Gold Price And Stock Market Cycles Update

The recent action has seen the expectation of additional short-term strength for gold, with the metal pushing up to a high of 1220.70 into last Tuesday - before giving way to a downside consolidation to end the week. The positioning of the time cycles suggests another try at strength into the new week, before giving way to a test of the lows on the next swing down.

Gold Market Cycles

From the comments made in recent articles, the gold market was deemed to be in a short-term upward phase, with the rally coming as a result of the 10, 20 and 34-day time cycles. In terms of price, the minimum expectation was for a rally back to the 10 and 20-day moving averages, each of which were hit with the following action.

In terms of patterns, the overall assumption is that the recent short-term rally would end up as a countertrend affair, with resistance at or into the 1227-1245 level (December, 2018 contract). Heading into the new week, if the metal is going to make another attempt at strength, the best odds would be into around mid-to-late week.

Going further with the above, if the metal does stall out at or below noted resistance, then the probabilities will favor a test of the 1167 swing bottom on the next swing to the downside into mid-September timeframe or later. Of note is that our Gold Timing Index (mentioned in prior articles) is currently on a short-term sell signal from the 8/27/18 close (1216, December contract), thus suggested limited upside above that figure in the days ahead.

For the mid-term, we are still looking for a larger-degree rally to play out at some point, although there is no particular indication that this rally is yet in force. However, it does appear that any new price low - if seen going forward - should be fairly limited. The biggest support for a mid-term upward phase again comes from the commercial hedgers (chart, above), which are holding near the smallest net short total in well over two years.

Cyclical Picture For US Stocks

With gold holding in an upside consolidation phase, I thought that we would take a look at the cyclical picture for the U.S. stock market. With that, the next peak of significance with stocks is due to materialize at anytime going forward, with a key focus on the early-to-mid September timeframe for that high to develop. In terms of price, there is key 'swing resistance' around the 2939 SPX CASH figure (plus or minus), making this a key level to watch in the coming days/weeks.

Stepping back slightly, the next decent peak for stocks into early-to-mid September is expected to give way to a reasonably sharp correction into the early-Autumn timeframe (i.e., late-September to mid-to-late October). In terms of price, the ideal path would favor a drop back to the 200-day moving average as the next mid-term cycles trough, with that low expected to come from the 90, 180 and 360-day waves.

On our 180-day cycle chart above, note that the 200-day moving average is also at or near the lower 180-day channel line - which is a level of mid-term support for the SPX going forward. In terms of patterns, the next low made with the 90, 180 and 360-day time cycles is expected to end up as a countertrend affair, which means that the index should remain well above the prior mid-term trough of 2532.69, registered back in February of this year.

Going further with the above, technical indicators such as the NYSE advance/decline line (chart, above) continue to confirm the new price highs - which is viewed as a bullish indication for the bigger picture. This is due to the fact that the a/d line will tend to diverge from price by 7-11 months or more at major price peaks. And, since this has yet to materialize here, the overall assumption is that higher prices will be seen well into the Spring of 2019 or later.

Going further with the above, in my Market Turns reports, back in February of this year - as the market was making its lowest low for the year - I noted that the four-year cycle had confirmed an additional upside target to the 3068.15 - 3277.82 SPX CASH region. With that, the overall assumption is that a move into this target zone will be seen in the coming months, though the exact path to get there is always less certain.

With the above said and noted, the ideal path would favor a correction with the 90, 180 and 360-day cycles into early-Autumn to hold at the 200-day moving average. From there, higher highs should play out first into year-end 2018, but, more ideally, will hold up well into the Spring of 2019 or later. At that point, we will need to be on the lookout for hard technical evidence for our next major top forming, which is expected to come from the bigger four-year component (chart, above). More on all as we continue to move forward.

Jim Curry

The Gold Wave Trader

http://goldwavetrader.com

http://cyclewave.homestead.com

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 US stock markets. He is also the author of several trading-related e-books, and can be reached at the URL's above.

********