Let’s start off with the exact wording I used in my last report, dated March 22, 2012.

“At this point in time I don’t see reason for gold to rally. Yes, bounces can and will occur, but there isn’t reason in terms of chart analysis to get bullish at this time. If anything, in the short term I think the bear side of the market is the place to be.”

I wish I had followed my own advice given the break this past Tuesday and Wednesday as it seems clear that the Bear side of the market is the place to be until the chart pattern changes. I don’t envision much of a change taking place taking place soon given that US financial markets are just beginning to factor in the adjustment to a pausing or lack of further quantitative easing and financial programs such as “Operation Twist”.  

No one knows what the Fed will next do. If a downside rout in stocks were to occur, that might prompt the Fed to “talk” up the idea of more easing. However, the Fed seems very satisfied at this point in keeping its bullets in its gun holster. The bullets are there if needed, but the Fed clearly apparently doesn’t feel the need to take the bullets from their holster and load them into their six shooter. As for shooting them, that’s a ways off.

The next “big” report coming up is the employment report on Friday. Yes, it’s Good Friday and the NYSE and other stock exchanges will be closed, but the futures markets in stock indices will be open for trading through early morning. How the futures trade off this report will set a tone. If the report comes out “good”, some will think that that in itself keeps the Fed on the sidelines. On the other hand, a “bad” report will provide analysts with reason to believe that the Fed will start loading their bullets, getting ready to off up another round of stimulus. A long as economic reports continue to show growth in the US as they’ve been doing, disappointment in lack of further stimulus will remain.

A strong Dollar is not gold’s’ friend right now. Yes, both can and at times do rally together, but that often occurs when traders are looking at both as a “safe haven” plays. That isn’t the market thinking right now. Iran, Europe, Syria, a slowdown in Europe and other world issues including Syria aren’t influencing gold at this time.

The Monthly chart pattern above is bearish as the Swingline Study shows prices continue to make lower highs (red arrows) and lower lows (yellow arrow).

When I add the 18-Week Moving Average of Closes, you see that prices are trading under this moving average which makes it resistance, which comes in near 1672.7. It would take a move over 1692.9, the most recent Swingline High to change the bearish chart pattern.

The chart pattern on the Weekly Chart above as measured by the Swingline is one of a lower highs and lower lows. However, because prices are over the 18-Month Moving Average of Closes, I look for first support to come in near 1580.00.

The chart pattern on the Weekly Chart above is one of a higher high and a lower low. Because the most recent action if that of a price break, the bears remain in control until the market sees a chart pattern change or prices take out 1790.4, the most recent high.

The chart below is published with permission of the Moore Research Center, Inc.

For simplicity purposes, I have only published what a Bull Year looks like given that there’s no reason to yet consider a Bear Year in my opinion.

The “seasonal chart” of the June contract shows sideways to lower prices in early April, leading to a rally high in May and break into June..

The chart pattern on the Daily Gold Chart is bearish. There is a pattern of lower highs and lower lows with prices trading under the 18-Day Moving Average of Closes as displayed as the red line on the above Gold Chart. Yesterday prices did broke down and hit the Bollinger Band Bottom (black interrupted line). Today prices are rallying off that band, but they are not higher by much and more importantly, prices have moved to the right side of the Bollinger Band, which means prices can track this band lower without becoming excessively oversold.

I see no reason to not remain bearish as prices remain in an orderly downtrend.

Rallies continue to look like selling opportunities until something occurs later in the summer. Often the close of prices on the last day of July becomes the number I use to look for prices to rally from into year end.

Spain is having issues keeping its interest rates lower. Eventually that may ignite another round of European sovereign debt issues, but rates aren’t currently high enough to warrant panicking. I expect there will be discussion about this at the upcoming G-20 meeting.

Right now the Friday Employment Report will be gold’s driving force. In essence it’s really a “risk on” or “risk off” event that may setup gold’s next direction.

I am looking of $1580 on the downside if the downtrend continues.

If you’d like more information about trading gold, simply call us at

1-877-973-2077.

By clicking here you will be taken to my subscription page or you can go to:

www.iraepstein.com and look on the left hand side of the page for the link.

Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. Chart data is courtesy of LGP-IraCharts. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc. or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are not indicative of future performance.

-- Posted Thursday, 5 April 2012 | Digg This Article