Update: Gold – The Next Trending Move

Back on 10/30 we looked at the big picture for gold.

We discussed that gold was in a monthly triangle consolidation and that a breakout of this multi- year consolidation should result in a powerful trending move.

Gold is breaking out.

A full report on gold, including the daily, weekly and yearly cycle can be found here.

Gold – The Next Trending Move

Gold closed below both the 200 day MA and the 10 day MA on Friday to signal the daily cycle decline.   Gold should go on to turn the 10 day MA lower as it seeks out its DCL.

But today, I want to focus in on the big picture.

Gold is in a monthly triangle consolidation. In a triangle consolidation the cycle low can migrate to the apex of the triangle. A break out of this multi- year consolidation should result in a powerful trending move.

The Big Picture

Occasionally it is beneficial to stand back and look at the big picture. This week we will do that with stocks and gold.

The decline into the ICL has stretched the ‘elastic band’ lower. This quick recovery of the all time highs could trigger a final melt-up phase.

Gold is in a monthly triangle consolidation. In a triangle consolidation the cycle low can migrate to the apex of the triangle. A break out of this consolidation should result in a powerful trending move.

Gold Signals New Daily Cycle

Gold printed its lowest point on day 36 to place it deep in its timing band for a DCL.

Gold formed a swing low and closed above the 10 day MA on Thursday. On Monday closed above the declining trend line to signal a new daily cycle. Gold is still contained by both the 50 day MA and the 200 day MA. Gold needs to close above both these MA’s in order for any rally to be sustained.

Gold Held Support

Gold ran into resistance at the 200 day MA on Tuesday, then formed a swing high on Wednesday, closing below the 50 day MA.

However, gold did not deliver bearish follow through. Instead, gold formed a bullish reversal on Thursday — closing above support from the converging 50 day MA and 10 day MA. Thursday was only day 13 for the daily gold cycle, leaving gold up to 2 to 4 weeks before printing a DCL. So there is plenty of time for gold to make another leg higher. A swing low here will set gold up for a potential break above the 200 day MA. Long positions can be entered (or added to) on a swing low, using the converging 50 day MA and 10 day MA as the stop.

Gold Got Hammered

Gold got hammered overnight

Gold dropped 90 points to break below the previous daily cycle low on Monday. Breaking below the previous daily cycle low forms a failed daily cycle which extends the intermediate cycle decline. This could kick off a 5 – 7 bloodbath day phase to print the ICL.

However, gold is in its timing band for both a daily and weekly cycle low. A swing low would signal a new daily cycle and quite possibly the ICl. A break above 1765.70 will form a daily swing low. For those with a higher risk tolerance can use a close above the previous DCL of 1750.10 as a buy signal.

Gold Breaks Through Resistance

Gold broke through a key resistance level on Thursday.

After peaking on day 11, gold formed a swing high and then was contained by the 10 day MA — until Thursday. On Thursday gold opened above the 10 day MA and went on to close above both the 200 day MA and the 50 day MA. This established a new high on day 21, which shifts the odds towards a right translated daily cycle formation. Gold also closed above the upper daily cycle band on Thursday. Closing above the upper daily cycle band ends the daily downtrend and begins a new daily uptrend.

Gold Resiliance

Gold is often seen as a hedge against inflation, which is why gold trends to trade inversely to the dollar. However, as we have seen recently, gold is beginning to rally despite the dollar’ s strength.

And even with the dollar having a really big day on Tuesday, gold still managed to rally.

Tuesday was day 33 for the daily dollar cycle. Which places the dollar in its timing band for a daily cycle decline. Gold may be sniffing out a top to the dollar’s daily cycle. Gold may also be sniffing out the top to the dollar’s intermediate (weekly) cycle, as well. I plan to cover the dollar’s intermediate cycle in this week’s Weekend Report. And if the dollar does roll over into an intermediate cycle decline, that should provide the tail wind necessary for gold to break above the dual resistance of the 200 day MA And the 50 day MA to begin a trending move.

Gold Delivers An Undercut

Gold broke below the day 5 low on Tuesday, to extend its daily cycle decline.

Since printing the day 55 low, gold has traded sideways, which allowed it to catch up to the 10 day MA. Tuesday was day 63, placing gold very deep in its timing band for a DCL. Tuesday’s bullish reversal helps to ease the parameters for forming a daily swing low. A break above 1779.20 will form a swing low. Then a close above the 10 day MA will signal the DCL.

Gold Extends It Daily Cycle Decline

Gold broke below the day 45 low on Monday to form a lower low.

While gold formed a swing low off of the day 45 low last week, it did not deliver any bullish follow through. So with gold undercutting the day 45 low on Monday, that extends the daily cycle decline. That makes Monday day 51 – which is very deep in its timing band for a DCL.

Since gold reversed off of the 200 day MA on Monday, it is possible to see gold form a swing low on Tuesday to signal the DCL. But the weekly chart suggests another possibility

Gold became stretched above both the 50 week MA and the 10 week MA on week 12. The current daily cycle decline caused gold to tag the 50 week MA and is allowing the 10 week MA to catch up to price. We could see gold tag the 10 week MA. At 55 days, if gold forms a daily swing low, after tagging the 10 week MA, that would have good odds of marking the DCL.