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Is The Gold Rally A Dead Cat Bounce?

By Kira Brecht of Kitco News
Monday March 9, 2015 9:18 AM

(Kitco News) - Gold prices gained overnight in Europe and are climbing in early New York trading Monday boosted by fresh reports of financial troubles out of Greece. Gold is being supported by safe-haven buying flows as investors weigh the possibility of a Greek exit from the euro zone.

But, is the rally a dead cat bounce?

Technically, last week's sell-off tugged April Comex gold futures below the 61.8% Fibonacci retracement of the November-January rally move. Traditionally, the 61.8% line is the last "line in the sand" for the sell-off move to be considered merely corrective. Gold's definitive push under the 61.8% Fibonacci zone is a bearish signal and leaves gold vulnerable to a 100% retracement of the November-January rally.

For now, gold found support around the Jan. 2 swing low at $1,168.30. The market became overextended on Friday's sharp slide trading under the lower daily Bollinger Band line. Generally, markets are unable to remain for long below the lower daily line as it represents an overextended market.

While gold bulls have gained some traction amid concerns about Greece, technically, the market is bouncing from an overextended and oversold position on the downside.

The bullish trend pattern off the November 2014 low has broken down.

On the downside, if sustained losses are seen below the Jan. 2 swing low at $1,168.30, the next support zone lies at $1,143.40 and then major support at the November 2014 low at $1,132.10.

On the upside, resistance lies at $1,190 and then the March 2 swing high at $1,223.00. It would take a recovery back above the $1,223.00 zone to improve the short-term trend outlook. For now, the bears are in control and Monday's early rally is a corrective snap-back rally move.

By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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