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Gold GOLD PRO WEEKLY, October 07 - 11, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Oct 6, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    Yesterday we've talked about fundamental background of recent weeks in detail which mostly was negative to financial markets, but... not for gold. Gold was shining brighter as soon as poor statistics data, D. Trump impeachment, stock market collapse and new spiral of US/China long lasting so-called negotiations appeared on the surface. It was deadly combination for Forex but it was quite supportive to the gold.

    As Reuters reports - Gold rose on Friday on growing fears of a global economic slowdown and rising expectations of more U.S. interest rate cuts, with investors was looking for cues from U.S. jobs data.

    The U.S. on Wednesday said it would slap tariffs on certain products from the European Union after the World Trade Organization gave Washington a green light to impose tariffs on $7.5 billion worth of EU goods annually in a long-running trade case.

    “We’ve received more evidence that global growth is struggling. We most likely have a global manufacturing recession and there is a risk that this spills over into the services, which is why gold has recovered quite rapidly after that sell-off last week,” said Julius Baer analyst Carsten Menke.

    “Fundamentals for gold are still positive, we have slowing global growth, lingering trade tensions and we see more rate cuts by the Fed. So this is an environment where gold should prosper and prices should be at $1,575 towards the end of the year.”


    Data from the United States showed services sector activity slowed to a three-year low in September, following the manufacturing sector, which contracted to the weakest level in a decade. Hiring by U.S. private employers also slowed further last month.

    “Trump’s tariffs against the European Union create a certain amount of uncertainty and potential for economic failure,” said SP Angel analyst John Meyer.

    Two U.S. Fed policymakers on Thursday signalled they are open to delivering another rate cut, while Vice Chairman Richard Clarida said the central bank “will act as appropriate to sustain a low unemployment rate and solid growth and stable inflation”.

    “Fed Chair Jerome Powell stated in July that this (rate cut) step was just an insurance against international risks and not the beginning of a new cycle, but in September it became clear it is a cycle and now more FOMC members are being supportive to rate cuts,” said Quantitative Commodity Research analyst Peter Fertig.

    “Yields are declining again, stocks are not performing well, the U.S. dollar is flat, which is all supportive to gold.”


    Adding to the economic gloom in Europe, a survey showed euro zone business growth stalled in September as an ongoing contraction in manufacturing activity is increasingly affecting the services industry.

    “It all indicates ongoing stress in the markets and an inevitable flight into recession,” Meyer said.

    The U.S. tariff announcement sent world stocks to near four-week lows while yields on major benchmark bonds slipped, reflecting fears about global growth.

    “Gold rebounded to $1,500 on the back of new trade tension... The short-term trend remains mixed, while the medium-long term is still positive for bullion,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.

    “The strength of the rebound seen in the last 48 hours is significant, confirming that investors are still seeing any correction in gold prices as a good chance to add more bullion to their portfolio.”

    Gold had jumped 1.4% on Wednesday after disappointing data on hiring by U.S. private employers unnerved investors already concerned about slowing growth in the world’s largest economy.

    Further supporting gold, the dollar slid to one-week lows against the euro and yen.

    Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, rose to 923.76 tonnes on Wednesday, very close to last week’s 924.94 tonnes, a peak since mid-November 2016.

    CFTC data shows that net long position has dropped slightly from the absolute top, as we've suggested, because gold was overbought and position is overextended, reaching all time high. In such circumstances any market needs technical relief, which we've got in last 1-2 sessions. Since situation has changed this week, it will be interesting to see how position will change on next data release.
    upload_2019-10-6_13-24-54.
    Source: cftc.gov
    Charting by Investing.com


    So, guys, it seems that our prediction is filled. As we've said, once US will finish with China - it will turn to EU, trying to use the whole global financial power while they still have it . Although nothing was announced in news or this is intentionally keeping in secret but indirect signs tell that US and China trade сcompetition is coming to an end. In our gold researches week by week we track situation in Chinese economy which has become few times worse since tariffs war has started. As soon as tariffs were initiated by US, all time we talked about US victory in this conflict because of fundamental factors that point on too different possession of US and China in this tariffs war.
    Now we see that US turns to EU. It means that peak of US/China conflict is passed, maybe some agreements already achieved, that satisfy US and now they could move forward. We will know this sooner rather than later I suppose. The first steps in attempt to put the tariffs burden on EU as well - is confirmation of our second prediction. We talked about it - when US break the China, they will turn to EU. And, the fact that US turns to EU with tariffs - is a bad sign, which indirectly points that major questions in US/China tariffs was are resolved, as US now could fight on two fronts.

