Sive Morten
Special Consultant to the FPA
- Messages
- 18,776
Fundamentals
(Reuters) Gold held steady on Friday, after rising over one percent in the previous session, as equities fell on weak corporate results and the dollar eased but the metal remained on course for a second straight weekly decline.
* Spot gold edged up 0.1 percent at $1,332.56 an ounce at 0051 GMT. Bullion rose 1.2 percent on Thursday, but was down about 0.4 percent for the week
* U.S. gold was up 0.1 percent at $1,332.80 an ounce.
* Asian stocks dipped early on Friday after weak corporate results halted Wall Street's record run overnight, while the yen held to large gains made after the Bank of Japan's governor downplayed the need for "helicopter money" monetary policies.
* The ECB held rates at record lows as it seeks to revive growth and inflation with cheap credit to the economy. It left the door open to more policy stimulus, highlighting "great" uncertainty and abundant risks to the economic outlook.
* According to a BBC interview, recorded mid-June but broadcast on Thursday, BOJ Governor Haruhiko Kuroda ruled out the idea of using "helicopter money" - or directly underwriting the budget deficit - to combat deflation.
* The U.S. Federal Reserve will wait until the fourth quarter before raising interest rates, likely in December after the presidential election, according to a Reuters poll which once again showed subdued inflation expectations.
* U.S. home resales hit their highest in nearly 9-1/2 years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy's strength.
* Confidence in prospects for the global economy has been dented following Britain's vote to leave the European Union, with a growing view that monetary policy is a fading force and many governments now need to borrow and spend, Reuters polls showed.
Technicals
Monthly
July currently has very limited impact on overall picture. Right now it slowly takes the shape of "shooting star" pattern. Although it doesn't prove that retracement could be as far as 1180 area, but at the same time it gives a hint that downward action could continue in August as well. Still candle has not closed yet and situation still could change.
Technically current upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.
As market slightly has moved above YPR1 and our K-resistance area, something is starting to form here, I mean pattern by which long-term global trend could change on gold.
Take a careful look at the picture - could you recognize here possible reverse H&S pattern? Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
Finally take a look at action on downward slope and upward one of the head - last move down was slower than current move up. All these moments point on possible H&S pattern here.
If we really will get it - then we could make an assumption on possible depth of retracement. Now the bottom of shoulder stands approximately around 1160 area...
Now market is approaching to major, all time 3/8 Fib resistance @ 1380 level. First reaction already has followed, as gold has dropped. But this drop has not taken the shape of tendency yet. Let's see how situation will change in coming 1-2 weeks:
Weekly
Based on analysis of monthly chart, we probably should be focused on searching downward reversal patterns, that could confirm (or destroy, may be) our thoughts on monthy pattern.
Here guys, again, we have only some hints. It seems that something is forming here, some really important thing will follow, and probably soon, but not yet, as market just has finished upside action.
There are two important things here. First one forbids us to go long - weekly overbought and reaching of 1.618 extension of recent retracement down. Second - again, the same 1.618 ratio and hint on H&S, but now on direct one, bearish reversal pattern.
Weekly chart also shows that the bottom of downward retracement will be around 1160-1170 as here we have major 5/8 Fib support. And also we could get some opinion on the shape of retracement. H&S usually suggests some AB=CD down, based on the head and on right shoulder.
So, everything that we've said last week is valid today as well. Now our former analsys is adjusted by bearish engulfing pattern right at the top of our construction here. Taking all this stuff together, we probably could start searching chances to go short. Usually after engulfing pattern has been formed, price shows minor return back inside its body. Thus, this could give us oportunity to take short position. Bearish divergence right at monthly resistance also brings more confidence with this setup:
Daily
Following the same logic and setup that we've created on weekly chart, here we could suggest how in particular gold could show this "upside" shy return.
