GOLD PRO Weekly January 13-17, 2014

[Sive Morten]

Fundamentals
Gold rose 1.5 percent on Friday, cementing a third consecutive weekly gain, after disappointing U.S. jobs data stirred speculation the Federal Reserve will take a gradual approach to tapering its bond-buying stimulus this year. The dollar fell broadly and the S&P 500 equities index was flat after a closely watched Labor Department report showed U.S. employers in December hired the fewest number of workers in almost three years. U.S. nonfarm payrolls rose just 74,000 in December, the smallest increase since January 2011, while the unemployment rate fell 0.3 percentage point to 6.7 percent as more people left the labor force. Analysts said that falling U.S. labor participation is likely to prompt the Fed to be cautious in trimming its stimulus after the central bank opted to cut its bond purchases for the first time in December. In addition, gold could be further underpinned by falling equities prices following last year's tumble in bullion prices and stock markets' record run-up, analysts said.
"As the stock market declines, hedge funds and momentum traders are taking profits off their equities positions and rolling them into gold," said Jeffrey Sica, chief investment officer at New Jersey-based Sica Wealth, which manages more than $1 billion in client assets. For the week, gold was up almost 1 percent, extending its rise to a third consecutive week, its longest weekly winning streak since August.
Other analysts, however, said the weaker-than-expected U.S. jobs data will boost gold prices in the short term only, because an overall improvement in the U.S. economic outlook and a rising interest-rate environment will weigh on the metal's price. "Gold has been on the firm side this year and this data helps support that but the effect is being moderated by the fact that the Fed has begun tapering ... nobody is now thinking the U.S. economy is near collapsing," Macquarie analyst Matthew Turner said.

Monthly
January has started with upward action. Still changes are shy here. Trend holds bearish. As on EUR, here I also have drawn new yearly Pivot Points. Appearing of 1361 Yearly PP could get special meaning from possible retracement point of view. It could become possible nearest upside target. Yearly PR1 is also very significant. 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, why it can’t reach overbought? This is very typical action for any market.
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. In fact current move up could be the last chance for possible upward bounce, if, say, market will show something like double bottom. Currently price action is very suitable for that – W&R of first bottom. This action in general is very typical for double bottoms and fake breakout could be the first sign of possible retracement up. Bearish market has no other reasons to stop right here, since there is no support right now – it has passed through 3/8 support, it’s not at oversold. Currently we should keep a close eye on move up. Now I’m gravitating to the thought that there really was W&R. Comex data is more reliable than just some Retail Forex broker, even Alpari UK.

Weekly
Trend has shifted bullish here. Upward action couldn’t get solid momentum yet. Price move is very gradual. Initially we’ve thought that this could become butterfly “buy” pattern, but it also could be “222” Buy, since if we’ve suggested that AB=CD has been completed and W&R really has happened, this could be double bottom. Also take a look, we have solid bullish divergence with MACD. By treating valleys as AB=CD pattern we’ll see that minor extension stands almost right at Yearly Pivot Point, and 1.618 extension stands slightly higher than Yearly PR1. This is really interesting agreement. Weekly chart points that we should search possibility for long entry. Odds suggest that after AB=CD completion market usually shows at minimum 3/8 retracement, and on the weekly chart this will be not small move. This, of cause, makes sense only if W&R of 1180 lows really has happened. If we will be wrong with this suggestion then we will get the trap that we’ve discussed previously.

Daily
It is difficult to add something really new here. Anyway analysis will stand around this possible H&S pattern. Trend holds bullish here and price has come up to expectations. Recall that we’ve said – if market is really bullish and trying to shift long-term sentiment, it should not at any case turn down again right now, because this could become an end for any bullish perspectives. Price should not show any unreasonable and sudden downward returns when it forms reversal pattern. Otherwise this pattern will loose foundation. So price has held above MPP that simultaneously was neckline of intraday Double Bottom pattern and kept chances for upward continuation.
Thus, in nearest day we have to keep an eye on move to 1250-1267 that is neckline, Fib resistance and MPR1. Scalpers could try to find bearish setups there, since according to our plan price should return right back down to 1217-1220 area – where should spear the valley of right shoulder. But for daily traders major concern stands around chances for long entry by this reverse H&S pattern. So, for day-traders major activity still stands in the future.

4-hour
So trend still holds bullish here. As market has held above neckline of Double Bottom pattern and that was former WPP, it has kept chances for greater reversal pattern on daily time frame chart. Now we have AB-CD pattern in progress with minimum target at 1257 that almost coinsides with WPR1=1260. That’s the setup for Monday. Unfortunately we will not get butterfly “sell” pattern here, since market already has exceeded previous high. If any retracement will happen prior target reaching, it will be better if price still will remain above WPP.

Conclusion:
Market still preparing and preparing possible solid reversal pattern on daily thus, it looks like major events will follow a bit later. But right now we already can see interesting agreement between possible upward targets and Yearly Pivots.
Meantime, in shorter-term perspective, on current week we will watch how market will form right shoulder of possible reversal H&S pattern.