    Speaking about the China again - here is update of Fathom consulting on Chinese economy conditions, dedicated to 70 anniversary of the People’s Republic of China. But it is no reasons for happiness.

    China’s economy is slowing hard.This is according to our China Momentum Indicator (CMI), created as an alternative to the official and often questionably-on-target GDP data. As highlighted in the chart below, the index reported that China’s economy slowed to a three-year low of 4.2% in August.

    [​IMG]

    Retail sales, bank lending to households and aviation passenger numbers have all slowed since the end of 2017 (when our CMI last peaked), despite being key indicators of a more consumer-led economy.

    [​IMG]

    This pursuit of growth at the expense of reform is the wrong medicine; it will work for a time, but allocative inefficiencies and diminishing returns mean that unless something changes China is destined for perennially lower economic growth. This idea is reflected in our forecast, with the path into the future expected to be one that winds to and fro, with key events likely to intensify China’s prioritisation of growth, regardless of the long-term cost.

    For example, we expect that in 2021, the centenary of the founding of the Chinese Communist Party (both a national celebration and a key milestone in the party’s plan to build a moderately prosperous or ‘Xiaokang’ society), growth will temporarily gain momentum. This could be through tried-and-tested growth tactics of credit-fuelled investments, which in the past have worked effectively in the short term to limit a slowdown. However, these efforts will only exacerbate existing imbalances and increase financial risk, dampening chances of long-term sustainable growth. As a consequence of this, we expect growth to return to trend and dip back down after the completion of 20th National Congress festivities in 2022.

    [​IMG]


    Technical
    Monthly

    Short-term sentiment has changed on gold market. If two weeks ago everything pointed on retracement, which actually has started, now situation is mixed. Even from technical point of view, as you will see on weekly chart, some abandoned pattern now take the second life.

    On monthly chart we do not have a lot of changes. Gold stands in reaction to strong resistance area and October is inside month by far. The resistance here is strong and valuable and it deserves meaningful retracement. But currently it is too few signs of real retracement. September drop was too small and mostly reminds consolidation around the level rather than retracement, and October performance just confirms this.

    Price doesn't go down and stands near the target. This is not the way how usually bearish reaction develops.

    We keep this area - 1530-1585 as tactical ceil by far, but, as we have additional driving factors, we should pay attention to daily and intraday performance, just to not miss the signs of upside continuation.

    In general, combination of butterfly target, major 5/8 Fib resistance and monthly overbought is rather strong barrier. Something really outstanding has to happen to force gold break it without respect. At the same time, the way how this respect will start is still unclear. Gold has a lot of freedom in this subject as it could flirt with resistance some time before major reaction will start.
    gold_m_07_10_19.
    Weekly

    Last time weekly chart has given us very valuable lesson. Despite how perfect technical picture is, it still could bring negative surprises. The price action that we have here is one of the most cunning that I saw on gold.

    Everybody remember our setup with weekly bullish grabber and potential DRPO "Sell". That was really fascinating setup. But gold wasn't able to proceed higher and form 2nd top of DRPO pattern. As a result it has dropped, erased grabber and completed daily H&S pattern target. We know that.

    Now take a look again at weekly chart. We still do not have 2nd close above 3x3 DMA and gold still has not reached 1447 major Fib level. It means that DRPO "Sell" is still possible, if now gold will proceed higher finally, show close above 3x3 DMA and form 2nd top of DRPO pattern. Really cunning price action.

    Situation even more tricky as now we have fundamental background for this action - very weak performance of US economy and new rate cut on horizon by the end of the month. Besides, Brexit edge is coming as well..

    That' being said, despite that smell of the retracement in the air - gold stands stubbornly too tight to the top, which means that major downside action is somewhere in the future and we can't ignore possible return back to the tops.
    gold_w_07_10_19.

    Daily

    Last week market has completed our near-standing upside targets. Friday's sell setup also has done well, and now daily chart shows all trickiness of situation. Minimum target of "222" Buy pattern is done as gold stands at 5/8 resistance. And we've got bearish grabber which tells, at least theoretically, about downside continuation. But this contradicts to weekly picture.

