Gold's Price Forecast Decline Complete - Up Into February

Sunday, January 27, 2019

gold coins

Last weeks trading saw Gold making lower lows for the recent correction into Thursday's session, with the metal dropping down to a bottom of 1275.30. From there, however, a sharp reversal to the upside was seen into Friday, here running all the way up to a peak of 1303.40 - before backing slightly off the same to end the week. With that action, Gold's countertrend decline is deemed to be complete, with additional strength favored in the days/weeks ahead.

Gold's Countertrend Correction Complete

From the comments made in past articles, the Gold market was seen to be in a countertrend correction with the 10, 20 and 34-day time cycles, with that decline being at or into normal bottoming territory. In terms of price, the 34-day moving average was noted as a potential magnet, and with overall support to the move at or into the 1267-1270 region (February, 2019 contract). Here again is our 34-day cycle:

gold daily continuous contract chart

In terms of Elliott-wave, the most recent decline was seen as being an Elliott wave '4'. With Friday's action, the countertrend decline is now complete with the 34-day wave, and with that we are seen to be in a wave '5' to the upside - one that is expected to form our next mid-term price peak for the metal. In terms of time, this peak has the best odds of forming in the month of February, though with more precise details noted in our thrice-weekly Gold Wave Trader market report.

The 72 and 154-day Cycles

In terms of patterns, the most recent decline with the 34-day wave was expected to remain at or well above the 1236 figure, and was expected to give way to higher highs into the month of February. In terms of price, the magnet to that rally phase was noted as being the wide range of 1311-1349, which is the 61-78% retracement range of the prior 154-day cycle downward phase.

Going further with the above, there is a smaller 72-day cycle that is also dominant in the Gold market, and which is shown again below:

The 72-day cycle is currently some 50 trading days along from its last labeled trough - and thus is looking for its next peak to form at anytime. As mentioned earlier, we are now in a wave '5' to the upside in Elliott-wave, and this wave 5 should top not only the 72-day component, but also the larger 154-day wave, ideally made at or into the 1311-1349 region (February, 2019 contract).

Here again is our 154-day cycle:

Note that the higher-end of our Fibonacci range is also at or near the upper 154-day channel top, and with that it should be hard for Gold to get above that on the current upward phase of the 34, 72 and 154-day cycles. Even said, the metal should have more upside to go, before these waves to attempt to top in the days/weeks ahead, with the current move up likely being only wave one, inside a five-wave pattern.

For the bigger picture, our next mid-term peak should come from the 72 and 154-day time cycles. From whatever high that ends up forming with these waves, Gold should see a sharp decline into late-Spring, where the next 154-day trough is projected to form. In terms of price, the minimum expected magnet to that decline is the 154-day moving average, though with the obvious potential for additional weakness through the same.

Gold Timing Index

The chart below updates our Gold Timing Index, which, as mentioned many times in prior articles, is our best indicator of mid-term trend direction for Gold:

From the comments made in past articles, our Gold Timing Index will tend to diverge from a new price high or low at mid-term peaks or troughs - though this will not always occur. With that, I have mentioned that this indicator offers up a similar technical inference to the NYSE advance/decline line in regards to U.S. stocks. That is, when the indicator is making a higher high along with price, it is seen as a bullish indication - and favors any short-term correction to end up as countertrend.

With the above said and noted, I have mentioned in recent weeks that the 1300.40 swing top - registered back in early-January - was confirmed by the action in our Gold Timing Index. With that, that action supported the recent decline phase to end up as countertrend, which was also in line with the time cycle analysis (with the 34-day wave, mentioned earlier).

With the above said and noted, Gold is now seeing the expected new price high. However, our Gold Timing Index is now registering a divergence against this new high, which is a technical warning sign - and is the initial setup for a mid-term sell signal. Having said that, a divergence between the indicator and price will not always result in a sell signal, as these divergences are often erased before a sell signal ends up being triggered. For that sell signal to appear, a close below the indicator's lower standard-deviation band would have to occur. I should add to the above that the buys and sells from our Gold Timing Index are reserved for the subscribers of our Gold Wave Trader market report. 

U.S. Stock Market

For the mid-term picture in stocks, our analysis is following along nicely, in that we have been looking for a rally back to the 200-day moving average or higher in the coming days/weeks. At some point thereafter, the SPX is likely to give way to its first decent correction phase, one which is likely to end up as a countertrend retracement, one to be followed by higher highs, upon completion.

On the flip side to the above, until proven otherwise, the rally off the late-December bottom of 2346.58 SPX CASH is expected to end up as a larger countertrend affair (Elliott 'B' wave), inside a much larger bear market, one which is expected to conclude between the Autumn of this year and the Spring of 2020. The current upward phase is due, primarily, to the configuration of the 180-day time cycle:

For the mid-term picture then, the SPX is likely to see additional strength inside the 180-day cycle upward phase, with a key resistance level being the 78% retracement of 2812. Just above that, there is the prior downside ‘reversal point’ of 2860, which - once taken out to the downside back in early-October - was the trigger for the prior correction phase of this component.

With the above, it will be very interesting to see how the stocks market reacts as key price levels are approached in the coming months, with the overall move up expected to be a countertrend affair, inside the larger bear market in stocks. If they do hold the action, then the probabilities will favor a sharp decline into the Autumn of 2019, though - more ideally - into the Spring of 2020, where the next long-term bottom is due with the four and nine-year cycles. More on all as we continue to move forward.

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.