Daily trend is bearish, but market has reached 50% Fib support and created bullish engulfing pattern. Usually it has target that equals to the length of its bars. At the same time we here have recognizable shape of H&S pattern that still awaits of appearing of right shoulder around 1350-1360 area. This corresponds to what we've said on weekly chart. Thus, daily bullish candlestick pattern could put a foundation for upward action:
4-hour
Here we have very useful picture. Recall our bearish dynamic pressure that we've traded last week. Here is an explanation why it has worked at all. Take a look that gold had 1.618 uncompleted target slightly below and dynamic pressure was a preparation to hit it. As soon as target has been hit - gold immediately has turned up.
Right under the neckline of our H&S pattern stands very strong support, that includes K-area and MPP. Currently it is not very important for us, but it could be imortant later.
Now we also have bullish divergence with MACD that also hints on possible upside action. Watch for bullish grabbers on Monday. If we will get any - this will be very important and almost guarantee starting of upside action to the top of right shoulder:
Hourly
Here is the pattern that we will use to monitor upward action. Scalp traders could use it for long entry as well. This is reverse H&S pattern. Right now gold stands at most "responsible" moment - bottom of right shoulder. Here is the moment where clarity should come, whether H&S pattern will work or fail.
As you can see gold has formed minor bearish grabber that suggests new low before upside reversal. Probably price will reach major 5/8 Fib support level. As you can see all picture right from monthly chart through hourly one looks very harmonic and shows single setup. Now you easily could combine the whole process up from hourly chart to monthly one:
hourly reverse H&S should lead us to 1360 area - top of 4-hour H&S pattern. By this action daily engulfing will be completed as well. This upward action is minor move up inside weekly bearish engulfing. As soon as it will be completed major downward action should start. On this way down 4-hour H&S probably will be completed and we will shift to weekly larger H&S pattern. This pattern, in turn, will lead us to the bottom of right shoulder of monthly reverse H&S and this will be major point to take positions with long-term bullish trend around 1160-1180 area... Looks really nice.
Conclusion:
We continue to keep long-term bullish view on gold market. But now chances on deep retracement are very high due combination of as sentiment as technical moments. Partially we even could recognize thrilling pattern on monthly chart which brings more clarity and shows definite levels to watch for. Now is the major question whether it will be formed or not.
In short-term perspective gold shows amazingly harmonic structure of different pattern. Next week we will work with upside action to 1360 area.
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.
(Reuters) Gold held steady on Friday, after rising over one percent in the previous session, as equities fell on weak corporate results and the dollar eased but the metal remained on course for a second straight weekly decline.
* Spot gold edged up 0.1 percent at $1,332.56 an ounce at 0051 GMT. Bullion rose 1.2 percent on Thursday, but was down about 0.4 percent for the week
* U.S. gold was up 0.1 percent at $1,332.80 an ounce.
* Asian stocks dipped early on Friday after weak corporate results halted Wall Street's record run overnight, while the yen held to large gains made after the Bank of Japan's governor downplayed the need for "helicopter money" monetary policies.
* The ECB held rates at record lows as it seeks to revive growth and inflation with cheap credit to the economy. It left the door open to more policy stimulus, highlighting "great" uncertainty and abundant risks to the economic outlook.
* According to a BBC interview, recorded mid-June but broadcast on Thursday, BOJ Governor Haruhiko Kuroda ruled out the idea of using "helicopter money" - or directly underwriting the budget deficit - to combat deflation.
* The U.S. Federal Reserve will wait until the fourth quarter before raising interest rates, likely in December after the presidential election, according to a Reuters poll which once again showed subdued inflation expectations.
* U.S. home resales hit their highest in nearly 9-1/2 years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy's strength.
* Confidence in prospects for the global economy has been dented following Britain's vote to leave the European Union, with a growing view that monetary policy is a fading force and many governments now need to borrow and spend, Reuters polls showed.
Technicals
Monthly
July currently has very limited impact on overall picture. Right now it slowly takes the shape of "shooting star" pattern. Although it doesn't prove that retracement could be as far as 1180 area, but at the same time it gives a hint that downward action could continue in August as well. Still candle has not closed yet and situation still could change.
Technically current upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.
As market slightly has moved above YPR1 and our K-resistance area, something is starting to form here, I mean pattern by which long-term global trend could change on gold.
