Sunday PM pre-game, 4/13/2014

 According to my benchmark chart on gold's intermediate cycles (weekly 3-line break, DJIA:GDXJ), we've had a bearish reversal, and I probably won't be long gold for awhile. However, I will wait to see confirmation on the similar chart I use for silver (GLD:GDXJ) before going short.

Now, it's true that gold is still above the 20-30-wk MA ribbon:

However, the price action looks similar to the false breakout of September 2012 (after the QE3 announcement that caught many off guard). By that, I mean a strong jump occurred above the ribbon, followed by a weak, momentum-less bounce off support that couldn't make it to the previous weekly closing high. Gold then fell to its first Fibonacci line (top blue, horizontal), and this time I bet it's headed to the second 50% Fib (center blue line)

Second, now that reader "David P. of Europe" has stolen the above chart and sold it to Eric King for 20 pieces of worthless fiat, I decided to look for a comparable monthly version, and what I found was simultaneously Astonishing and Staggering.

I don't thing Eric King will be posting this one soon, however, because it indicates that the gold bear market probably has another few years to go.

Note how important the monthly moving average ribbon has been, going way, way back (I shan't reveal the specifics, lest David P. of Europe betray me again, but here's a hint: the bounds are Fibonacci numbers). The upper bound is still well over the old line in the sand, $1525, and anyone who thinks that level won't pose serious resistance needs to remove KWN from his bookmarks posthaste. So basically, it seems probable to me that gold will first need to get to the MA ribbon (probably after the ribbon has fallen significantly lower than where it lies presently), and bump and track below it for awhile, before a legitimate Bottom is manifest.

There will be another clue: check the monthly RSI: the vertical dotted lines (white), which cycle quite regularly every 7-8 years, denote when the 50% RSI level was cleared to the upside after a break below AND the monthly MA-ribbon was cleared (surprisingly, these have generally been simultaneous events!) These points signal the tradeable Gold Bottoms exceedingly well. So we must needs wait.

So not looking good for gold. Please don't shoot the messenger -- it brings me no joy to prognosticate that the reign of the Paper Aristocracy shall not end any time soon, but Charts capture the word of the gods, to whom we are as flies. Here are some more charts to distract from the ongoing rape and pillage...

 Gold has stalled here at the 20 EMA; my guess is we're headed to the bottom of the envelope channel sometime soon...

As I mentioned last post (for a different reason) $1290, where the 144-day MA stands currently, may be a good line in the sand for going short. 
My monthly chart from last month, where I predicted a move up to the arrow before another down draft, looks prescient. If the "double bottom" breaks, no serious support for as far as the eye can see.

I thought gold might at least make it to the 89-week (fibonacci) or 78-week (i.e. year-and-a-half) MA, but it hasn't come close, and $1440 feels like a tall order the way sellers appear with every small step up. The trend line below looks like a good target, currently at $1200. 

I also mentioned we should keep an eye on gold in swiss francs. 
Since then, it also failed to hold above the 50- and 200-day MAs, which haven't come close to a "golden cross"

Silver also looks dangerous to hold as per these charts. I'm ready to go short if these major lines should break, with an eye on the gold silver ratio (first chart):

Any bullish charts? Perhaps palladium, which appears to be breaking through important resistance. I'll be looking to see if it's stuffed.

And stocks look weak, but indices are still far from their 200-day MAs (not shown). And look at the monthly candlestick chart going back to 1980. The 34-month MA (yellow) would be a great entry point, IMO. I don't think there will be any serious crash this year (the yellow and green Fib MA's were broken only twice since 1980, and the current boom cycle has not gone obviously "parabolic" by any stretch; looks comparable to the long bull market through the 1990's, circa 1994 or 1996)

On the other hand, I had mentioned a month ago I'd keep an eye on this monthly 3-line break chart. Now: the month is far from over. So I predict by months end, the reversal will be erased. But ... if it's not, that would be bullish for gold and commodities in general.

How gold performs vs. oil (and other commodities) will probably be determined by whether this bounce off the Fib 38% line holds. I don't think it will. Partly because of the final chart below ($GOLD:$CCI), which appears to be continuing its grind down, meaning gold will continue to do worse than other commodities for a good part of 2014.

Till next time,


Warren James said...

Magic. Thanks GM.

costata said...

"...anyone who thinks that level won't pose serious resistance needs to remove KWN from his bookmarks posthaste."

Classic. Thanks GMJ.

Anonymous said...

Good to see you're still fighting the good chart fight, GM. Nice analysis.

The PM situation is looking very ropey to me: in fact, I'm pretty sure that gold is going to tank over the next few months, and silver will perform even worse. Perhaps even in time for the anniversary of the Great Mayday Massacre of 2011...

Still feeling very strong on my annual bet with Turd.