Gold (spot futures)
(based on 30-year advanced data charts)
Yearly: well, next time, you see a W based rally, respect it, what a superbull run this has been and there is no sign of reversal yet!
Quarterly: something is afoot here, with a possibility for a double top or some sort to topping here. After a decade of superbull run, this one is showing signs of tiring here.
Monthly: We can see a super giant M double top here, taking shape gradually. The Apex point of the M is near 728, at least we should give that level a test to see whether it holds or not. There is a need to return to the long term trendline like the stock markets had done in the past two years. There are two major trendlines down there, either 780ish or 658ish, depending on when we are going to test them. A fall below 900 is when the big bears will come out to play.
Weekly: it is a very complicated top, well, after such a superbull run, it has to topple in a big fashion too. We see a giant M is taking shape, the left hand side of the M is formed by two failed W there and now we are shaping up this right hand side with a double topping M. There are various battle lines, though 875 is the big one. While people start to talk about inflation, some might think it is good for gold, actually it may not be the case. It is the fear of inflation and the collapse of value of all other assets that have driven gold to such historical levels. Now when the reality starts to head into a recovery, the fear deposit in gold might be transferred to more vibrant and risk taking assets which may give investors a better return when the economy fully recovers. Asset rotation is a very important theme for global investors, as is regional rotation and so on.
Daily: If you ignore the top in 2008, then we are still very much inside this upstream moo river for the past decade or so. For now, we need to meander across from the upperbank to the lowerbank. If you link up the two tops, then you can see we are stuck in a big triangle here, a break of either side will be very significant indeed as the depth of the triangle is huge. I am fairly confident that gold will head towards 500 first, before the much talked about 1500 dollars.
Moo River Watch
Price chart: so far, we are forming an inside bar, with a lower high and a higher low, which keeps both bears and bulls guessing hard. Bollinger Bands widen so much, which is quite scary, as moves will be big and aggressive.
RSI: it has reached a high level of 84ish, but Dow went into 90's, so while it is over bought, it could be overbought further, if the market wants that.
Elder Ray is bending downwards.
Price chart: if you use line (close) chart, you can see a potential for either an M topping here or a failed W topping. If price goes up a bit more, it will almost negate the possibility of the M topping. We are at a critical moment. Para sar dots have gone red for the fourth quarter now, which is good going for bears. On candles, it is a very flat bullbear battle zone, which might be a continuation pattern or a topping exercise, depending on the shape it takes on the line chart. If we meander within this flat zone for too many quarters, then it might just turn out to be a continuation pattern.
Momentum indicators are showing all kind of signs of topping, though there are clearly visible correlated M's or failed W's yet.
Price chart: this is where the proof is in the topping. We see a M shape on upper bollinger band, but so far price has held above bollinger midline this year, which is rather stubborn and frustrating for bears. Most bears are still waiting for a signal to pile in. It looks like an inversed Head and Shoulder pattern (turned upside down). As long as 1000 holds, the chance for a big drop is very high.
Momentum indicators are showing all signs of topping and bearish divergence. For example, RSI has broken down from the upstream moo river and into a downstream moo river and there is an M shape here, though it might go for a failed W instead. Momentums are really collapsing here.
Price chart: if you use line (Close) chart, this is almost a copy of the left hand side of the giant M we talked about on yearly. This is yet another failed W taking shape.
We can see correlated M's having taken shape on Momentum and Elder Ray and more significantly, RSI, while stuck in a downstream moo river, has just been rejected by the upperbank. More downside to come.
Overall, the trend for 2009 should be down, but there are still some lingering late bulls there dwelling on the bull wagon while the big boys are gradually taking off the wheels. If you can, avoid gold, as it is going to be as wild as last year's stock market. If you must, then you must be prepared for the huge volatility. Have a plan A when you get it right; have a plan B when you get it wrong; have a Plan C to withdraw from this instrument if it is not working for you. I won't have any involvement with wild beasts like gold and oil. It is the low volatility market that pays a patient daytrader day in day out, without the huge risk as in a high volatility market.
The choice is yours. All that glistens might be last decade's gold.
(disclosure: I do not hold any trading positions on gold futures)