Gold Cycle And Technical Update

Sunday, August 19, 2018

Last weeks trading saw Gold holding below our key (upside) price reversal levels, which kept the metal in its current weaker configuration - with the mid-term cycles still pushing south at the present time.

gold daily continuous contract chart

Gold Short-Term

For the near-term action, Gold needed to see a reversal above the 1229.00 figure (December, 2018 contract) to confirm the upward phase of the 34-day cycle to be back in force, though with the metal remaining below that level on the push up into the 8/9/18 swing top. With that, the downward phase of this wave is obviously still in force - and would now require a reversal back above the 1226.00 figure to confirm this wave to have bottomed.

For the very short-term, however, Friday's late-day reversal above the 1190.60 figure should be a decent indication that a bounce with the 10 and 20-day cycles is likely in force. If correct, the ideal path would favor a rally back to the 10 and 20-day moving averages in the coming days, a move which is favored to end up as another countertrend affair - within a larger (and extended) mid-term downward phase.

Mid-Term Gold

For the mid-term picture, it would now take a daily close above the 1263.50 figure (December, 2018 contract) to confirm the correction phase of the larger 72-day, 154-day and 310-day cycles to be complete - and for the next upward phase of these waves to be confirmed in force. Otherwise, any rally with the smaller-degree waves that remains below the same can continue to see the metal pushing to lower lows in the days/weeks ahead, with key support now looking to be the 1125-1132 area - which is 'swing support' on the weekly chart.

Otherwise, if and when the next low is indicated to be in place with the mid-term cycles, Gold should see a rally in the range of 8-19% or better off the lows, with the 154-day and 310-day moving averages (chart, above) acting as normal minimum magnets. In terms of time, the next mid-term rally phase is expected to last in the range of 5-8 weeks or more, once in force.

In terms of patterns, until proven otherwise, the next upward phase of the 310-day cycle - if and when seen - is now favored to end up as a larger countertrend affair, due to the fact that the prior 310-day trough was recently taken out to the downside, thus forming the more bearish pattern of a ‘lower-low’.

Gold Timing Index (Update)

In terms of technical action, as noted in our Gold Wave Trader market letter, the divergence that was seen between our Gold Timing Index and price had been negated with the recent action, which tells us to expect any short-term rallies to continue to end up as countertrend. This again is due to the fact that this indicator will diverge from price action at mid-term bottoms, which means that this divergence will have to try and re-form at some point in the days/weeks ahead.

With the above said and noted, the ideal path would be for a decent short-term rally to play out with Gold, one followed by lower lows on the next swing down - which would setup a potential divergence with this indicator. Following that divergence, the actual trigger for a new mid-term buy signal is for the indicator to see a daily close above its upper standard-deviation band.

Commercial Hedgers

In taking a look again at the COT data from last week, the Gold commercials (chart, above) continued their recent short-covering bout, exiting approximately 18,000 positions - and in the process dropping their current bearish total down to only 7,350 contracts, with the data current to the 8/15/18 close.

From the comments made in past articles, the fact that the commercial hedgers are now holding their lowest net short total in well over two years is seen as supportive of the idea of a mid-term rally phase playing out at some point. However, price is still the ultimate determiner, with the metal needing a daily close above the 1263.50 figure (December, 2018 contract) to confirm that rally phase to be in force. Stay tuned.

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.