Gold In Holding Pattern - US Stocks Short-Term Toppy

Sunday, November 17, 2019

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gold analysis

Last week's trading saw gold forming its low early in the week, with the metal dropping down to a bottom of 1446.10 - made in Tuesday's session. From there, strength was seen into later in the week, here pushing up to a Thursday high of 1475.50 - before backing off the same into Friday.

Gold Market, Near-Term

With the action seen in recent weeks, the current downward phase of our 72-day cycle is at or into extended territory, and is the cycle that should be responsible for the next decent rally phase. Here again is that 72-day wave:

For the near-term action, our last short-term bottom was projected for November 12th, plus or minus, where we did see a low of 1446.10 - made right on this date. With that, the bounce off of this low is ideally favored to hold up into early-to-mid week, this week, before putting in another short-term top, which is expected to come from the smaller 10-day component, shown below:

With the above said and noted, the next short-term downward phase of this 10-day cycle could well be the one that ends up troughing our larger 72-day cycle, for what is anticipated to be a multi-week rally into December - January. In terms of price, a rally back to the 72-day moving average should be the minimum expectation for the upcoming rally phase, though with the obvious potential for additional follow-through above the same.

Having said the above, the next rally phase of the 72-day cycle is now expected to end up as countertrend - against the early-September peak of 1566.20. This is due to the configuration of our larger 310-day component, shown again below:

Stepping back, the overall assumption with the 310-day cycle is that a drop back to the 310-day moving average will eventually materialize, though this could take some time to develop - following an interim rally with the aforementioned 72-day cycle.

Commercial Hedgers

In looking again at the latest numbers from the CFTC, the commercial hedgers exited some 16,000 of their recent shorts, which drops their current net short total down slightly to the -301,000 contract range - with the data current to the 11/12/19 close.

As noted in past months, the overall net short position held by the commercials is the most bearish technical overhang for the market. And, though they have covered some of these into the recent weakness, the overall suggestion is that this will remain as a bearish indication in the coming weeks/months, at least until otherwise reversed.

U.S. Stock Market Update

The last bottom for the 45-day cycle was registered back in early-October, doing so with the tag of the 2855.94 SPX CASH figure. From there, the upward phase of this wave was confirmed to be back in force, with the outlook calling for additional strength into the late-October to early-November timeframe or later, with a push back to new all-time highs being favored. With that, the next decent swing top is due to materialize at anytime - with its current upward phase moving into extended territory. Here is that cycle:

With the above said and noted, once the 45-day cycle does top out, then the probabilities will favor a minimum correction which takes prices back to the 35-day moving average or lower on the SPX, a move which is expected to end up as countertrend - against the early-October bottom of 2855.94. If correct, the probabilities will favor a push back to new all-time highs on the next upward phase of this wave into what looks to be early next year. From there, a more important peak should try and form with our next cycle:

The chart above shows our most dominant mid-term cycle for stocks, which is the 180-day wave - or 9-month cycle. In terms of price, this wave last bottomed back in early-August, a move which was expected to end up as countertrend - against the early-June trough.

Until proven otherwise, this wave is currently projected higher into early next year, with the potential for a push up to the upper 180 and 360-day channel line conjunction before peaking. From there, we will be on the lookout for the next major peak in stocks, one which is expected to give way to a minimum drop back to the 360-day moving average - though is more likely to see additional follow-through back to the 48-month moving average or lower.

The Overall Bottom Line

The bottom line with the above is that gold is working on a bottom with the 72-day cycle, whether in place or not remains to be seen. As for U.S. stocks, they are in short-term topping range, with the next move expected to be a sharp correction of a few weeks off the top - but one which is anticipated to end up as countertrend, to be followed by higher highs into early next year. 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.