Sive Morten
Special Consultant to the FPA
- Messages
- 18,673
Fundamentals
On passed week there were some events that significant in general, but had only slight impact on gold market. Let’s start from US Data on consumer spending and confidence, factory activity that has pointed on pickup in economy growth. Although Bernanke was hurry to calm down markets by statement that Fed doesn’t see yet reasons for closing QE program and turn to more hawkish policy – this had no expectable impact. We’ve discussed that previous FOMC voting has carried real surprise when votes on QE outlook are divided. Investors still believe that better U.S. outlook could prompt the Fed Reserve to halt its stimulus earlier than expected. Whatever Big Ben says – votes are split and this fact remains. It just means that situation is changing per se and when Fed will announce closing of QE officially – this is just a question of time.
Second issue is about US Budget spending cuts across the board. U.S. lawmakers have so far failed to agree on a comprehensive budget plan to reduce the government deficit. Since this initiative is not new and the failure to find a compromise on the way how will be better to accomplish it, this had moderate impact on gold prices. What is a real interesting is that new debates on US Debt ceil should come on May and the fact that the Republicans and Democrats have been unable to agree on that boast poorly for their ability to come on agreement over the debt ceiling. Thus Analysts now closely monitor how a divided Congress will deal with the next debt ceiling, which is scheduled to come into effect on May 18. Interestingly that gold rallied to an all-time high in September 2011 a month after the United States lost its “AAA” rating that year.
So the major driven force for gold market will remain US economy data and changing Fed rhetoric. Most investors are careful with radical assessment of current situation on Gold. There are different opinions now from those who think that gold could show deep retracement to 1200-1300 level (we’ve discussed this either on previous week) to those who think that retracement can finish as fast as it has started and may be Gold is forming Double Bottom on daily time frame. Since there is no agreement on spending sequestering – if debt will continue to rise this will support gold prices in long term perspective.
Still all ETF across the board confirm by holding statistics that this is one among greatest outflows on Gold market. Hedge funds have made significant withdrawals and ETF sold out their holdings. Thus SPDR ETF has contracted holdings more than for 70 tones in 2 weeks.
As we will see from charts below – speculators partially have re-established longs but this has happened at decreasing of Open Interest. This is more common with retracement action rather than trend. So this situation indirectly hints on potential downward continuation.
Latest COT Report shows this recovery – speculators’ position slightly increases but this happens amid decreasing of Open Interest.
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Analysis of SPDR Fund holdings with Gold price shows dramatic decrease that supports overall bearish sentiment now.
Final chart is comparing Open Interest with Gold Price. This comparison is rather pointedly. While previously Open Interest has decreased when gold prices reduced – now this relation is opposite. Open Interest decrease when price bounce and has increased when gold dropped on previous week. This is very typical for retracement behavior. Now is difficult to prove something, but I have a feeling that this is not the end point of gold’s decline yet.
As a conclusion we probably can state that passed week news had a moderate impact on the market and has not drastically changed overall sentiment. Market remains bearish unless the bearish euphoria downs a bit and is becoming more reasonable.
Monthly
There are no much changes on monthly chart. Trend holds bearish here. Since March has started market has left the oversold condition and from that point of view can continue move down. Previous action and February month showed solid bearish power. As we see in previous month – gold rather significant penetrated oversold line and definitely it can do this again. Previous two touches of oversold market has pierced it for 50-70$ per contract. As we’ve said on previous week, it is difficult to predict – will market try to reach 1535 support and Yearly pivot support 1 by some spike or not, but what we can say – it hardly will pass this level at oversold. Also take a look that all price action holds almost for 2 year in a range of black candle of September 2011. It’s high and low levels now become extremely important, because it could be really significant move after breakout of the low. Harmonic swings also point on 1530 area. So, next target here is 1530, while we still should keep in mind really big picture and possible retracement even to 1200+ area.
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Weekly
Trend is bearish on weekly chart. Market has shown the bounce up on previous week from monthly oversold, 0.88 support and 1.618 weekly AB-CD target – rather strong support area. It looks like gold holds harmonic swings rather good – as downward as upward, but retracement up hasn’t quite reached the area that we’ve talked about – 1630-1642. Will it happen? Difficult to say based solely on weekly chart – no patterns, no leads, except may be reversed hammer pattern. Probably we have to search answer on lower time frames. Take a note that MPS1 stands in agreement with yearly Pivot support 1 around 1530 area.
