Tighten Gold, Silver Risk Levels Near Range Base

September 19, 2016 8:25AM CDT

DEC GOLD

Thur/Fri's continued slide leaves Thur's 1332.5 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter the market needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so would confirm a bullish divergence in short-term momentum, break the slide from 07-Sep's 1357.6 high and expose at least another intra-range corrective pop.  This tight but objective risk parameter may prove handy given the market's proximity to the extreme lower recesses of a 1374 - 1305-range that has constrained prices for the past three months.

Gold 240

 

Gold Daily

Since exploding above May's 1306 high in late-Jun, the daily log scale chart above shows that this general area has held as new support.  The Fibonacci fact that 01-Sep's 1305.5 low is also the exact 38.2% retrace of May-Aug's 1201.5 - 1374.2 rally reinforces this area as a key support condition, the break of which would expose a larger-degree correction or reversal lower.  Should the market fail below 1305.5, an historically frothy 91% reading in our RJO Bullish Sentiment Index shown in the weekly log close-only chart below warns of a vulnerability to lower levels that could be significant as the market forces the capitulation of this long-&-wrong exposure.

In sum, a cautious bearish policy remains advised with strength above 1332.5 required defer or threaten this call enough to warrant moving to the sidelines.  In lieu of such 1332.5+ strength and especially if the market breaks 01-Sep's key 1305.5 low, further and possibly steep losses should not surprise.

Gold Weekly

DEC SILVER

As this blog was being prepared, the 240-min chart below shows that the market has recovered above 13-Sep's 19.35 minor corrective high that confirms a bullish divergence in momentum.  This mo failure defines Fri's 18.715 low as the END of the decline from 07-Sep's 20.235 high and our new short-term parameter from which the risk of any non-bearish decisions like short-covers and cautious bullish punts might now be objectively based and managed.

Silver 240

Silver Daily

Stemming from the extreme lower recesses of the past 2-1/2-months' range shown in the daily log chart above, the market should be considered vulnerable to another intra-range rebound and possibly a resumption of this year's major uptrend shown in the weekly log scale chart below.  Market sentiment has eroded a bit since mid-Jul and just ahead of early-Aug's peak, but at a still-frothy 81% level it remains more of a threat to the bull than supportive.  Plus, silver is unlikely to recover if gold breaks that key 1305 levels and exposes potentially tremendous downside vulnerability.

So something's gotta give here.  Either today's bullish divergence in short-term silver momentum is only exposing a minor corrective hiccup ahead of resumed losses OR gold's gonna surprise us with a recovery above our short-term risk parameter at 1332.5.  Traders are advised to to acknowledge either outcome and act accordingly.  For the time being shorter-term traders are advised to move to a neutral/sideline position while longer-term players are advised to pare bearish exposure to more conservative levels.  A relapse below 18.715 will nullify this bullish divergence in short-term mo and resurrect a bearish count that could expose surprising losses thereafter.

Silver Weekly

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