Gold

[PCMNewsdesk]

[Gold] made fresh new lows today in a fifth wave. Spot prices declined to $1190.75 this morning, before bouncing a bit thereafter. Today's new lows represent Minute wave v (circle), which, when complete, will mark the end of Minor wave 1 of Intermediate wave (5). Minor wave 2 will be a multi-week countertrend rally. As noted, the other possibility is that a rally will be Minor wave E of (4), but that does not alter our overall forecast in any meaningful way. Gold's bigger-picture bear market does not count complete. A break of $1184.23 would eliminate the wave E possibility.

Now look at the cycle designations on gold's daily chart. During 2014, gold has made a cycle low every 44 trading days. In addition, Minor wave A of Intermediate wave (4) unfolded over 44 trading days. Wave B may be subdivided into 44-45 day sections, as shown. So this particular cycle seems to be governing gold's swings since the Intermediate wave (3) low. Cycles often appear and disappear with no prior warning, so one cannot fashion a forecast based solely on them. But with gold meeting the lower line of a parallel channel from March (see green lines) and with sentiment so extreme (DSI at 5% bulls on Sept. 19), the odds are elevated that a gold rally is nigh. If prices are making lower lows after next Wednesday, we will assess again the potential for a countertrend rally.

[PCMNewsdesk]

[Gold] made a new extreme last night at $1182.90 and then reversed sharply higher today. The overnight low was significant because it breached the wave D of (4) low at $1184.23, which eliminates the alternate potential. The odds remain high for a countertrend rally, as discussed previously, and if it unfolds it will be labeled wave 2 of (5). The evidence for an upward push continues to mount. Friday night the DSI declined back below 10% gold bulls (7%), keeping measure of investor optimism at negligible levels. Also Friday night, the most recent weekly Commitment of Traders Report shows the public's view toward gold has capitulated to the bear market. The weekly chart displays the weekly position of Small Traders, those whose futures and options positions are small enough so that they don't have to be reported to the CFTC. This cohort represents the retail investor. Small Traders currently hold their largest net-short position in 16 years, since August 1998. Even in gold's decline from March 2008 to November 2008, when gold declined 34%, the public held fast to a net-long position. But with gold locked in a bear market from September 2011 and falling to a new low in an Intermediate-degree wave, the retail investor is now betting on a continued selloff. Each of the prior net-short positions since the Spring of 2013 has led to a short-term rally. This one may too. Friday we discussed a turning pattern that has governed gold's swings during Intermediate wave (4): It's due now. With prices meeting the bottom channel line formed during this year's selloff (see green lines), odds are that a multi-week upward push is starting. The initial target area is $1240-$1245, with higher potential. A break of last night's $1182.90 low would mean that gold was continuing its subdivisions toward even lower levels.

[thelife786]

Gold] fabricated a new acute endure night at $1182.90 and again antipodal acutely college today. The brief low was cogent because it breached the beachcomber D of (4) low at $1184.23, which eliminates the alternating potential. The allowance abide top for a countertrend rally, as discussed previously, and if it unfolds it will be labeled beachcomber 2 of (5). The affirmation for an advancement advance continues to mount. Friday night the DSI beneath aback beneath 10% gold beasts (7%), befitting admeasurement of broker optimism at negligible levels. Also Friday night, the a lot of contempo account Commitment of Traders Report shows the public's appearance against gold has capitulated to the buck market. The account blueprint displays the account position of Baby Traders, those whose futures and options positions are baby abundant so that they don't accept to be appear to the CFTC. This accomplice represents the retail investor. Baby Traders currently authority their better net-short position in 16 years, back August 1998. Even in gold's abatement from March 2008 to November 2008, if gold beneath 34%, the accessible captivated fast to a net-long position. But with gold bound in a buck bazaar from September 2011 and falling to a new low in an Intermediate-degree wave, the retail broker is now action on a connected selloff. Each of the above-mentioned net-short positions back the Spring of 2013 has led to a concise rally. This one may too.

