Gold Price And Stock Market Cycles Update

Sunday, September 16, 2018

gold analysis

With the action seen last week, this weekend I thought we would take a look at the cycle work in relation to both the gold and U.S. stock markets, to get some idea of what we might expect to see play out as we move into the Autumn months.

Gold Price Cycles

For the near-term, the gold price cycles are really in a position to go either way at the present time, with the short-term cycles looking weaker - but with the mid-term cycles looking for a larger rally phase to materialize at anytime.

gold continuous contract chart

For the short-term then, the most recent rally phase was due to the 34-day cycle (chart, above) - and all cycles below that wave. The upward phase of this same 34-day cycle has been expected to end up as a countertrend affair, holding below the 1263.50 figure (December, 2018 contract) on a close. Going forward, any reversal below the 1188.00 figure - if seen - would be our best indication that this wave has topped, and that additional correction is going to be seen.

Otherwise, if the metal (December, 2018 contract) is able to remain above the 1188 figure, then there is still some shot that a test of Fib Resistance could be seen at the 1227-1245 region.

Stepping back slightly, there are recent indications that the larger 72-day cycle bottomed at the 1167 swing low - and with that is heading higher off the same (chart below):

With the above said and noted, the upward phase of the 72-day cycle would tend to favor additional strength - while the next downward phase of the smaller 34-day component is looking for its next correction phase, with the 1188 figure being the short-term dividing line.

For the bigger picture with gold, there are no indications yet that our larger-degree low has formed with the bigger 154 and 310-day cycles (chart, above) - which would currently need to see a daily close above the 1263.50 to confirm. Should that materialize, the probabilities would favor additional strength back to the 310-day moving average or better, though that move would be expected to end up as a (albeit larger) countertrend affair.

Going further with the above, our Gold Timing Index is currently on a short-term sell signal from the 8/27/18 close (i.e., 1216, December contract), a signal which would be closed out by any daily close below the lower standard-deviation band of this same indicator. I should also add that - since no mid-term buy signal was seen at the 1167 swing bottom - the overall assumption has been that any rally would end up as an eventual countertrend affair, and would give way to new lows (below 1167) on the next swing down.

Adding to the above, since buys and sells with our Gold Timing Index tend to line up with peaks and troughs with the 310-day time cycle, we are under the assumption that the bottom for this larger wave is still out there somewhere. And, in order to set up the next mid-term buy signal with this indicator, the same would need to see a divergence from price - where price makes a new low, but the indicator does not. Following that requirement, the actual trigger would be for a close above the indicator's upper standard-deviation band.

U.S. Stock Cycles

In looking at the cycles on the S&P500 index (SPX), our last low of significance was made back in mid-August, with the 45-day cycle bottoming at the 2802.49 SPX CASH figure:

With this 45-day cycle seen as being some 21 trading days along to the upside, the next peak of significance is expected to come from this same cycle - and which has been projected to be made on or past the mid-September timeframe, which we are obviously now into. A major level of resistance for the SPX comes in at the 2939 figure, which is plus or minus 12 points in either direction.

Stepping back, the next high for the 45-day cycle looks primed to peak the larger 90-day component, which is shown on the chart below. This particular wave is some 54 days along from its last low in late-June - and thus is also at or into topping range:

Going further with the above, there are bigger cycles that are looking to trough this Autumn, with the combination of these being the 180-day and 360-day cycles, with the last low for the smaller component registered back in February of this year, at the 2532.69 SPX CASH figure:

In terms of price, the overall assumption is that a decline back to test the 200-day moving average or lower will be seen at some point this autumn, though there is a wide range where this could materialize. Even said, the patterns do favor this decline to end up as a countertrend affair - inside a larger four-year cycle upward phase, one that is not expected to peak until the Spring of 2019 or later.

Going further with the above, there is an open upside target with the four-year cycle to the 3068.15 - 3277.82 SPX CASH region, which we expect to be met at some point in the coming months - ideally following a correction with the smaller-degree (i.e., 360-day on down) cycles, with the 200-day moving average acting as support to the same.

For the bigger picture then, the next major top for U.S. stocks should come from the four-year time cycle, made somewhere from above the 3068.15 SPX CASH figure - and, ideally, made on or past the Spring of 2019. From there, we will need to be on the lookout for technical indications of this peak forming, which is expected to be followed by a sharp decline of 30% or more into the next four-year cycle trough.

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.