Sive Morten
Special Consultant to the FPA
- Messages
- 18,760
Fundamentals
On coming week we will have to recall again one of the major factors for gold – Fed position on US economy. When we’re speaking on gold, we need to separate major moments from minor and pure technical issues. Thus, as we’ve discussed previously there are three major long term factors for gold now:
– Fed view on US economy, that now is changing;
– May debates on US debt ceil;
– US budget sequestering and end of tax benefits period. We know that UK has turned to national debt reducing program but now this initiative does not show any positive result, even more – economy activity has reduced.
So, on coming week we again will stand with Fed meeting and assessment of US economy perspective. Based on CPI data on previous week that has shown just 0.2% inflation that is lower than in January, many investors think that it could be a signal that Fed probably will continue $85B inflows per month in considerable future. Still, we know that in previous month votes are divided. Although officially Bernanke tells that inactivity will be more expensive for economy than continued stimulus – some pressure and disagreement is growing among voting members. And as we’ve said previously this could lead to end of QE earlier than it was planned initially. In fact this is the major topic that will be closely monitored by investors on coming week.
Bounce up on EUR and Gold was triggered by this event, because previous trend down was solid, investors know what has happened on previous FOMC meeting, so they do not want to carry this risk and prefer stay flat in turmoil of meeting. In general accommodative monetary policies favor gold, because low interest rates encourage investors to put money into non-interest-bearing assets. That is what expected now, but some surprises from the Fed could follow.
Technical weakness of gold continues. Thus on previous week SPDR fund has lost 3.43 tonnes but reducing of holdings has slowed. CFTC data shows that speculators slightly have increased net long positions, but this increase was just nominal. Open interest grew for ~15K contracts – thus, investors have added to shorts greater amount still.
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Analysis of SPDR Fund holdings with Gold price as we said, shows slower but still contraction of physical gold in SPDR stores, even at growing price of gold. We understand that this is just a retracement, at least by now, but this fact is just another confirmation of this idea.
Since there was no significant price change on previous week, there is no drastical turns in Open interest with relation to price of gold. We see some increase in OI with just nominal price appreciation. But in general as we’ve said earlier, OI mostly indicates increasing of short position.
the end of fundamental part I just want to repeat some long-term issues that we’ve announced previously and that will dominate on gold market in considerable future I suppose.
Market participants gradually turns from just panic sell-off to reasonable contraction of positions in gold and already starting the preparation for money flow with anticipated US economy growth. Still, currently this early economy rally euphoria has significant risks – lack of consecutive positive data, Fed indecision concerning QE program, May US debt debates and long-term budget sequestering program that could just burke an economy with ending tax benefit program. Thus in short-term perspective looks bearish, but we should be careful in assessment of long-term trend and it is too early to say that long-term Gold bull trend is over. I do not even dare to suggest what will happen if economy will get a negative impact from budget savings program and what particularly Fed will be able to say. This will be totally blur situation. While ECB notes that recession in EU economy probably will increase in nearest future and having Italy downgrading I feel some lack of confidence to state that US economy will show flawless and tremendous growth.
Pure technically, as we’ve noted – even move to 1200-1300 will be just minor retracement to major 3/8 support level. But currently fundamentals point that in nearest future gold is bearish and probably downward move sooner or later will continue.
Monthly
There are no much changes on monthly chart. Trend holds bearish here. March action looks not very impressive; in fact it is inside small action compares to February. Besides, on previous week price stood in a tight range as well. Thus, all that we’ve said previously – we can repeat here again.
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 still stands at monthly oversold, 0.88 support and 1.618 weekly AB-CD target – rather strong support area. Couple valuable observations could be made here. As we’ve talked about it in daily updates on previous week – market stands at support on really big charts – monthly and weekly. Sometimes this leads to retracement that could take some more time, could be extended in time other words. That’s why previously I’ve said that we can’t exclude appearing some reversal pattern that will not be as fast as just single leg retracement or AB-CD retracement, pattern that could include another small leg down. Such pattern as butterfly “buy” for example. If this will be the case – price will reach major 1530 area and simultaneously clear out current lows, that is very typical for gold market. This is first observation.
Second is – market has not touched as MPP as destination of harmonic swing, so by some or other way retracement has not bad odds to come. Most probable destination point is 1630-1640.