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.

 

[Sive Morten]

Gold Daily Update Tue 14, January 2014

Good morning,
Gold is entering in our resistance zone that includes WPR1, MPR1 and also works as neckline of possible reversed H&S pattern. This area is interesting for us by two reasons. First is as short-term area for possible scalp short position and second and major one - as confirmation of H&S pattern, if price will bounce down from here:

4-hour chart shows nice bullish action that add confidence with possible reaching 1260 area. Take a look that price just re-tested broken highs and haven't moved any further. Now we have AB=CD action with minor 0.618 extension around WPR1. As this is minor extension, market should reach it with solid probability:

On hourly chart situation looks very similar to EUR. Here also could be either Butterfly "sell" or 3-Drive that has target approximately in the same area as daily neckline stands. So let's see, whether we will get nice pattern to take scalp short position here:

 

[Sive Morten]

Gold Daily Update Thu 15, January 2014

Good morning,
as EUR gold has shown downward action, but here it looks shyer and not as reliable as on EUR, especially if we will take into consideration situation on weekly chart. Particularly speaking, guys, I'm not ready to rely on this action down and tell that market stands on the way to 1220 low. Not yet, probably. This move down is just a reaction on MPR1 challenge:

On 4-hour chart you can see the reason, why I still expect another leg up. Major reason is that price has not reached even minor 0.618 AB-CD extension that stands few cents higher. We feel comfortable when reversal happens after touching targets but not prior ones.
Second - we have bearish rising wedge in progress right at solid daily resistance and accompanied by MACD divergence. This is nicely looking setup, but it is not finished yet. Thus, keep an eye on gold market. As final leg up will happen - that probably could become our setup for short entry. We will discuss it tomorrow:

 

[Sive Morten]

Gold daily update, Thu 16, January 2014

Good morning,
changes come slowly on Gold market. Yesterday we've discussed that current move down could be as just retracement as start of right shoulder. There no solid reasons to treat it as right shoulder yet. Mostly because we have uncompleted pattern and target on lower time frame. Here, on daily, as well - this could be just minor reaction on reaching WPR1. Bearish engulfing pattern that was formed here has reached minimum target already. Besides, price has not exceeded harmonic down swing and this move still could be treated as retracement:

On 4-hour chart we can see these objects - wedge and uncompleted AB=CD 0.618 minor extension. That makes me think that chances on possible move to 1255-1260 area still exist.

But, guys, honestly speaking, we do not care how market will start move down - either right now or from 1260, because our primary interest is 1210-1220 area where the bottom of right shoulder should appear. Yes, we will be a bit more lucky if market still will show move to 1260, because in this case we will be able to take scalp short position as well. But if this will not happen - I will not be upset too much.
Currently idea of taking short position is not fascinating for me by reasons that we've just discussed. Another moment here is too far stop that has to be placed if we would enter short right here.
Thus, conclusion as folllows - continue to watch when market will reach 1210-1220 area. If somehow price will reach 1255-1260 area, we will search some bearish reversal patterns there and see whether we will be able to enter short...

 

[Sive Morten]

Gold Daily Update Fri 17, January 2014

Good morning,
on first glance we see nothing new on daily chart. And this is trully so. But today Iv'e taken look at AUD again and bingo - AUD has shown solid plunge down and re-new weekly lows. Recall that AUD has predicted W&R and upward action on gold as well. At the same time there is not 1:1 correlation. May be AUD only has started to form reverse H&S and now is forming the head of the pattern, while gold is approaching to form right shoulder. We will see, but anyway this is a bit warning sign and need to be watched in nearest future:

On 4-hour chart we still see the same wedge, divergence and attempt to move higher. But this move up is too gradual, this is not an impulse move and mostly reminds retracement at the eve of downward continuation. If this really will happen, all that we still need to do is monitor action around 1210-1220 area:

On hourly chart we see this really gradual action. Market is forming AB=CD pattern that potentially has target right at lower trendline of wedge and could become a part of larger "222" Sell pattern here. Also AB=CD creates an Agreement with 5/8 Fib resistance area. Thus, if you're thinking about short position - pay attention to this area around 1247.

 

[gpeter991]

Sive, when you say that the h&S pattern is obvious, and market participants see it, is there a possibility that it does not form at all and the price action goes down from current levels?

 

[Sive Morten]

Sive, when you say that the h&S pattern is obvious, and market participants see it, is there a possibility that it does not form at all and the price action goes down from current levels?

Well, this could happen, but market also could continue move up without right shoulder, right? Obvious pattern is not always bad issue. Because as pattern becomes obvious as it's failure will be obvious too. That's why we wait the point where our potential loss will be minimal, i.e. the valley of right shoulder.
And then we will see. Usually when real reversal is starting on long-term charts, even obvious patterns work.

 

[gpeter991]

thank you Master Sive, we learn every day.

 

[pragmatic]

61.8

It is just a thought so I wanted to share.
It is not very characteristic but maybe ABC to the 61.8 already have happened, so this is a good opportunity to go short ON THE HOURLY 222.