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FXA Column

Gold, waiting to rebuy for new highs....

Tue, Feb 9 2010, 19:17 GMT
by David Solin

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Gold continues to chop lower from the Dec 3rd high at $1227.50, but is seen as a correction (wave 4 in the rally from the April low at $865.00), and with an eventual resumption of the longer term gains to new highs after (within wave 5). Note too the non confirmation/bullish divergence on the daily macd on the recent new lows (see bottom of daily chart below), adds weight to the view that an important low may be nearing. However, there are no firm signs of a bottom of that magnitude (at least so far), leaving open scope for more ranging and even marginal new lows first (see “ideal” scenario in red on daily chart below). So for now, would wait for a close above the ceiling/bearish trendline from Dec (currently at $1114/17), or a retest of the Feb 5th low at $1044/47 (also 50% from the April low at $865.00) to buy. Initially stop on a close below the base/falling support line since Dec (currently just below that low). Note only temporary support on the Jan 13th buy at $1135, before stopping a few days later below the bullish trendline from Aug (then at $1107, closed at $1103).
Longer term, the market continues to chop since finally reaching (and temporarily breaking above) the long held target at the ceiling of the bullish channel that has been in place since 1999 in Dec. However, the nearer term upside pattern is not “complete” (see shorter term above) while the upside pattern from the Oct 2008 low at $681.00 is also not “complete” (currently within wave III, see numbering on weekly chart below). Though this suggests at least another 6 month (and likely longer) of “net” gains ahead, the upside is likely to be an extended period of wide, upward ranging (large pullbacks followed by limited new highs), and versus any big picture, extended new highs. Clearly not the type of market to “chase” new highs for the longer term (or even the nearer term for that matter), versus waiting for good sized pullbacks to buy and then getting aggressive with trailing stops on new highs.

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Published on  Tue, Feb 9 2010, 19:25 GMT


Foreign Exchange Analytics http://www.fxa.com | d.solin@fxa.com

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