Daily
Here on the chart you can see what I’m talking about – butterfly “Buy”. You may ask – why butterfly, why we can’t just expect the upward AB=CD, that we’ve discussed initially. Three reasons, guys and first, is bearish dynamic pressure. I do not have MACD here, but if you will plot it, you’ll see that trend has turned bullish 2 weeks ago, but look at price action – it stands flat. Yes, it shows small upward slope, but it’s not sufficient, it doesn’t show any impulse. Second is – gold likes to take out lows and highs and stop out positions around. 1555 is significant low and major low and support stands at 1536. Also take a look that daily oversold, yearly pivot support 1 and 1.27 extension of potential butterfly. That is second.
And finally – take carefully at current upward swing – it has the shape and action that is more typical for retracement. This is flat action, deep retracements, a lot of small candles with long shadows. If we treat as AB-CD, than probably it stands at minor 0.618 target and personally I wouldn’t take a bet on upward continuation right now, since CD leg is too flat compares to AB. This is sign of weakness.
4-hour
Now we’re shifting to most interesting staff. Here is much clearer view of flat action, compares to initial thrust up with AB leg. Current picture already looks bearish – we have engulfing pattern righ around 5/8 resistance and bearish divergence, so may be on Monday we will get reversal pattern here. From another point of view – market has not quite hit 0.618 extension of AB-CD pattern, that’s why some splash up is possible in a way of Butterfly “Sell” or something of that sort.
1-hour
From the other point of view – it already could be a reversal pattern, double top. Trend has turned bearish and mostly will depend on how market will behave around WPP and WPS1. Breakout through WPS1 will tell two things – first is that this is not just retracement down and second – this will trigger downward move, that could become a right wing of daily butterfly.
So, if you intend to take short position right now – place stop above 0.618 extension or even above 1.27 target of potential Butterfly “Sell” here. Conversly – wait either Double top confirmation or clear appearance butterfly Sell or may be some other pattern
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Conclusion:
Fundamental picture has not changed much, sentiment on gold market is moderately bearish and downward move should continue in long-term perspective, although it probably will be a bit slower.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why we still expect some deeper upward bounce on daily time frame.
Although we do not have clear signs of it yet, but price action looks like retracement could take longer time and appear in a shape of some reversal pattern that suggests another downward leg. Most obvious is butterfly, but may be it could be some other pattern. Anyway in very short perspective we should be ready for downward turning – upward action is too slow and choppy, some reversal pattern already has started to form on intraday charts.
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 coming week we will have to recall again one of the major factors for gold – Fed position on US economy. When we’re speaking on gold, we need to separate major moments from minor and pure technical issues. Thus, as we’ve discussed previously there are three major long term factors for gold now:
– Fed view on US economy, that now is changing;
– May debates on US debt ceil;
– US budget sequestering and end of tax benefits period. We know that UK has turned to national debt reducing program but now this initiative does not show any positive result, even more – economy activity has reduced.
So, on coming week we again will stand with Fed meeting and assessment of US economy perspective. Based on CPI data on previous week that has shown just 0.2% inflation that is lower than in January, many investors think that it could be a signal that Fed probably will continue $85B inflows per month in considerable future. Still, we know that in previous month votes are divided. Although officially Bernanke tells that inactivity will be more expensive for economy than continued stimulus – some pressure and disagreement is growing among voting members. And as we’ve said previously this could lead to end of QE earlier than it was planned initially. In fact this is the major topic that will be closely monitored by investors on coming week.
Bounce up on EUR and Gold was triggered by this event, because previous trend down was solid, investors know what has happened on previous FOMC meeting, so they do not want to carry this risk and prefer stay flat in turmoil of meeting. In general accommodative monetary policies favor gold, because low interest rates encourage investors to put money into non-interest-bearing assets. That is what expected now, but some surprises from the Fed could follow.
Technical weakness of gold continues. Thus on previous week SPDR fund has lost 3.43 tonnes but reducing of holdings has slowed. CFTC data shows that speculators slightly have increased net long positions, but this increase was just nominal. Open interest grew for ~15K contracts – thus, investors have added to shorts greater amount still.
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Analysis of SPDR Fund holdings with Gold price as we said, shows slower but still contraction of physical gold in SPDR stores, even at growing price of gold. We understand that this is just a retracement, at least by now, but this fact is just another confirmation of this idea.
Since there was no significant price change on previous week, there is no drastical turns in Open interest with relation to price of gold. We see some increase in OI with just nominal price appreciation. But in general as we’ve said earlier, OI mostly indicates increasing of short position.
the end of fundamental part I just want to repeat some long-term issues that we’ve announced previously and that will dominate on gold market in considerable future I suppose.