[PCMNewsdesk]

An early morning upward bump in [Gold] fizzled as New York trading got underway, with prices falling just shy of pushing past last Wednesday's $1250 high. Still, the analysis from last week remains intact. Prices still hold the potential to carry higher before Minor wave 2 ends. Another push should carry gold to the next resistance area at $1260-$1274. As before, a close much below $1216 would greatly diminish the odds for a gold rally and instead suggest that another wave down to fresh new lows was underway.

[PCMNewsdesk]

[Gold]'s rally may have run its course, pushing to an intraday high at $1255.61 yesterday (Oct. 21). Silver has steadfastly refused to confirm gold's push and remains below its $17.85 high on October 15. When a non-confirmation develops between these two metals it usually means the move in force is at or near an end. In this case it would suggest that the rally from the October 6 low, which we label Minor wave 1, is drawing to an end. At yesterday's high, Minor wave 2 retraced 45% of Minor wave 1 and extreme measures of investor pessimism have been alleviated. There are other options, such as a modest pullback now while silver makes a new low, followed by another upward push in both metals. However, with the larger-degree trend pointed lower, any selloff may be the start of Minor wave 3 down and that's what we are prepared for.

[PCMNewsdesk]

After falling to just 7% bulls at its October 3 low, [Gold]'s wave 2 rally produced a DSI reading of 34% on October 21, which is probably good enough to mark the end of the countertrend move. The high of $1255.61 should not be taken out. A move down through $1182.9, the wave 1 low, will confirm that wave (5) down is underway.

[PCMNewsdesk]

[Gold] is in the process of tracing out a five-wave decline from the $1255.61 high on October 21, adding more evidence to the view that gold's countertrend rally from October 6 is over. Short term, a small-degree fourth wave is about to conclude, which will lead to a price drop thereafter. Gold should decline to at least $1210-$1222. A small "five down" will be the first sub-waves of Minor wave 3 of Intermediate wave (5). An alternate possibility is that Minor wave 2 develops more complexly, but even this alternate would have prices dropping further over the next week or so prior to a bounce back. So near term, the trend is down.

[PCMNewsdesk]

[Gold] declined to $1208.20 today, falling to just below the bottom of the $1210-$1222 range that was cited in Monday's STU. Over the short term, the wave structure has various options so we do not have a strong near-term forecast tonight. The bigger-picture forecast remains clear, however. Gold is tracing out five waves down from its September 2011 peak at $1921.50 and the fifth wave of this structure, which we label Intermediate wave (5), is not complete. So eventually gold will make new lows, declining to at least $1100 before wave (5) terminates.

[PCMNewsdesk]

The previous metals plunged today. [Gold] declined to $1161.54 intraday, which is a new 4-year low. By declining beneath the wave (3) low at $1180.04 on June 28, 2013, gold has satisfied the minimum expectations for wave (5). But wave (5) is far too short relative to prior corresponding waves from the September 2011 peak to suggest it is complete. As we said Wednesday, prices should decline to at least $1100 during the current Intermediate-wave decline. If gold were to bounce near term, the upward push should only be Minor wave 2 of Intermediate wave (5), with Minor waves 3, 4 and 5 still ahead to the downside. So our conclusion is that gold will decline further before an Intermediate-degree low.

[PCMNewsdesk]

[Gold] is tracing out five waves down from the $1255.61 high on October 21. The decline will either be part of a fifth wave, which when complete may mark the end of Minute wave v (circle) of Minor wave 1, or it will be part of Minor wave 3 of Intermediate wave (5), a longer and deeper selloff. Both views are acceptable and both views indicate further selling pressure over the near term. Sentiment is extreme, again. The Daily Sentiment Index (trade-futures.com) is now at just 4% gold bulls, which is the lowest percentage since June 20, 2013 (3%). The extreme last June led to a 2½-day sideways consolidation and then a resumption of a gold decline that erased another $89 from the price. The same behavior does not necessarily have to repeat, but the near-term wave structure suggests gold is not at a significant low. Short term resistance is solid in the $1181-$1195 range.