Bottom in Gold? | RJO Futures

January 4, 2017 4:55AM CST

FEB GOLD

The market's recovery today above our short-term risk parameter defined by 14-Dec's 1168 corrective high confirms a bullish divergence in momentum that defines 15-Dec's 1124.2 low as the END of the decline from 02-Nov's orthodox high of 1309.3 shown in the daily log scale chart below.  Per such 1124.3 is considered our new short-term parameter from which the risk of any non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

This is a relatively short-term mo failure and of a scale INsufficient to conclude the end of the broader downtrend from 02-Aug's 1374.2 high.  But for longer-term reasons we'll discuss below, traders are advised to beware just such a longer-term base/reversal environment that could result in a resumption of early-2016's uptrend and reversal of the secular bear market from 2011 to Dec'15. Gold Daily

Gold Weekly

The weekly log close-only chart above shows the extent of the rally from late-Nov'15's 1056 low to Jul'16's 1358 high that, in fact, breaks the secular bear market from Sep'11's 1877 all-time high weekly close.  The prospect that the 2011 - 2015 decline is a complete 5-wave Elliott sequence reinforces this count as does the fact that market sentiment at the time reached historically bearish levels typical of such major base/reversal environments.

These technical facts suggest that the rally from Dec'15's 1045.4 intra-day low to 06-Jul's 1377.5 high is just the INITIAL (A- or 1st-Wave) of a major base/reversal PROCESS, suggesting further that the relapse from the Jul or Aug high is a (B- or 2nd-Wave) CORRECTION within that process.  Given that this suspected correction has retraced this year's early rally "extensively" (i.e. more than 61.8%), the risk/reward merits of a long-term bullish policy from current mid-1,100-area prices could be hugely opportunistic.

To be sure, we cannot CONCLUDE a major reversal higher from such a smaller-degree momentum failure.  But while 15-Dec's 1124.3 low and short-term risk parameter remains intact, neither should we ignore it as a possibility.

Gold Weekly

On a very short-term basis, the 240-min chart below shows the impulsive (5-wave) manner in which the market has rebounded from 15-Dec's 1124.3 low.  Such trendy, impulsive-looking behavior in the direction of the suspected new trend satisfies the second of our three reversal requirements after the bullish divergence in momentum.  Proof of 3-wave, corrective behavior on a subsequent relapse attempt remains required however to satisfy our key third reversal requirement.

As a result of this week's continued gains the 240-min chart below shows that the market has identified yesterday's 1146.5 low as the latest smaller-degree corrective low that can be used as a micro risk parameter for any non-bearish decisions like short-covers or cautious bullish punts.  We don't expect this market to simply "take off" on an uptrend tangent never to trade at these levels again.  Rather, we anticipate a relapse attempt at some point to either correct the recent rally within the context of our major base/reversal count OR negate it by a plunge below 1124.3.

These issues considered, all traders are advised to move to a neutral/sideline position as a result of today's recovery above 1168 in order to circumvent the heights unknown of a larger-degree correction or reversal higher.  If our preferred bullish call is correct, somewhere along the line we expect the market to counter the current recovery with a corrective relapse.  If the market survives that relapse at a level higher than 15-Dec's 1124.3 key low and short-term risk parameter, we believe the risk/reward merits of instituting a long-term bullish policy could be outstanding over the rest of 2017.

Gold 240

MAR SILVER

Taking its next constructive step after stemming the recent bear trend with a bullish divergence in short-term mo discussed in 29-Dec's Technical Blog , yesterday's resumed rally above last Fri's 16.345 high leaves Fri's 15.88 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market now needs to fail below to render the recovery from 20-Dec's 15.675 low a 3-wave and thus (bear market) corrective structure.  In this regard 15.88 becomes our new short-term parameter from which the risk of non-bearish decisions like short-covers and cautious bullish punts can now be objectively rebased and managed.

Silver 240 Silver Daily

On a broader scale 07-Dec's 17.30 larger-degree corrective high remains intact as our key long-term risk parameter the market needs to recoup to, in fact, break the broader downtrend from 02-Aug's orthodox high of 20.835.  This said however, the fact that Dec's sell-off from that 17.30 high spanned a length 61.8% of Nov's preceding 19.00 - 16.15 decline amidst a return to a historically low 33% reading in the Bullish Consensus warns us to be on the lookout for the END of a suspected major correction of Dec'15 - Aug'16's uptrend ahead of an eventual resumption of that uptrend to new highs above 20.835.

Silver Weekly

Finally, the monthly log scale chart below shows the Dec'15 - Jul/Aug'16 rally BREAKING the secular downtrend from Apr'11's 49.82 all-time high.  2016's early strength warns of a base/reversal environment that could be major in scope and suggests that Aug-Dec's relapse could be the (B- or 2nd-Wave) correction within that major base/reversal PROCESS ahead of a resumption of the reversal to new highs above 21.225.  Gains above 07-Dec's 17.30 high will reinforce this long-term bullish count while a relapse below 15.88 will defer or threaten it.

In sum, a cautious bullish policy is advised for shorter-term traders from the 16.30 level OB with a failure below 15.88 negating this call.  Longer-term players remain advised to maintain a cautious bearish policy with strength above 17.30 negating that count.  In effect the market has identified 17.30 and 15.88 as the key directional triggers heading forward.

Silver Monthly


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