Gold – 16 Sep

Gold broke down below critical support at 1794, but rallied and finished just below the critical level and closed at 1793. That is too close to say that support has failed, but a lower low was definitely set on the chart making a short term downtrend. Also, price is below the 18 day moving average which re-enforces the downtrend and paints the chart short term bearish. Now 1850 has to be taken out to change the trend to neutral. Resistance is the 18 day moving average currently at 1832 followed by the swing high at 1850. Support is still the 1794 level and then the Bollinger band at 1753. It looks to me that price wants to test the Bollinger band and Fibonacci 38.2% support. The 45 day moving average is coming up to bolster that area. The real question is this: will the swing low at 1705 hold? If it does, then the pattern we are making is a consolidation triangle where price oscillates, closing into a tighter and tighter range in time. If 1705 falls, then we have a bigger issue where a solid downtrend will be in place. I think the fundamentals of gold have never been better and a sustained break below 1705 is unlikely.

PHYS, the real and 100% allocated gold bullion fund, is maintaining its 4.3% premium to net asset share value. Like spot gold, it also barely broke critical support. As of this posting, price is actually just above that level. Therefore I will say that support is still the 15.74 level with the swing low of yesterday as further support at 15.53. The Bollinger band will support below that level around 15.16. Finally, the 50 day moving average is currently at 15.04 and climbing. All this support builds an excellent floor between current price and the swing low at 14.42.

I think this chart illustrates the degree that the bears will have to carry the day to paint a bearish scenario in the intermediate term. Again, with the EU in serious trouble and our economic numbers an absolute abortion, I think gold will find buying all the way down that will bolster price. I doubt seriously that 14.42 falls. The technical studies are going nowhere fast and are neutral. The Bollinger bands aren’t expanding or contracting which says that volatility isn’t really changing.There is some potential positive divergence developing between price, MACD, RSI, and stochastic. Look at the MACD histogram and the slope between successive troughs and compare to the slope of a line connecting price troughs. The positive price slope is in disagreement with MACD slope. Unless price really picks up steam to the downside soon, the chart is saying the down move will soon reverse.

We essentially have a standoff between the bears and the bulls that are locking profits and the speculative longs. That is what consolidation patterns are for, to generate consensus.

This entry was posted in Gold, Matrix Sentry TA, PHYS, Technical Analysis. Bookmark the permalink.

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