Gold, sharp decline nearby?

Gold near term outlook:

In the Jun 23rd warned of the risk of a final pop higher (as part of a more major topping), which did indeed occur the very next day as the market surged on the surprise Brexit vote.  Note that the market surged above the ceiling of the long discussed expanding triangle/ rising trendline from March, before quickly reversing back below (see daily chart below).  Seen as a bearish false break and along with a slew of longer term negative signs (see longer term below), adds to the view of a large topping pattern over the last few months (and eventual declines below the base/falling support line from March, currently at $1193/96). Key resistance remains at the ceiling/rising trendline since Mar (currently at $1328/33) as a break/close clearly back above would put this more major topping view on hold (though not necessarily abort).  Nearby support is seen at the recent $1302/05 low and $1278/81 (38% retracement from the May 30th low at $1200.  Bottom line : recent false break of the rising trendline from March another negative and adds to the view of a larger topping.                                                          

Strategy/position: 

Took profit on May 16th sell at $1310 on Jun 24th at $1275 ($35 profit, $3 above the bearish trendline from Jun 16th, also said to stop on an intraday break given the risk of a sharp pop higher).  For now with a larger topping still seen, would resell here (currently at $1321) and initially stopping on a close $5 above that rising trendline from March (limited risk).  But will also want to switch to a trailing stop on nearby declines (generally don't like the idea of stop that moves away from the market).    

Long term outlook:

As discussed above, a number of longer term negatives add to the view of an important topping and include widespread bullish sentiment (contrary indicator), long technicals that have not confirmed the last few highs (see bearish divergence on the weekly macd) and view since May of a more important bottoming in the US$ index (inverse relationship, see email from Tuesday). Note too that expanding triangles break down into 5 legs and with the recent pop higher seen as that final leg (wave 5, see weekly chart below), a potentially sharp decline/downside resolution may be near.  Further resistance above that broken ceiling is seen at $1358/63 (both that Jun 24th spike high and the bearish trendline from Sept 2011). Bottom line: potentially more major top also forming and with scope for a nearby, sharp decline.

Strategy/position:

Still bearish from Apr 29th at $1279 but would also switch to neutral on a close $5 above the ceiling of that expanding triangle.