Gold Posts Weekly Reversal Top

goingbroke

December Gold posted a weekly closing price reversal top, indicating the possible start of a substantial decline. This type of pattern typically indicates the start of a 2 to 3 week break equal to at least 50% of the last rally. This makes $1212.00 the next likely downside target.


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roadrunner

Gold had put in 5 straight weekly advances, something which had not been since since the second half of 2007. 5 weekly gold advances are relatively rare indeed. The fact that the string ended at 5 resets the clock. But it doesn't guarantee a 50% retrace either though $1212 at this point seems healthy for the gold market. The mid-July bottom in gold at $1155 was in many ways a "deeper" bottom than the Feb one as it nearly touched the 200 dma, which is not a common occurence with gold. It's not likely that in only 6 weeks it's time for another full washout. With 5 months between those 2 bottoms, it would seem that another 5 months to the next "hard" bottom would take gold to December. Gold is currently only at 7% above its 200 day moving average. That's not where big corrections tend to occur. Typically, 15-25% above the 200 dma is when complacency sets in and intermediate/longer term corrections start to take hold. It certainly does look like gold wants to take a breather with 2 daily GLD closings <10 dma (first time in >month) and neg. divergences in most momentum indicators.

roadrunner

CaptHenway

I predict that it will go either up or down, or maybe not.

30AnvZ28

<< <i>I predict that it will go either up or down, or maybe not.

>>



I second that motion.

OPA

Only 43 days to go before Saint Crispen's Day.

ProofCollection

The most likely downside, if any, will be to ~1223 which is the 38.2% Fib retracement of the entire move from ~1155.

The energy that came in off of a test of Friday's low, a 38.2% retracement of the move from ~1194, indicates very strong support in the 1247-1250 area. In fact, it's a very bullish sign to continually accomplish these 38.2% retracements 'as you go' because it helps the pattern to maintain its energy for continued movement.

And while counting successive green or red candles is interesting, many have gone broke betting on black on the roullette wheel after a long string of reds.

roadrunner

And while counting successive green or red candles is interesting, many have gone broke betting on black on the roullette wheel after a long string of reds.

Very true. The odds of another red or green after a string of consecutive ones is still 50-50. But unlike rouellete, craps, and other true games of chance, the gold market runs on fairly similar cycles as well as human emotions of fear and greed. None of those play a role in which way the dice or roullette wheel comes up.

roadrunner

jmski52

many have gone broke betting on black on the roullette wheel after a long string of reds

I'll be out in Vegas in a few weeks. I'll let you know how many long strings I can come up with.

ProofCollection

<< <i>Very true. The odds of another red or green after a string of consecutive ones is still 50-50. But unlike rouellete, craps, and other true games of chance, the gold market runs on fairly similar cycles as well as human emotions of fear and greed. None of those play a role in which way the dice or roullette wheel comes up. >>



True as well. If you are in the middle of any strong trend, the behavior changes. The NDX rally in early 1995 strung together 9 consecutive monthly white candles, as did the Nikkei in late 88/early 89. Gold has 6 consecutive monthlies in 2005. When crude fell from $150 recently, we had 7 straight red monthly candles. SP500 put in 9 weekly green candles starting in Mar 2008, and the USD futures put in 9 red candles starting just this last June.

And while a roullette wheel can roll solid red for hours, a market has limits. In looking through a few charts at weekly and monthly charts, it seems that 3 or 4 candle runs are common, anything over 5 is pretty uncommon, and 9 is probably a once or twice a decade ocurrence. Although if you ignored small doji candles of the opposite color in the middle of two good strings, such trends are more common.

CaptHenway

Sometimes if you bet both red AND black on the roulette wheel, it comes up green.

I am still bullish on gold, if only because all of the alternatives are in deep doo-doo.