Gold and Silver may have peaked in the short term [Video]

XAU/USD

Gold has collapsed significantly in each of the last 3 days.

The first collapse was followed by a very strong bounce to a new all time high.

The second bounce on the first of October retested that all time high.

I waited patiently for yesterday's expected collapse to test strong support at 3835/31. Longs needed stops below 3823 & unfortunately we ran as far as 3819 before the recovery.

So far as I write over night we have only managed to recover about half of the loss but almost reached the 2 targets of 3850 & 3865.

As I said yesterday, I'm not going to be too optimistic with the targets and I will look for quicker profits than normal.

I don't think we should hold onto positions too long with this increased volatility.

Just be aware that increased volatility is often apparent at market tops.... Although the period of volatility lasts a long time before markets turn around and go down.

Be prepared. This might just be the beginning of a volatile period and we may even see a reversal pattern form over the next few weeks or months.

I'm starting to be more concerned about a significant move to the downside, although I don't think it will happen just yet.

I see strong support at 3835/31 again today. Longs need stops below 3820.

I'm going to take a break below 3820 as a sell signal today targeting 3805/00 for profit taking.

We should see buyers trying to pick a bottom as they have done in the last 3 sessions at strong support at 3796/3792.

Longs need stops below 3783.

As I write we are sitting in the middle of yesterday's range, leading to a neutral doji on the daily chart, indicating the market may have run out of steam.

It is possible we reverse from the 3860/3870 area we test the all time high at 3890/3895 it might be worth trying a short position with a stop above 3902.

XAG/USD

Silver has now hit all 3 targets 4735/40, 4775/80 & 4800/4810.

Yesterday I warned: ''Be aware that the market is now severely overbought and further gains might be limited. A small correction to the downside could be expected with first support at 4630/20. Longs need stops below 4590.

This call could not have been more accurate!

We made a high for the day exactly at 4800/4810. (In fact it was right in the middle of the range at 4805).

Silver then immediately collapsed in a straight line (exactly as predicted in fact) to my support level at 4630/20.

Longs needed stops below 4590 & with a low of the day at 4588, the trade worked perfectly with an immediately 100 tick recovery.

Again yesterday I don't think the analysis and predictions could have been more accurate!!

It's important to note that we have a potential 1 week head and shoulders pattern forming.

Therefore I don't trust the support at 4630/20 today and I will take a break below 4600 as a sell signal.

Shorting into a strong bull market goes against my rules, but with the bearish engulfing candle on the H4 chart & head & shoulders pattern I have good reason.

A break lower should target a buying opportunity at 4546/4536. (The bulls have not given up yet and will be looking for bargains today).

Longs need stops below 4515.