    Now we have to keep a close eye on 1520 area. Once market will break it up and erase the grabber - we are on the road to new top and potential DRPO "Sell" on weekly chart. This setup could take the shape of the pattern that you will find on 4H chart.
    gold_d_07_10_19.

    Intraday

    4H and 1H charts provide setups for any taste. First is, on 4H chart, we suggest that gold could form reverse H&S pattern at top, complete weekly XOP and form 2nd top of DRPO pattern - if our bullish setup indeed will start to work. The Head shape could be different - it could be, say, direct action to COP target, or AB=CD shape if deeper retracement will happen, but anyway, market will have to keep upside tendency and keep recent lows intact.
    gold_4h_07_10_19.

    On 1H chart we see that our bearish scalp setup is done perfect - "222" Sell has triggered downside NFP drop which stopped right at target - K-support area. Still, on Friday's evening multiple bearish grabbers have been formed, and theoretically retracement is possible on Monday, at least until market stands below recent tops:
    gold_1h_07_10_19.

    As situation looks a bit complex, here is some hints for trading setups. Bearish setup is more simple as it is based on daily resistance and the grabber. Invalidation point for the setup is recent top and 1520 level. Theoretically bearish position could be taken until market stands below it. Trying to fit bullish fundamental background into bearish trading setup - is different question. As they stand contradictive, overall bearish context is not as strong right now. So it makes sense to think twice before taking short position. The advantage of bearish setup is small risk, because market stands very close to invalidation point.

    On bullish setup task is more difficult - whether we should take position right now, or wait for retracement, or - maybe wait for 1520 breakout? We suggest that two latter setups are preferable. I mean either to wait deeper retracement and maybe "222" Buy pattern, or total erasing of bearish setup and jump above 1520 level, when bearish patterns will be destroyed. Maybe Stop "Buy" order could be used for this purpose... So, it is a lot of room for your own homework on this subject.

    Conclusion

    Recent events mostly make impact on short-term sentiment on the market. While major retracement still stands on the table - its shape and starting moment are not clear yet.


    Disclaimer

    This FPA Investment Research is for information and education purposes only. Any decision to make any trade on the market has to be made solely by the reader. Information that is presented in research or its update is not an offer or call to make the trade on the financial markets and expresses just a personal opinion of the author who is might be wrong. Reader has to make decision on any trade solely and care all responsibility for results of this trade.


    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.
     
  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    As you know and we said it in weekly report - we have big plans and potentially big patterns on gold market. But the trick stands around daily chart right now. Although fundamental background is positive as well as sentiment - we have bearish grabber at major 5/8 resistsance level, which theoretically suggests drop below recent lows. This contradiction makes us to be careful with any position taking and use strong areas for this purpose, until situation becomes clear and grabber either fail or market will break all intraday support levels:

    gold_d_08_10_19.

    Today the major question stands around current drop - whether it is a retracement before upward continuation or this is daily grabber in progress. As market has completed our initial AB-CD XOP target, it has to increase the scale where whole AB-CD to XOP is a new AB leg right now and BC leg is forming currently:
    gold_4h_08_10_19.

    Bears should be happy as scalp setup that we've discussed in weekend is done. Indeed, top stands untouched and market dropped to 1491 area. Now our long entry setup is completed as well - market stands at Agreement support, as two downside extensions have reached the target. Our '222" Buy is formed, so first entry setup is done. We do not know whether we're right or wrong but strength of the level gives us the chance to tight stop to b/e easily. That's what we have to follow. If gold will drop down again - we will watch for XOP target and next Fib support to see what response will be there. This is our tactic by far. Somehow I suspect that daily grabber could fail. It looks a bit irrational in current fundamental background.
    gold_1h_08_10_19.


    Disclaimer

    This FPA Investment Research is for information and education purposes only. Any decision to make any trade on the market has to be made solely by the reader. Information that is presented in research or its update is not an offer or call to make the trade on the financial markets and expresses just a personal opinion of the author who is might be wrong. Reader has to make decision on any trade solely and care all responsibility for results of this trade.

    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.
     
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    It seems that our trading plan starts to work. At least first long entry attempt is good. On daily, we're not occasionally talked about irrational nature of bearish grabber. It just doesn't fit to current sentiment and fundamental background. And chances that it will fail exist.

    At the same time recent upside action gives us hope that our medium-term upside setup could work and gold indeed could reach our 1567 weekly target. At least currently it shows good performance started by morning star pattern and keeping it by bullish flag pattern that is forming here:
    gold_d_09_10_19.

