Gold Cycle And Stock Market Update

Sunday, April 7, 2019

fine gold

Last week's trading once again saw the Gold market forming its high into early-week, here doing so with the tag of the 1301.70 figure - registered in Monday's session. From there, a decent decline was seen into Thursday, with the metal dropping all the way down to a low of 1284.90 - before bouncing off the same to end the week. Overall, the short-term cycles are looking for a rally, with the mid-term cycles still deemed to be pointing south into what looks to be the month of May. From there, a decent rally is expected to play out into the Summer months.

The 154-day Gold Cycle

The most dominant mid-term cycle for Gold is currently the 154-day wave, and is shown again on our chart below:

gold daily continuous contract chart

From the comments made in recent months, a mid-term downward phase was expected to play out with the 154-day cycle, ideally peaking in the month of February - and then dropping into late-Spring. In terms of price, our overall assumption has been that a tag of the 154-day moving average would be seen on or before this wave troughed, simply due to the statistical fact that 85-90%% of the downward phases of this wave will see a decline back to this moving average.

In terms of time, the ideal low for this 154-day wave is shown by our detrend's projection - which is always the best estimate of where the cycle will bottom. That is currently projected for the mid-to-late May timeframe, though there is a large plus or minus variance in either direction - and thus we will have to be on the lookout for other technical factors to confirm when this 154-day cycle has actually seen its price trough.

In terms of patterns, the overall assumption has been that the current downward phase of the 154-day cycle would end up as a countertrend affair, against the August, 2018 bottom - the prior low for this wave. Stepping back, if and when the next low is in place for the 154-day cycle, then the probabilities will favor a sharp rally into the Summer months, one which takes the metal back above its late-February peak of 1356 (June, 2019 contract).  

Gold's Dominant 10-Day Cycle

Even with a mid-term downward phase currently deemed to be in force for Gold, there should be several up-and-down gyrations in-between, with these coming from the smaller-degree cycles. The next of these is due to play out anytime, and should come from the smallest cycle, the 10-day component - which is now dominant inside of price action. Here is that cycle once again, in chart format:

With the above said and noted, the 10-day wave may well have bottomed with Thursday's tag of the 1284.90 figure (June, 2019 contract), though it has yet to be confirmed. Having said that, the next decent short-term bounce is well overdue, with this wave at some 18 trading days along from its last labeled trough. In terms of price, our minimum expected rally would see the 20-day moving average acting as a magnet, though a retracement of 61-78% of the prior swing down would be a normal path for what would be viewed as a countertrend rally.

In terms of patterns, however, with the mid-term cycles seen as pointing down, as noted above we would expect the next short-term rally phase to end up as another countertrend affair. If correct, another push back to or below the lows - and a tag of the 154-day moving average or lower - is the expectation, before the larger 154-day wave bottoms out.

Gold Timing Index

In terms of technical action, our best indicator for mid-term trend direction of the Gold market is our Gold Timing Index, which is shown on our next chart:

As noted our Gold Wave Trader market report, our Gold Timing Index finally confirmed a mid-term sell signal back in early-March, which is still in effect, and with that supports the idea of a 154-day cycle downward phase currently in force. The good news for the bullish case is that this indicator is now showing a divergence against the new price low - which is always the initial setup for the next mid-term buy signal. Having said that, it would take a daily close back above the indicators upper standard-deviation band to actually trigger that buy signal - something which may - or may not - materialize going forward.

U.S. Stock Market (Update)

From the comments made in recent months, the last mid-term trough for the S&P 500 (SPX) was made with the 180-day cycle, doing so in late-December of 2018. From there, this wave was projected higher into at least the Summer of this year, where it will be looking for its next peak.

In terms of price, in my Gold-Eagle article that was posted back in early-March, I noted that the 45-day cycle was in its correction phase, with that cycle shown again below:

In terms of patterns, the last correction phase of the 45-day cycle was expected to end up as a countertrend affair, to be followed by higher highs - due to the configuration of our mid-term 180-day cycle, which is shown on the next chart:

In terms of price, back in early-March I noted an upside target for this 180-day cycle to the 2881.56 - 2928.73 SPX CASH region, which has now been satisfied with the action seen last week. Having said that, with so much time left (i.e., several months) in the upward phasing of this 180-day wave, the overall assumption is that higher numbers will continue to materialize, with price still well away from its upper 360-day channel line.

With the above said and noted, the next correction of significance is due again to materialize at anytime, coming from the aforementioned 45-day cycle, which is next projected to trough around the early-to-mid May timeframe. Once again, with the configuration of our larger 180-day wave, we should expected any decline with the 45-day component to end up as another countertrend affair, to be followed by higher highs well into the Summer of this year.

The Bottom Line

The overall bottom line for Gold is that a short-term rally is due to play out with the smaller 10-day cycle in the coming days, though that rally would be favored to end up as countertrend - against the larger 154-day downward phase into mid-Spring. As for the U.S. stock market (as measured by the S&P 500 index), a mid-term upward phase is currently deemed to be in force into at least mid-Summer of this year, though with the next decline of significance due in-between, and coming from the smaller 45-day component. Having said that, it is too early to confirm the next downward phase of this wave to be in force at the present time. Stay tuned.

Jim Curry

The Gold Wave Trader


Gold-Eagle provides regular commentary and analysis of gold, precious metals and the economy. Be the first to be informed by signing up for our free email newsletter.

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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.