Gold Forecast: Gold Cycles Predicted The Rally - US Stocks Update

Sunday, June 9, 2019

gold analysis

Gold saw its low for last week made in Monday's session, here doing so with the tag of the 1310.90 figure. From there, a sharp rally was seen into later in the week, with the metal running all the way up to a Friday peak of 1352.70 - before backing slightly off the same into the daily/ weekly close.

Gold's Mid-Term Picture

From the comments made in past months, the cyclical analysis for gold called for the last high of importance to be registered around the mid-February timeframe. From there, weakness was projected into the month of May, where the next semi-important trough was projected to form - coming as a result of the 154-day time cycle, which is shown again on the chart below:

From my comments made last week: "the action seen into late last week ended up confirming our 154-day cycle to have bottomed - and which also triggered us back into the long side of the market. Going further, when forming the pattern of a 'higher-low', the probabilities favor the following upward phase to take out the prior peak for the cycle - which is the February, 2019 top of 1361. With that, our assumption is that this level will be taken out in the coming weeks, with the next mid-term peak not projected to materialize until later this Summer."

With the above said and noted, the 5/31/19 reversal back above the 1310 figure for the August, 2019 contract was our best indication that the expected mid-term trough was in place with the 154-day cycle - and that a multi-month rally is currently underway; this projected path can easily be seen on our 154-day cycle chart.

In terms of price, as mentioned last weekend, with the last 154-day cycle downward phase forming the pattern of a 'higher-low', the probabilities strongly favored a minimum push back above the February peak of 1361 to be seen on the current upward phase of this wave - which we are already within earshot of. Having said that, we see the potential for a push up to the low-to-mid 1400's going forward, simply due to a low-end statistical analysis of this same wave.

Even with the above, there are some technical problems with the current rally, with the biggest being the position of the commercial hedgers:

Going further with the above, the action seen last week has seen the hedgers adding some 69,000 contracts back to the short side of the market, which is now their biggest bearish position this year. In other words, they are now more bearish than they were back at the February top, which I have to say will have to at least 'temper' the mid-term bullish view, though this could obviously change in the coming weeks. More important first is the position of the 154-day cycle, which is looking for strength in the coming months - though this outlook has to be viewed at least cautiously, due to the configuration of the commercial hedgers.

Gold, Short-Term

Even with gold expected to move higher in the medium-term, in the short run we should see the normal up-and-down gyrations in-between. In other words, the move up with the 154-day cycle is unlikely to be a straight shot higher, but one with correction phases along the way, the first of which is due to materialize at anytime. That correction should come as a result of the smallest cycle that we track, the 10-day component, which is shown again below:

With the position of the mid-term cycles, we are expecting any short-term decline phase with the 10-day wave to end up as a countertrend affair, though it could be a fairly sharp retracement, if and when seen, with the extended position of this smaller-degree cycle. From there, a push back to higher highs for the bigger swing would materialize, before another decent short-term decline phase is seen.

U.S. Stock Market Update

From the comments made in recent articles, the U.S. stock market was well overdue for a sharp correction phase, with that decline expected to come from the 45 and 90-day time cycles In terms of price, that decline was favored to take the SPX back to a tag of its 35 and 70-day moving averages, which was obviously seen with the recent drop. Take a look at our next chart:

You can see the drop back to the 35 and 70-day averages, which was our normal minimum decline phase with the 45 and 90-day waves - due to my rule in regards to moving averages. In terms of patterns, that decline was favored to end up as an eventual countertrend affair, which bottomed with the tag of the 38% retracement level of the prior upward phase.

With the above said and noted, 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.

Even with the above, as with the gold market, the short-term cycles are extended to the upside for stocks, and with that we are looking for a decent retracement to soon play out on the SPX, but one which is expected to end up as countertrend. We have several key dates for the next short-term peak - and trough - to materialize, which we note in our daily Market Turns report. Stepping back, we do expect another decline of significance (i.e., mid-term) to play out into the early-Autumn timeframe, ideally following new all-time highs into mid-Summer. 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.