Technicals | Aug 05 2015
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Bottom Line 04/08/15
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 1072 / 1055 / 1000
Resistance Levels: 1145 / 1170 / 1260 / 1311
Technical Discussion
‘Paradoxically though, Commitment of Traders reports (COTs) are starting to look more bullish (on a shorter term basis) over the past couple of weeks, with the Commercials (who generally trade on the right side of the ledger) starting to build long positions across the board.’ We emphasise the paradox in this statement as Gold has continued to march on lower since our last review. Ideally 1134 was to hold yet it has failed to do so. Yet basis the COT report and August generally being one of Golds strongest months seasonally, then the chance of some strength returning should not be discounted over the coming days. Especially if the recent low circa 1072 continues to hold.
Reasons to stay bearish (neutral above 1233 more bullish above 1311):
? 1134 now broken below
? outlook only improves dramatically above 1311 and then 1353
? sentiment has been strongly bearish (note: the herd is wrong at extremes)
? another round of market testing now in play which is positive
As stated price has now broken below 1134 yet it is worth noting that buyers almost immediately came out of the woodwork on day two of the breakdown which revealed a wide ranging price bar closing mid range. Volume was well above average as well. If sellers had dominated on this day, it would have closed either at its lows or even lower than what it did. Four days later price did eventually probe lower, yet once again it closed off its lows via another bout of high volume. In our view this ongoing weakness is now being tested by some speculative buying, similar to what we saw over a period of time between 1145 and 1170.
Market tests rarely prove successful on first attempt, yet we are now potentially witnessing a second round so the bears have been put on notice. Not saying price cannot continue lower yet it is common to see markets being tested strongly just as dominating trends are slowly coming to a close. Note the word slowly as well, as the process could well take many months to play out. Lows attained thus far sit at 1072, the 61.8% retracement of the full move higher off the 2001 lows measures in at 1028, and the triangle target we have been monitoring projects 961. Price has certainly made its way into the ball park though it has to be said.
Trading Strategy
We are witnessing signs of life here yet we are not in the business of picking absolute lows. Price could easily drop again before undergoing another round of testing, especially, as identified, there are some deeper price targets yet to be attained. Yet it has to be said, from the analysis we are forwarding, that a major low point in Gold could be getting near. At least on a short to medium term basis. Watching Gold and precious metals in general very closely now.
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