Beware Gold Base/Reversal, Toggle Directional Biases and Exposure Around $1,182.3 | RJO Futures

December 14, 2016 2:50AM CST

The slowdown in the RATE of descent over the past couple weeks is clear in the 240-min chart below with Fri/Mon's latest stage of the slide leaving 07-Dec's 1182.3 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 moire immediate bearish count.  Its failure to do so would confirm a bullish divergence in momentum that would at least interrupt the broader downtrend from 02-Aug's 1374.2 high.  But for reasons we'll discuss below, even such an admittedly short-term mo failure could not be ignored as the possible start to a base/reversal-threat environment that could be major in scope.

Gold 240

Gold Daily

The daily log chart above shows the nicely developing POTENTIAL for a bullish divergence in the rate-of-change measure of momentum.  PROOF of strength above 1182.3 is required however to CONFIRM the divergence to the point of non-bearish action like short-covers and cautious bullish punts.  And even then, such a momentum failure would only allow us to conclude the end of the downtrend from 02-Nov's orthodox high of 1309.3, NOT the larger-degree 4-1/2-month decline from 02-Aug's 1374.2 high.  HOWEVER....

....It is very interesting to point out that last week's 1161.9 low came with a mere $0.90-cents of the (1162.8) 61.8% retrace of Nov'15 - Jul'16's 1056.2 - 1358.4 rally on a weekly log scale close-only chart basis below.  Reminding traders of our very long-term bullish count that contends Nov-Jul's rally is just the initial (A- or 1st-Wave) salvo in a major correction or reversal of the secular bear market from Sep 2011's high, the market may be near or at the end of a (B- or 2nd-Wave) corrective PROCESS that would warn of a resumption of this year's earlier rally to eventual and potentially major gains above Jul/Aug's 1375-area highs!

Gold Weekly

Indeed, on a major, long-term scale shown in the monthly log chart below, traders are reminded of the very unique COMBINATION of historically bearish sentiment and a confirmed bullish divergence in MONTHLY momentum back in Feb that, in fact, broke the 4-YEAR bear market in gold prices .  Against this backdrop and until the market negates it with a failure below Feb's 1045 low, it remains very conceivable (and we believe likely) that the relapse from the Jul/Aug high is a correction and a potentially outstanding long-term risk/reward buying opportunity.

These issues considered, a bearish policy remains advised with a recovery above 1182.3 not only threatening this count enough to warrant its immediate cover, but also exposing a base/reversal count that could surprise by its scope and warranting a switch to a new cautious bullish policy.  In effect traders are advised to toggle directional biases and exposure around 1182.3.

Gold Monthly


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