trump's plan" in a new version, mentioned above, then the question of the elimination of the Bretton Woods system becomes fundamental. But! A significant part of the income of Germany and other EU economic leaders is derived from the part of private demand that is subsidized under this system. In other words, its liquidation means a rapid collapse of the German economy (and the EU) with all the ensuing consequences!

The reasoning that the "Trump plan" will not be implemented can be accepted only in one case: if an alternative plan is proposed. But in this case, we can recall the continuation of the basic rule of strategy in chess, which we put in the title of this review: the only thing worse than having no plan is having two plans at the same time. Thus, it will be possible to raise only one question: when?

We treat both this geopolitical issues as gold-friendly.

Conclusion:

In recent few weeks we see more and more headlines dedicated to supposed "adjustments" of US statistics. Still, the majority treat numbers directly, without any critical mind, which leads to corresponding market reaction across the board. As a result, it is a question - how reliable these moves are? On all markets, no matter it is Gold, FX, DXY or whatever. Because if we get "fake" collapse then we have to worry on opposite action, because data could be revised. Situation becomes more evident that US economy situation is becoming worse. More and more analysts appeal to "simple math", which evidently shows inability of US Treasury and the Fed to resolve problems of rising budget deficit, dept without another money printing or QE, if you like it more. Soon, this view might become a dominant across the board. Especially if we get some "surprising" drawdowns in NFP numbers or "mystery" spikes in inflation data. A lot of mismatches now are accumulating because of artificial correction of statistics. We've talked a lot about them in job market (NFP vs vacancies, real wage, av. work week etc), inflation (CPI vs wage inflation, PCE, GDP deflator), growth (GDP vs. Retail Sales, ISM etc.). All these stuff is becoming more evident and soon only blind will not sign it. It means that chaos measure, entropy scale is increasing, which should lead to high volatility on the market. It will be more difficult to use technical analysis and make daily/intraday trading. Still, things that we've mentioned today, and overall tendency among economists, analysts, market society slowly but stubbornly is coming to Fed and US Treasury disclosure.

To be honest, guys, I've been caught up on the thought, that if I would know that Fed just add money to the system digitally without booking them in account - I wouldn't be surprised. If you not book it, statistics doesn't see it, M3 money supply indicator is not supported anymore. Banks just get unregistered money off the balance and put it into the system. Say you could use off-balance hidden accounting. Only indirect and relative statistics analysis could recognize it and with big time lag...

Overall global situation tells that gold is the last thing that is real in modern world. Now we should think about "return of the investments", saving what we have, instead of "return on the investments". Besides, with such an inflation level, economical and geopolitical turbulence, return could be not worthy of the risk that we would have to take, say, buying stocks now. Obviously we do not have any reasons to change our view, suggesting that now is good opportunity for gold investments and any deep is worthy to consider for accumulating and more investments.
 
Technical
Monthly

Taking in consideration possible statistics manipulation, recent strong upward action, we have more reasons now to treat current action just a pullback and consider it as a good chance to increase investments in gold. This week we have no drastic shifts on monthly chart. Everything mostly goes with the plan - precise turn around 1950 and action back to YPP around $1836.

Still as majority of market society trusts to the Fed and statistics agencies' tales, we have reason to count on deeper downside action. Let's see.

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Weekly

On weekly gold we have many similar things to EUR analysis. The same reversal bar, first close below 3x3 DMA, but action is a bit stronger. Still, major 3/8 FIb level is not reached. It means as Gold as EUR keep chances for DRPO "Sell" pattern as well.
Next week we get CPI numbers, trend stands bullish and market could start flirting with MACDP, potentially forming the bullish grabber. This is what we also have to keep an eye on. Mostly conclusion is the same - appearing of the grabber and upside turn stands in favor of DRPO "Sell" reversal top, while direct downside drop to 1828 support area could give us B&B "Buy" pattern. Both are great for trading. Gold is not oversold here.
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Daily

Here I would treat performance as indecision with light bearish advantage. Indeed, price has neither started upside reaction on strong support nor shown downside breakout. Multiple spikes suggest that bears keep pressure on the market, as well as reversal bar. 1870 support level seems to not broken yet as well. Coming CPI data could change everything, so here it makes sense to wait for more clarity. We do not miss anything as we have potential great trading setups on a weekly chart - large scale, extended swings.

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Intraday

For gold intraday chart we could make the same conclusion as for EUR. Although it seems we shouldn't been worry about stronger upside action on Friday, but lows are not broken, price returns back. Friendly CPI could lead to appearing of, say, reverse H&S pattern and a bit stronger upside bounce. It is too slow and weak reaction for the bears. Bearish action has to be stronger with direct downside breakout. So, it seems that recent drop is mostly the rest of previous downside momentum, but not a continuation, not an extension yet. So, the pullback still could happen, and now it would be better wait for some evidence, patterns maybe.
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Good morning,

Gold has minimal changes compares to previous sessions. Nobody wants to take risk at the eve of CPI and other important data releases. Situation stands a bit tricky. Today, in FX video we've discussed bullish cross market divergence. Here, the price action is also a bit strange - after Fib level has been broken, bears have not increased the success, but taken the pause. If we wouldn't have CPI, I call for short entry. But right now market is waiting:
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On 4H/1H chart we also have bullish divergence, but I would rely on it too much. If we're correct with our suspicions then we could get reverse H&S pattern. If not - we keep an eye on next support area and weekly B&B "Buy", according to our weekly trading plan:
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Greetings everybody,

So, Gold looks more heavy compares to FX market and it seems our worryings concerning upside spike were in vain. We haven't got any like on GBP and EUR. So if you have taken short position ignoring our doubts - that's great.

Gold performance actually is another reason why I think that EUR H&S pattern could fail (watch today's EUR video). Now it is confidently moving lower to the next support area around 1825-1830. Recall, that this is our major level where weekly B&B "Buy" could start. This is perfect area - K-support and daily oversold, which tells that it also should be a floor for this trading week:

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On 4H chart we also have COP target around:
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Since it is too late to sell and too early to buy - our plan is to wait when support will be reached and then look for reaction. Our interest is to get evidence of upside reversal to take long position confidently. With Retail Sales and PPI ahead, something should happen probably.
 
Greetings everybody,

So, yesterday's plan accurately has been completed - market hits intraday COP target around 1828$. It was a brief touch on daily K-support area:
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Since the daily/intraday picture is a part of our long-term analysis and we're watching for weekly B&B "Buy" starting point, now we need to get clear signs of upside bounce/reversal around 1820-1830 area. This should give us the entry point:
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Pattern should be more or less extended, it should not be just a candlesticks pattern. Now on 1H chart we just have downside channel, so let's keep watching. We do not consider short positions here, as market is at strong support area:
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Greetings everybody,

So, PPI supports downside trend on gold market as well and currenty we're coming to culmination. Price now is flirting with daily K-area and this is potential level where weekly B&B "Buy" could start:
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Downside COP has been completed as well:
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But, unfortunately we do not have yet any bullish reaction on 1H chart:
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Reaching of the level is important, but this is only 1st stage. Now we're going to 2nd one - appearing of the pattern. We need to see bullish reaction here to be sure that B&B is really starting. Besides, pattern appearing has pure pragmatic meaning - it gives us clear points for entry, stop placement and safe a lot of many due tight stop level.
So, it seems that we have to patient and wait a bit more until reaction will appear (or level will be broken, B&B cancelled.)
 
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