Gold Reaches Resistance - Now What?Monday February 20, 2017 14:22
Sometimes we get lucky. Four weeks back when Gold's parabolic weekly trend flipped from Short to Long, we penned on 14 January "Gold Seeking 1240 on this Up Run". Done: Gold reached this past Wednesday as high as 1246 to hover up in the 1240s-glow for some 24 hours before being summarily thumped down to 1223; (you "stay-up-all-night" 60-minute traders then seeing Gold fall in 14 of 18 hours). Nonetheless came Friday's resilience, the yellow metal settling out the week yesterday at 1235, which per the above panel is now just four points below where price was (1239) the like six weeks into 2016.
But as begs our title, "Now What?" Let's start with Gold's weekly bars. And as we below see from December-to-date, Gold has been in a purposeful rise, further guided by the ascending four blue dots depicting the present parabolic trend as Long. Stark across the chart is the ever-present staple of the purple-bounded 1240-1280 resistance zone, an area which repetitively has been congestive for Gold whether rising or falling from as far back as June 2013. We look for its permanence as a fixture in this chart to be forgotten upon Gold's eventually moving up and beyond Base Camp 1377, which was the precise high of 2016 and the safety shelf to which price fell from its All-Time High of 1923 some five and a million years ago:
Given the trend is our friend, the above chart is technically-positive. Now let's assess an analysis that is technically-negative, or near to so being. If you peeked at yesterday's "Prescient Commentary", you read that "Gold ... having attained the 1240-1280 resistance zone has since pulled back, the daily Moneyflow provisionally crossing sub-50 (scale 100-0); should that be confirmed at close, our Market Rhythms page calls for a Target then of some 70 points lower". Well, the Moneyflow study did finish Friday sub-50 at 44. That in mind, have a look at this graphic from our Market Rhythms lab of Gold's daily bars from just over a year ago-to-date. When the Moneyflow measure goes above 50, the bars then turn from red to green, and vice-versa. Therefore, Gold's Moneyflow having gone sub-50 yesterday, the next bar will begin a red series:
Does that in turn mean we're going to set a Market Rhythm Target of some 70 points lower? No. For as the comment went on to read: "...we think rather that Gold will focus on battling the overhead resistance zone; as well, the 1220 area appears as structural support." As noted a week a ago, we continue to sense the commitment to Gold is sound through here such that pullbacks in price shall be minimal, the focus instead being upon attempting to drill up into the 1240-1280 resistance zone. Still, we'd not be surprised to see at least a brief stint of red bars appear in the above chart, (which for the present is the featured "Rhythm Performance Chart" displayed at the foot of the website's "Gold" page, as updated daily).
Thus we summarize Gold's "Now What?" as seeing a bit more hem-'n-haw within an overall upside bias toward dealing with the 1240-1280 resistance zone. If the commitment to Gold we sense is real, 'twill sit atop that zone as the year unfolds; however the route therein shall be anything but straight. Yet at the end of the day, 'tis for investors alright, and for traders: delight!
As for ramping up the drama a bit further, how's this for precision? As you know, Gold is traded on the COMEX in increments of 10¢ per ounce, Friday's final trade in the electronic session being at 1234.7. And as rounded to the nearest dime, what now is Gold's 300-day moving average?
Spot on correct, Squire, (unlike were his Atlanta Falcons last Sunday; bit of a band-wagoner is our lad).
"Lady Gaga walked right past our box."
Oh good grief. The point is that Gold and its mighty "line-in-the-sand" average -- which has resumed rising -- are now smack on one another. Moreover, the look of Gold per this next view of daily closes since the highest ever is (finally) appearing evermore positive, the most recent material low (1130 'round the parabolic red line) being clearly above the chart's overall low of 1050:
Here's another Gold positive: a rising stock market diverting from a sagging economy. Not brought to light by your favourite FinMedia source? Pity, but don't worry, for the Economic Barometer tells the truthful tale. The key, of course, is that this picture wend its way into the minds of the Federal Open Market Committee members, to be instilled therein come their mid-March machinations. Might it just "Frost" their making an interest rate move? 'Course, many a metric shall hit the Econ Baro between now and then. But as the masses fawn over the amazing stock market, Gold in the end prefers the road less traveled by (i.e. the Baro), as 'twill make all the difference:
All of this positively noted for Gold, again near-term we are wary of more than a modicum of pullback in price, but nothing on the order of a 70-point demise per the aforementioned Market Rhythm analysis on Moneyflow. Let's put this into numbers. In the following two-panel graphic for Gold, we've on the left the last three months of daily bars, the declining baby blue dots indicative of the unraveling consistency within the 21-day linear regression trend. Note therein the three red lines: we deem those as structural support levels should Gold indeed work lower. Then on the right is Gold's 10-day Market Profile: you can see price having settled out the week on the most heavily-traded price of the last fortnight (1235), with trading supports as labeled at 1225, 1215, 1207 and 1199:
Turning to the same presentation for Silver, clearly 'tis more positive, her "Baby Blues" not materially having (as yet) fallen off, with price at the top of her 10-day Market Profile in closing out this past week with a high for the year at 18.02, (at which our slick trading colleagues of the Silver miners certainly must be thinkin' "ka-Ching!"):
So in closing, 'tis a fairly robust week ahead for incoming economic data; not that the data itself shall be robust, rather, there's just a lot of it: we'll have 16 metrics working their way into the now clearly down-tilting Econ Baro, including one of its predictive favourites, the Conference Board's lagging index of leading indicators: the "consensus" suggests a 0.5% rise; the Baro suggests otherwise. Our word to the wise? Mind your Gold: 'tis the ultimate prize!