Gold And Stock Cycles Powering Higher Into Summer

Sunday, June 23, 2019

fine gold

For the gold market, last week's trading saw the metal forming its low in Monday's session, here doing so with the tag of the 1336.60 figure (August, 2019 contract). From there, a near straight shot higher was seen into late-week, with the metal running all the way up to a peak of 1415.40 - registered in Friday's session.

Gold's 154-day Time Cycle

For the mid-term picture, the last semi-important low for gold was projected to be made in the month of May, with that bottom having came and went with the early-May tag of the 1272.70 figure. In terms of patterns, that move was expected to come as a result of the 154-day time cycle that we track, which is shown again on the chart below:

gold daily continuous contract chart

In looking at our 154-day chart, from the detrend's projected path we can see that this wave is currently pointing higher into later this Summer, where the next decent swing top is expected to form, and which should come from the smaller 72-day cycle. From there, gold should see a decent correction into the early-Autumn timeframe, but one which is forecast to end up as countertrend - against the early-May bottom that we just witnessed.

In terms of patterns, as mentioned in past months, the probabilities favored the recent 154-day downward phase to end up as countertrend - against the August, 2018 trough. From there, a minimum push back above the February, 2019 peak (1361) was expected to play out on the current upward phase of this cycle, which we have obviously seen.

Having said the above, in our Gold Wave Trader report, we noted that the normal rallies with this 154-day cycle were in the range of 11.5% or more - suggesting a push up to the 1420's or better before this wave attempted to peak. We are nearly there with the action seen last week. However, being so early in the upward phase of the 154-day wave (with several months to go before topping), we are likely to see even higher prices than the statistical average of 11.5%.

Gold Market, Shorter-Term

With the action seen last, the last short-term correction phase bottomed out with the 10-day cycle, doing so with our expected tag of the 10-day moving average, seen on 6/11/19. In terms of patterns, due to the configuration of the larger 154-day wave, that move was expected to end up as countertrend - to be followed by higher highs, which has obviously been seen.

With the above said and noted, the next short-term peak is once again expected to come from this 10-day cycle, which is shown on the chart below:

In terms of time, the peak for this 10-day wave is due at anytime - with the cycle itself now at some 8 trading days along, and still making higher highs. Once it does top out, the metal should see a minimum correction back to the 10-day moving average or lower into later this month, though, as per the most recent correction phase of this wave, that move is expected to end up as another countertrend affair. If correct, the larger uptrend should be expected to continue into later this Summer, before forming our next semi-important peak.

Commercial Hedgers

As mentioned in prior weeks, the biggest headwind for the gold market going forward is the position of the commercial hedgers. Take a look again at our chart below:

With the action seen last week, the commercial hedgers have added another 20,000 shorts (approximately), which brings their current net short total up to 223,855 contracts, with the data current to the 6/18/19 close. I have noted in past outlooks that this is a technical negative for the metal, though that does not mean immediately. That is, the hedgers are scale traders, and are likely to continue to scale in additional positions on further strength. The next decent swing high is not expected to come for several more months, though we should continue to see the normal up-and-down gyrations in-between, with the smaller-degree cycles.

U.S. Stock Market

As noted in prior updates on the U.S. stock market (basis the S&P 500 index, or 'SPX'), the last low of significance was expected to come from the combination of the 45 and 90-day cycles, with that low projected to materialize around the mid-May timeframe, but with a larger plus or minus variance in either direction - due to the size of the 90-day wave.

With the above said and noted, the patterns favored the downward phasing of the 45 and 90-day cycles to end up as countertrend - holding above the March bottom of 2722.27 on the SPX. This path did end up as correct - though just barely - with the SPX bottoming at the 2728.81 figure on June 3rd, which was on the back-end of our expected range. Either way, the action that followed ended up confirming a combination low with these waves being set in place - and with that the next upward phase of the same is currently deemed to be in force.

From my 6/9/19 article: "the downward phase of the 45 and 90-day cycles is favored to be complete, and with that the ideal path favors a push back to new all-time highs in the coming weeks with the SPX, with the potential for a push up to the low-end 3000's before the next peak of importance attempts to play out."

In terms of price, as noted above, a countertrend decline with the 45 and 90-day cycles was expected to give way to new all-time highs (above 2954.13 SPX CASH) on the current upward phase of these waves, which has now been satisfied with the action seen into late last week. Having said that, this was just the minimum assumption, and with a good amount of time left in the mid-term upward phase, we should see even higher highs in the days/weeks ahead.

Take a look at the chart below:

The chart above shows our most dominant short-to-mid-term cycle, the 45-day wave. We can see this wave pointing higher off the early-June low, with the extrapolated channel path suggesting a move up to the low-end 3000's in the coming weeks. At some point, however, we should see another correction phase playing out with this component into what is looking to be the month of July, though we would expect that move to end up as another countertrend affair, to be followed by higher highs, upon completion.

For the bigger picture, we think that another decent top should try and form around late-Summer with the SPX, one which - as with the gold market - should give way to a sharp decline into an early-Autumn bottom. That move seems likely to end up as another countertrend affair - at least until proven otherwise. If correct, higher highs should play out into late-2019 and/or the Spring of 2020, where a much larger-degree peak is expected to form.

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.