Saturday, 3 August 2013

1000Gold’s Gold Report on Friday 2013-08-02. The Bears are still Strong in Gold: Gold bugs are not out of the woods yet!

1000Gold’s Gold Report on Friday 2013-08-02. The Bears are still Strong in Gold: Gold bugs are not out of the woods yet!

This Friday has seen a further deterioration of the position in gold after the failure earlier this week of the second bullish pennant to have formed on the recent rally from the $1180 low.

Basically, there has been quite a lot of economic and government/Federal Reserve news this week and it was expected to have a potential negative effect on the gold price as it often does, for reasons of alleged price manipulation and/or from previous observations of market moves around these kinds of announcements.

There have been two sharp downticks this week, each followed by an immediate snap back rally that has not reached the initial point of the downmove. So the price is stepping down lower.

As ‘Doc’ Richard Postma said on earlier this week, he expected gold to test the area around $1300 and it did so, breaking down through that important support to $1282.60 but rallying back to $1312 by the close on Friday.

It is necessary to see these moves in the perspective of the last 6 months.

1. The correction to $1282 has retraced 38.2% of the rally from the low of $1180 to the recent high of $1348. That would be a neat Fibonacci corrective move for a strong uptrend. However, the price has been in a downtrend channel since 23 July parallel to the well established downtrend - and that downtrend has broken lower as you can also see below. I don’t like that, though I do like the bounce today back into that narrow channel:
2. Guess what? $1283 is also the 38.2% retracement level for the ENTIRE BULL MARKET! So it is actually a key level that took the bounce on Friday at $1282.60:

3. Looking at the bigger picture, there is little to be excited about from a bull’s perspective. The current July upswing from $1180 is hardly stronger than the rally in late April to early May from the crash low of $1321 low.

4. The current rally has broken slightly above the parallel that has held as resistance up to now but was repelled slightly by that parallel today (see red circles below). Will the price action follow a similar pattern to the post April 15th rally and go down to revisit the bottom of the downtrend channel in a path similar to one of the three shown in the chart below? Only time will tell but gold bugs still have plenty to worry about over the next few days or more.

5. The channel floor meets the 50% retracement of the entire bull market soon at $1087. Could this be a possible target in price and time?

6. The target low of $1040-1050 has been proposed by a famous investment bank. That would be the floor of the bull market uptrend as shown below, joining the line between the 2005 and 2008 lows and projecting to the present day:

6. The last week and a half’s trading looks like topping action. If there is not a very quick recovery and a new rally early next week, then maybe watch out below!

7. The July upswing looks ominously similar to a slightly stretched out in time version of the late April rally as shown by the areas marked in blue below:


8. As mentioned before, to escape from this downtrend channel, the gold price must move to about $1350 to get above the top downward sloping line of the downtrend pitchfork, which is drawn from the top of the 12th April crash or alternatively, from an earlier high that was the top of a little head and shoulders that formed just before the crash:

9. Although I really like the pitchfork drawn above because it encompasses much of the trading and it forecast tradable support and resistance points, it needs to be noted that there has been barely any price action in the upper quartile of the channel since the April crash and no re-visit to the upper channel line at all. Anyway, one would not necessarily expect price to break out through the upper channel line immediately on any re-visit to the upper line. It might just act as resistance, at least on the first return there.

10. On the chart below, I mark in blue the resistance that has been in force and has marked the two highs from the rallies in late April and late May (those highs were marked in red circles on one of the charts above). It is of key importance for gold to get above that line as soon as possible:

11. It all seems like rather bearish price action, with convex formations all over the charts. Nearly all of the upmoves decelerate - and nearly all of the downmoves accelerate to form parabolic formations. Maybe that’s why chartists don’t like V-bottoms, because they are a symptom of this kind of bearish action. As the chart below shows, there have been only a couple of tiny upside accelerations recently, one after the April crash and one after the June crash and both occurred before topping action came in!

12. Finally, I noticed a few minutes ago that a parallel that has been in play will meet $1180 quite soon. Could we get a re-visit to $1180 and a double bottom? See below:

13. In conclusion, the short term uptrend has given way to the long term downtrend at this point and needs to re-assert itself right now.
Upside needed: $1350. Old reverse Head and Shoulders target was to be $1421.40 (see here

Possible downside targets: $1180, $1087, $1040 and $890.

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