Take a careful look at the picture - could you recognize here possible reverse H&S pattern? Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
Finally take a look at action on downward slope and upward one of the head - last move down was slower than current move up. All these moments point on possible H&S pattern here.
If we really will get it - then we could make an assumption on possible depth of retracement. Now the bottom of shoulder stands approximately around 1160 area...
Now market is approaching to major, all time 3/8 Fib resistance @ 1380 level. First reaction already has followed, as gold has dropped. But this drop has not taken the shape of tendency yet. Let's see how situation will change in coming 1-2 weeks:
Weekly
Based on analysis of monthly chart, we probably should be focused on searching downward reversal patterns, that could confirm (or destroy, may be) our thoughts on monthy pattern.
Here guys, again, we have only some hints. It seems that something is forming here, some really important thing will follow, and probably soon, but not yet, as market just has finished upside action.
There are two important things here. First one forbids us to go long - weekly overbought and reaching of 1.618 extension of recent retracement down. Second - again, the same 1.618 ratio and hint on H&S, but now on direct one, bearish reversal pattern.
Weekly chart also shows that the bottom of downward retracement will be around 1160-1170 as here we have major 5/8 Fib support. And also we could get some opinion on the shape of retracement. H&S usually suggests some AB=CD down, based on the head and on right shoulder.
So, everything that we've said last week is valid today as well. Now our former analsys is adjusted by bearish engulfing pattern right at the top of our construction here. Taking all this stuff together, we probably could start searching chances to go short. Usually after engulfing pattern has been formed, price shows minor return back inside its body. Thus, this could give us oportunity to take short position. Bearish divergence right at monthly resistance also brings more confidence with this setup:
Daily
Following the same logic and setup that we've created on weekly chart, here we could suggest how in particular gold could show this "upside" shy return.
Daily trend is bearish, but market has reached 50% Fib support and created bullish engulfing pattern. Usually it has target that equals to the length of its bars. At the same time we here have recognizable shape of H&S pattern that still awaits of appearing of right shoulder around 1350-1360 area. This corresponds to what we've said on weekly chart. Thus, daily bullish candlestick pattern could put a foundation for upward action:
4-hour
Here we have very useful picture. Recall our bearish dynamic pressure that we've traded last week. Here is an explanation why it has worked at all. Take a look that gold had 1.618 uncompleted target slightly below and dynamic pressure was a preparation to hit it. As soon as target has been hit - gold immediately has turned up.
Right under the neckline of our H&S pattern stands very strong support, that includes K-area and MPP. Currently it is not very important for us, but it could be imortant later.
Now we also have bullish divergence with MACD that also hints on possible upside action. Watch for bullish grabbers on Monday. If we will get any - this will be very important and almost guarantee starting of upside action to the top of right shoulder:
Hourly
Here is the pattern that we will use to monitor upward action. Scalp traders could use it for long entry as well. This is reverse H&S pattern. Right now gold stands at most "responsible" moment - bottom of right shoulder. Here is the moment where clarity should come, whether H&S pattern will work or fail.
As you can see gold has formed minor bearish grabber that suggests new low before upside reversal. Probably price will reach major 5/8 Fib support level. As you can see all picture right from monthly chart through hourly one looks very harmonic and shows single setup. Now you easily could combine the whole process up from hourly chart to monthly one:
hourly reverse H&S should lead us to 1360 area - top of 4-hour H&S pattern. By this action daily engulfing will be completed as well. This upward action is minor move up inside weekly bearish engulfing. As soon as it will be completed major downward action should start. On this way down 4-hour H&S probably will be completed and we will shift to weekly larger H&S pattern. This pattern, in turn, will lead us to the bottom of right shoulder of monthly reverse H&S and this will be major point to take positions with long-term bullish trend around 1160-1180 area... Looks really nice.
Conclusion:
We continue to keep long-term bullish view on gold market. But now chances on deep retracement are very high due combination of as sentiment as technical moments. Partially we even could recognize thrilling pattern on monthly chart which brings more clarity and shows definite levels to watch for. Now is the major question whether it will be formed or not.
In short-term perspective gold shows amazingly harmonic structure of different pattern. Next week we will work with upside action to 1360 area.
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.