Stocks Looking For A Low - Gold Price Still Up

Sunday, October 28, 2018

gold analysis

Last week's trading saw gold forming its low in Monday's session, here doing so with the tag of the 1222.80 figure (December, 2018 contract). From there, strength was seen into late-week, with the metal running all the way up to a Friday peak of 1246.00 - before backing slightly off the same to end the day/week. For the near-term action, the stock market is short-term bottoming, with the gold market looking for a smaller-degree peak.

Gold Cycles

From the comments made in my past articles, the 34 and 72-day time cycles were deemed to be rally mode for the gold market, with that assessment calling for a minimum rally to the 1236 figure (December, 2018 contract), though, as mentioned last weekend, the probabilities favored additional strength being seen - due to the fact that the larger 154-day component had also confirmed an upturn.

Here again is our 34-day cycle, updated to the current market action:

gold daily continuous contract

Stepping back, more key is the position of the larger 34-day component, which is seen as 19 trading days along - and with that is moving back into topping range. In terms of time, however, the ideal path would favor the current upward phase of this wave holding up into the first week or so of November, before peaking the metal for what should be a correction back to the 34-day moving average or lower.

In terms of price with the above, there is the decent potential for a push up to the 1248-1260 region before peaking the 34-day cycle, for its anticipated correction back to the 34-day moving average or lower into mid-to-late November.

Stepping back further, the next peak for the 34-day cycle seems likely to end up as the high for the larger 72-day component (chart, above), which is some 48 days along to the upside - and thus is moving into topping range. Having said that, as noted earlier, the ideal path would be for that peak to come from higher numbers than already seen - and into the first week or so of November.

Basically then, the upward phase of the 34-day cycle (early-November or later) should end up topping the 72-day cycle, for a correction back to the 34 and 72-day moving averages into what is looking to be the late-November timeframe, plus or minus. In terms of price, both the 34 and 72-day moving averages should provide the minimum magnets to that correction phase.

For the bigger picture with gold, the overall assumption is that the current rally phase will end up as an eventual countertrend affair, with the 154-day cycle (chart, above). That means that the metal should remain below the 1390's, and should give way to a lower low below 1167 on the next mid-term down phase - though with the longer-term outlook looking for a drop into the 800's before the next major low forms.

Gold Commercial Hedgers

In looking at the COT numbers from last week, the commercial hedgers added another 15,000 shorts (approximately), which brings their current net short total up to 46,520 contracts, with the data current to the 10/23/18 close. Though not a large position, this is seen as more bearish for the market going forward - but it won't stop the metal from posting higher highs on the current short-term upward phase.

US Stock Market

As mentioned in my articles from past months, the next significant decline was expected to come from the 180 and 360-day time cycles, which were projected to bottom out around the Autumn of this year. In terms of price, the minimum magnet was noted as the 200-day moving average for the SPX, though there was the decent potential for a drop on down to the lower 360-day moving average:

From last weekend: "the SPX has met the expected tag of the 200-day moving average, though there is the potential for additional weakness on down to the lower 360-day moving average - following the completion of the recent shorter-term rally phase. Note as well that this 360-day moving average is also right at the bottom of the rising four-year cycle channel, and thus needs to contain any mid-term decline."

With the above said and noted, both the 200 and 360-day moving averages have now been hit with the recent action, thus satisfying any normal expectations in regards to these waves. Having said that, due to momentum considerations, I see the good potential for additional weakness playing out these waves, before the next mid-term trough attempts to form.

Going further with the above, the 360-day moving average is also a key mid-term support level (plus or minus) for the SPX. Going even further, should a monthly close below the 2645 SPX CASH figure be seen at any point going forward, then the probabilities would favor a peak for the larger four-year cycle to be set in place. Otherwise, holding above that figure would keep the upward phasing of the larger cycle intact into the Spring of 2019, still with the potential for new all-time highs to be seen:

For the bigger picture (chart, above), we are looking for an eventual decline back to the 48 and 96-month moving averages, which are normal price magnets to a four and nine- year cycle downward phase. Whether or not these waves have actually turned south is not yet known, though we may have some idea in the coming days, depending on the market action. 

US Stocks, Shorter-Term

For the short-term, the next bottom of significance is expected to come from the 45-day cycle, which is the most dominant cycle in the U.S. stock market. This cycle is now 51 trading days from its last labeled trough, and thus is at or into normal bottoming territory:

Whether the expected low is yet in place for this 45-day component remains to be seen, though, once complete, the overall assumption is that a rally back to the 35-day moving average will be seen in the coming weeks, a move which - until proven otherwise - is expected to end up as a countertrend affair, against the downward phasing of the larger 180 and 360-day waves. More we continue to move forward.

Jim Curry

The Gold Wave Trader


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Jim Curry is the editor and publisher of The Gold Wave Trader and Market Turns advisories - each of which specializes in the use of cyclic and statistical analysis to time the Gold and U.S. stock markets. He is also the author of several trading-related e-books, and can be reached at the URL above.