Gold at Significant Turning Point

Dec 12, 2008: 3:01 PM CST

Gold prices have reached an important technical confluence node – rising above this key level would be tremendously bullish, but there’s a good deal of bearish confluence resistance overhead… but gold might just make it above with just a little push.  Let’s look at the daily and weekly charts to see these developments.

Gold Prices Weekly:

The significant resistance takes place at the $830.35 level, which corresponds with the 38.2% Fibonacci retracement of the current down move, and is combined with the falling 50 week EMA at $827.30.  If would be a major accomplishment for gold to close above the $831 per ounce level soon.

However, it has significant headwinds before doing so.  The weekly chart is in a technical downtrend which has been confirmed, and the momentum oscillator just registered a new momentum low in November, confirming the price lows.  We’re technically on (or ending) a counter-swing rally into resistance, but the recent bullish candle either will help shake the bearish technical picture… or fall victim to it.

The EMA structure is in a bearish orientation (the 20 is beneath the 50), and both serve as overhead resistance – which is occurring this week.

For Fibonacci purists (using absolute spike highs and lows), the 38.2% retracement registers at $818.92.  I tend to side with Constance Brown and use significant or closing prices instead of spike prices, somewhat of a controversial technique.

Now, let’s drop to the daily chart and see another reason why a close above $831 per ounce would be mighty significant.

Gold Prices Daily:

Like the weekly chart, the trend is still confirmed as officially ‘down,’ and the EMA orientation is actually in “the most bearish structure possible” – those are even stronger headwinds against which to fight.

There isn’t a positive momentum divergence, but rather a sense of positive momentum building along with the price.

The $830 zone is significant for one subtle reason.  Should price breach the November highs, we would officially confirm a fresh uptrend in the daily chart on the price of gold – that would be the genesis of a new technical trend, and short-term timeframes precede long-term structure timeframes… but let’s not get too far ahead of ourselves.  Doing so would lock in a pattern of higher highs and higher lows – failure at this level would lock in a double top and leave gold prices inches away from a true reversal.

Mini-Gold futures (as of this writing) are trading around the $721 level after reaching an intraday high of $829.60.

Continue to watch this closely to see what happens at this critical technical juncture.

Corey Rosenbloom
Afraid to Trade.com

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Comments
  • There indeed has been overlap on the daily and weekly charts in terms of Wave structures - I'm with you that we're experiencing a complex corrective phase in gold, though I'm not sure if I'm able to label the corresponding corrective waves adequately. They always say about Elliott that to master it, you have to master the corrections, and that's where it can get quite difficult and I'm learning through many examples and seeing my counts play out in real time.

  • Andrew Stanton

    The weekly chart shows five waves down from the high but there is lots of overlap and all but the last one are clearly madeup of three sub waves. My best guess is we are looking at an unfolding A-B-C-X-A-B-C (W-X-Y) that requires one more new low to complete. The corrective look of the move up from the October low supports that count.

  • Vasu

    Corey :
    According to my understanding GLD is the only ETF which has completed the 5 wave downtrend and is now in the 1 st wave uptrend. Even if it encounters a pull back at these resistance levels I might give it a benefit of doubt that it is just having a small 2nd wave correction. Please correct me if I am wrong . I have recently started my elliot wave analysis and you are my GURU.:)

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