Daily
On daily time frame unfortunately we do not have any solution yet – will it be deeper retracement up, or market will continue move down. Still, we can create trading plan, at least how to deal with significant levels. Here we see bearish dynamic pressure, when market has turned trend to bullish, but price action is bearish. Also market has erased stop grabber that we had on Friday. All these moments tell that market probably could fail with AB-CD move that I’ve drawn here and continue move lower.
If this will be the case – take a look at WPS1 stands slightly lower than previous swing low and this level will become extremely important. That will be next situation to watch. If market will form W&R of this low right around WPS1 – this could turn to double bottom pattern on daily and lead to even greater retracement up. I’m still talking about this deeper pullback, because monthly oversold shouldn’t pass without any significant retracement on lower time frames, especially from solid support area on weekly chart. I suspect that situation is more delicate than it seems on first glance.
1-hour
Here there are still some hints on possible retracement start. In general this later recovery on Friday looks like bullish engulfing pattern at 4-hour time frame. Here it could be treated as a bit ugly reverse H&S pattern. The one thing that doubts me a bit – is 1.618 AB-CD extension that slightly has not been touched. At the same time market has shown already greater upward swing and has broken bearish tendency. So, may be it will be safer to take long position only if market will pass above the neckline and red circle highs. If we will start to catch current retracement, we can get move to 1.618 extension against us, or even downward continuation to WPS1, that is also possible. So, probably it will be safer to take long either if market will break above red circle’s highs or wait for W&R of previous lows on daily and hope on possible Double Bottom pattern there.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Conclusion:
Due to additional fundamental moments market could reach 1530 support earlier than expected and in perspective we can’t exclude even move to 1200-1300 area.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why deeper retracement is still possible.
Very probable that it could come either as AB=CD or as double bottom on daily chart. We can start to speak about failure and re-establishing move to 1530 only if market will fail with this retracement and drop below current lows on daily time frame.
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 passed week there were some events that significant in general, but had only slight impact on gold market. Let’s start from US Data on consumer spending and confidence, factory activity that has pointed on pickup in economy growth. Although Bernanke was hurry to calm down markets by statement that Fed doesn’t see yet reasons for closing QE program and turn to more hawkish policy – this had no expectable impact. We’ve discussed that previous FOMC voting has carried real surprise when votes on QE outlook are divided. Investors still believe that better U.S. outlook could prompt the Fed Reserve to halt its stimulus earlier than expected. Whatever Big Ben says – votes are split and this fact remains. It just means that situation is changing per se and when Fed will announce closing of QE officially – this is just a question of time.
Second issue is about US Budget spending cuts across the board. U.S. lawmakers have so far failed to agree on a comprehensive budget plan to reduce the government deficit. Since this initiative is not new and the failure to find a compromise on the way how will be better to accomplish it, this had moderate impact on gold prices. What is a real interesting is that new debates on US Debt ceil should come on May and the fact that the Republicans and Democrats have been unable to agree on that boast poorly for their ability to come on agreement over the debt ceiling. Thus Analysts now closely monitor how a divided Congress will deal with the next debt ceiling, which is scheduled to come into effect on May 18. Interestingly that gold rallied to an all-time high in September 2011 a month after the United States lost its “AAA” rating that year.
So the major driven force for gold market will remain US economy data and changing Fed rhetoric. Most investors are careful with radical assessment of current situation on Gold. There are different opinions now from those who think that gold could show deep retracement to 1200-1300 level (we’ve discussed this either on previous week) to those who think that retracement can finish as fast as it has started and may be Gold is forming Double Bottom on daily time frame. Since there is no agreement on spending sequestering – if debt will continue to rise this will support gold prices in long term perspective.
Still all ETF across the board confirm by holding statistics that this is one among greatest outflows on Gold market. Hedge funds have made significant withdrawals and ETF sold out their holdings. Thus SPDR ETF has contracted holdings more than for 70 tones in 2 weeks.