Market participants gradually turns from just panic sell-off to reasonable contraction of positions in gold and already starting the preparation for money flow with anticipated US economy growth. Still, currently this early economy rally euphoria has significant risks – lack of consecutive positive data, Fed indecision concerning QE program, May US debt debates and long-term budget sequestering program that could just burke an economy with ending tax benefit program. Thus in short-term perspective looks bearish, but we should be careful in assessment of long-term trend and it is too early to say that long-term Gold bull trend is over. I do not even dare to suggest what will happen if economy will get a negative impact from budget savings program and what particularly Fed will be able to say. This will be totally blur situation. While ECB notes that recession in EU economy probably will increase in nearest future and having Italy downgrading I feel some lack of confidence to state that US economy will show flawless and tremendous growth.
Pure technically, as we’ve noted – even move to 1200-1300 will be just minor retracement to major 3/8 support level. But currently fundamentals point that in nearest future gold is bearish and probably downward move sooner or later will continue.
Monthly
There are no much changes on monthly chart. Trend holds bearish here. March action looks not very impressive; in fact it is inside small action compares to February. Besides, on previous week price stood in a tight range as well. Thus, all that we’ve said previously – we can repeat here again.
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 still stands at monthly oversold, 0.88 support and 1.618 weekly AB-CD target – rather strong support area. Couple valuable observations could be made here. As we’ve talked about it in daily updates on previous week – market stands at support on really big charts – monthly and weekly. Sometimes this leads to retracement that could take some more time, could be extended in time other words. That’s why previously I’ve said that we can’t exclude appearing some reversal pattern that will not be as fast as just single leg retracement or AB-CD retracement, pattern that could include another small leg down. Such pattern as butterfly “buy” for example. If this will be the case – price will reach major 1530 area and simultaneously clear out current lows, that is very typical for gold market. This is first observation.
Second is – market has not touched as MPP as destination of harmonic swing, so by some or other way retracement has not bad odds to come. Most probable destination point is 1630-1640.
Daily
Here on the chart you can see what I’m talking about – butterfly “Buy”. You may ask – why butterfly, why we can’t just expect the upward AB=CD, that we’ve discussed initially. Three reasons, guys and first, is bearish dynamic pressure. I do not have MACD here, but if you will plot it, you’ll see that trend has turned bullish 2 weeks ago, but look at price action – it stands flat. Yes, it shows small upward slope, but it’s not sufficient, it doesn’t show any impulse. Second is – gold likes to take out lows and highs and stop out positions around. 1555 is significant low and major low and support stands at 1536. Also take a look that daily oversold, yearly pivot support 1 and 1.27 extension of potential butterfly. That is second.
And finally – take carefully at current upward swing – it has the shape and action that is more typical for retracement. This is flat action, deep retracements, a lot of small candles with long shadows. If we treat as AB-CD, than probably it stands at minor 0.618 target and personally I wouldn’t take a bet on upward continuation right now, since CD leg is too flat compares to AB. This is sign of weakness.
4-hour
Now we’re shifting to most interesting staff. Here is much clearer view of flat action, compares to initial thrust up with AB leg. Current picture already looks bearish – we have engulfing pattern righ around 5/8 resistance and bearish divergence, so may be on Monday we will get reversal pattern here. From another point of view – market has not quite hit 0.618 extension of AB-CD pattern, that’s why some splash up is possible in a way of Butterfly “Sell” or something of that sort.
1-hour
From the other point of view – it already could be a reversal pattern, double top. Trend has turned bearish and mostly will depend on how market will behave around WPP and WPS1. Breakout through WPS1 will tell two things – first is that this is not just retracement down and second – this will trigger downward move, that could become a right wing of daily butterfly.
So, if you intend to take short position right now – place stop above 0.618 extension or even above 1.27 target of potential Butterfly “Sell” here. Conversly – wait either Double top confirmation or clear appearance butterfly Sell or may be some other pattern
Sponsored by Pellucid FX - Premium STP Forex Broker >>
Conclusion:
Fundamental picture has not changed much, sentiment on gold market is moderately bearish and downward move should continue in long-term perspective, although it probably will be a bit slower.
Still, technically market is oversold on monthly chart and has reach significant weekly target that’s why we still expect some deeper upward bounce on daily time frame.
Although we do not have clear signs of it yet, but price action looks like retracement could take longer time and appear in a shape of some reversal pattern that suggests another downward leg. Most obvious is butterfly, but may be it could be some other pattern. Anyway in very short perspective we should be ready for downward turning – upward action is too slow and choppy, some reversal pattern already has started to form on intraday charts.
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.
i don't know how long it will stop buy then change to sell. You can give me advice ?