-- Published: Wednesday, 7 February 2018 | Print | Disqus
By Ira Epstein
Current events have injected financial markets with a solid does of volatility. Wage inflation showed up in the latest US Jobs Data numbers both here and in Germany. Japan continues to languish. Stock indices ended a vertical move to the upside, that began on January 1st and ended on January 29th.
As you know gold soared at year end along with stock indices. Gold was at 1236.5 the week of December 15 and topped out the week of January 26th at 1365.4. Yes, that was a rally of approximately $129. Keep in mind that stock indices, energies and a host of other markets were in vertical rallies into the end of January. We’re now about $45 off January’s peak.
What does this mean?
To answer this, I think we first look at the PriceCounts. I have made a chart below to show you how they’re setup now. (We have a series of PDFs and videos to help you learn how to do these on your own. Our QT charting software contains the study) PriceCounts in and off themselves are not a trading tool. What they do is after a chart setup takes place, provide you with a “measure” of where prices might be headed. The PriceCount has 5 potential objectives. Hitting the first objective has the higher probability. Each one after the first has less and less probability of being hit. The first 3 are the ones most commonly hit.
Let’s look at April Gold with its set of PriceCounts
The 1st Downside PriceCount come in at 1309.2. In front of that is support of the Lower Bollinger Band, at 1321.5. I have a syllabus on the top left of this chart. Prices today and yesterday went down to challenge the lower Bollinger, where support showed up.
The “red” line on the chart is the 18-Day Moving Average of Closes. On rallies expect this number to offer resistance.
Daily Chart with Swinglines, Bollinger Bands and Slow Stochastics
As you can see, the market as measured on the bottom graph where the Momentum Oscillator, the Slow Stochastic Study, is now oversold. Oversold is commonly defined as one of the two lines that makeup this oscillator being under at 20 reading. Oversold either converts to becoming more bearish, or Embedded as I call it when both of the Slow Stochastic lines close under the 20 reading for 3 or more consecutive days. So far that is not occurring, which means this market is oversold. If the lines don’t embed, that will be due to prices reversing higher.
Weekly Gold Chart
Look at the setup from 1123.9 to 1218.9. Look at the setup from 1123.9 to 1218.9. That formation created an upside PriceCount that culminated at the 2nd PriceCount, against the Upper Bollinger Band. The 3rd PriceCount is still an open target, but as explained above after the 1st PriceCount is hit each after that has a lesser probability of being hit. The 1460 is still a possibility.
Economic data, across the world is strong. The US Fed is on schedule to raise interest rates 3 times this year. Fear that the Fed will get ahead of itself and slow down the US economy was seen this week. It was a major force in all the volatility we’ve seen this week. Last week’s job in US wage inflation spooked the markets.
The question is whether gold will respond to inflation. My answer is that it already has and will continue to do so. Going up $129 in a matter of weeks and getting a pullback of 1/3 of that amount is not unusual. Nor would a bit more of a pullback, so 50% over or a $60 break do longer term damage to the weekly Chart.
On the Daily Chart, the 1st PriceCount of 1309.2 is an open count. If hit, it would put prices under the Lower Bollinger and keep the market in oversold territory.
Getting over 1365 in April Gold puts the market over a double top, and open the possibility of getting up to the 3rd PriceCount.
Right now, the trend is down, oversold, and but working prices lower. Look for support near 1296. If hit, I will issue an update.
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-- Published: Wednesday, 7 February 2018 | E-Mail | Print | Source: GoldSeek.com