    On 4H chart now we turn to larger scale AB-CD (as our initial AB-CD has hit XOP target) and nearest destination point is COP at ~1525. Another important point here is top of the week in red circle. As soon as market will take it out - current upward action stops to be the retracement and becomes "CD" extension.
    gold_4h_09_10_19.
    Overall situation is friendly, so we could relax and do just one thing - manage position, move stops to b/e or even below "C" point, grab some profit etc.. So everybody decides solely. On 1H chart price action reminds reverse H&S pattern and its OP target stands at the same 1520 area. That's what we will keep an eye on.
    gold_1h_09_10_19.


    Disclaimer

    This FPA Investment Research is for information and education purposes only. Any decision to make any trade on the market has to be made solely by the reader. Information that is presented in research or its update is not an offer or call to make the trade on the financial markets and expresses just a personal opinion of the author who is might be wrong. Reader has to make decision on any trade solely and care all responsibility for results of this trade.


    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.
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Let's proceed with gold. Currently we do not have any doubts yet on bullish sentiment on the market but now you could see how sellers step-in around 1520 area. It was easy upside run to 1515, but not any more.

    On daily chart, of course, we would like to see clear upside flag breakout. Still as market is coiling around the top and doesn't fall in deep pullback - this is also good sign.

    gold_d_10_10_19.

    On 4H chart we see good upward run yesterday and market has renewed week's top, erasing downside AB-CD pattern that we've mentioned. As price action becomes choppy - it means that sellers step in here. But bulls absorb new offers by far as price is climbing higher. This is the reason why we think that it is possible to keep longs. Besides, take a look, here we could get bullish grabber. If it will work - market will jump above 1520 major resistance to reach COP @ 1524. Stops could be triggered and breakout probably will be strong.
    gold_4h_10_10_19.

    Conversely, if bulls will fail and market breaks this upward channel, dropping below "C" point - deeper downside action will happen. Thus, depending on your view, make conclusion on trading setups. Bulls could keep longs (if you have it already), bears should wait for clear bearish signs, such as breakout of the channel here. Scalp traders could try to play with grabber when it will be confirmed.
    gold_1h_10_10_19.


    Disclaimer


    This FPA Investment Research is for information and education purposes only. Any decision to make any trade on the market has to be made solely by the reader. Information that is presented in research or its update is not an offer or call to make the trade on the financial markets and expresses just a personal opinion of the author who is might be wrong. Reader has to make decision on any trade solely and care all responsibility for results of this trade.


    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.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
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    Greetings everybody,

    It is really tough task to trade gold right now. Actually, it is always tough on the gold, but current moment is especially difficult.

    On daily chart we have absolutely confusing picture - first is bearish grabber, yesterday is bearish reversal session but today is potential bullish grabber. Very mixed situation, which doesn't suite to everybody.

    We definitely see that sellers step in around 1520 resistance area, but the fact that gold stands in tight range and doesn't collapse is on positive side. IMO gold now is bullish rather than bearish, but this is not the call for position taking, this is just how I see this situation.
    gold_d_11_10_19.

    The grabber that we've discussed on 4H chart yesterday - has not worked and gold shows deeper retracement. We warned that new longs near the resistance is a very risky. Currently we have another risky situation, and even advantage of this setup is the same - relatively close invalidation point. Here, on 4H chart we have hidden bullish divergence and if gold will hold above "C" point which is invalidation one for this setup, we could get upside action to COP or even higher by butterfly pattern:
    gold_4h_11_10_19.

    On 1H chart this divergence looks even better and we have the same OP target around 1520 although now the placement of A, B and C point is different.
    gold_1h_11_10_19.
    That's being said, if you enjoy this risk and know how to trade in such environment - risk/reward provides good balance to take a bet. Try to follow clear patterns and take position as close to invalidation point as possible.
    But for majority I would say - it is better to wait, when gold will set the direction. In general it should either confirm our scenario with action to 1567 target or - destroy it.


    Disclaimer

    This FPA Investment Research is for information and education purposes only. Any decision to make any trade on the market has to be made solely by the reader. Information that is presented in research or its update is not an offer or call to make the trade on the financial markets and expresses just a personal opinion of the author who is might be wrong. Reader has to make decision on any trade solely and care all responsibility for results of this trade.


    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.
     
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