As we will see from charts below – speculators partially have re-established longs but this has happened at decreasing of Open Interest. This is more common with retracement action rather than trend. So this situation indirectly hints on potential downward continuation.
Latest COT Report shows this recovery – speculators’ position slightly increases but this happens amid decreasing of Open Interest.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Analysis of SPDR Fund holdings with Gold price shows dramatic decrease that supports overall bearish sentiment now.
Final chart is comparing Open Interest with Gold Price. This comparison is rather pointedly. While previously Open Interest has decreased when gold prices reduced – now this relation is opposite. Open Interest decrease when price bounce and has increased when gold dropped on previous week. This is very typical for retracement behavior. Now is difficult to prove something, but I have a feeling that this is not the end point of gold’s decline yet.
As a conclusion we probably can state that passed week news had a moderate impact on the market and has not drastically changed overall sentiment. Market remains bearish unless the bearish euphoria downs a bit and is becoming more reasonable.
Monthly
There are no much changes on monthly chart. Trend holds bearish here. Since March has started market has left the oversold condition and from that point of view can continue move down. Previous action and February month showed solid bearish power. As we see in previous month – gold rather significant penetrated oversold line and definitely it can do this again. Previous two touches of oversold market has pierced it for 50-70$ per contract. As we’ve said on previous week, it is difficult to predict – will market try to reach 1535 support and Yearly pivot support 1 by some spike or not, but what we can say – it hardly will pass this level at oversold. Also take a look that all price action holds almost for 2 year in a range of black candle of September 2011. It’s high and low levels now become extremely important, because it could be really significant move after breakout of the low. Harmonic swings also point on 1530 area. So, next target here is 1530, while we still should keep in mind really big picture and possible retracement even to 1200+ area.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Weekly
Trend is bearish on weekly chart. Market has shown the bounce up on previous week from monthly oversold, 0.88 support and 1.618 weekly AB-CD target – rather strong support area. It looks like gold holds harmonic swings rather good – as downward as upward, but retracement up hasn’t quite reached the area that we’ve talked about – 1630-1642. Will it happen? Difficult to say based solely on weekly chart – no patterns, no leads, except may be reversed hammer pattern. Probably we have to search answer on lower time frames. Take a note that MPS1 stands in agreement with yearly Pivot support 1 around 1530 area.
Daily
On daily time frame unfortunately we do not have any solution yet – will it be deeper retracement up, or market will continue move down. Still, we can create trading plan, at least how to deal with significant levels. Here we see bearish dynamic pressure, when market has turned trend to bullish, but price action is bearish. Also market has erased stop grabber that we had on Friday. All these moments tell that market probably could fail with AB-CD move that I’ve drawn here and continue move lower.
If this will be the case – take a look at WPS1 stands slightly lower than previous swing low and this level will become extremely important. That will be next situation to watch. If market will form W&R of this low right around WPS1 – this could turn to double bottom pattern on daily and lead to even greater retracement up. I’m still talking about this deeper pullback, because monthly oversold shouldn’t pass without any significant retracement on lower time frames, especially from solid support area on weekly chart. I suspect that situation is more delicate than it seems on first glance.
1-hour
Here there are still some hints on possible retracement start. In general this later recovery on Friday looks like bullish engulfing pattern at 4-hour time frame. Here it could be treated as a bit ugly reverse H&S pattern. The one thing that doubts me a bit – is 1.618 AB-CD extension that slightly has not been touched. At the same time market has shown already greater upward swing and has broken bearish tendency. So, may be it will be safer to take long position only if market will pass above the neckline and red circle highs. If we will start to catch current retracement, we can get move to 1.618 extension against us, or even downward continuation to WPS1, that is also possible. So, probably it will be safer to take long either if market will break above red circle’s highs or wait for W&R of previous lows on daily and hope on possible Double Bottom pattern there.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Conclusion:
Due to additional fundamental moments market could reach 1530 support earlier than expected and in perspective we can’t exclude even move to 1200-1300 area.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why deeper retracement is still possible.
Very probable that it could come either as AB=CD or as double bottom on daily chart. We can start to speak about failure and re-establishing move to 1530 only if market will fail with this retracement and drop below current lows on daily time frame.
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.
