Gold Correction Continues, Defines New Risk Levels

June 20, 2018 7:47AM CDT

Yesterday's break below Fri's 1277.9 low reaffirms the developing downtrend and leaves yesterday's 1286.8 high and last Thur's 1313.0 high in its wake as the latest smaller- and larger-degree corrective highs this market is now required to recoup to threaten or negate a more immediate bearish count. Per such, these levels represent our new short- and longer-term risk parameters from which a bearish policy and exposure can be objectively rebased and managed. The market's failure to sustain losses below 1286.8 will confirm a currently-threatening bullish divergence in momentum, stem the slide and expose a base/reversal-threat environment.
Gold 240min Chart
Gold Daily Chart
These bear risk parameters may come in handy given the market's proximity to the Fibonacci minimum (1270) 38.2% retrace of Dec'16 - Apr'18's entire 1124 - 1369 rally on a weekly log scale basis below amidst relatively low levels in our RJO Bullish Sentiment Index. This said however, only a glance at this weekly chart is needed to appreciate the magnitude of the 1365-to-1377-area resistance that has capped this market for the past TWO YEARS. Until and unless this market proves commensurately larger-degree strength above Thur's 1308.3 corrective high daily close and our key longer-term risk parameter, the trend is down on at least an intermediate-term scale and should not surprise by its continuance or acceleration with former 1285-to-1290-area support considered new near-term resistance.

On an even broader scale 12Dec17's pivotal 1238.3 low is this market's next major downside threshold, the failure below which could expose sharp losses to the lower-quarter of the past couple years' range around 1180ish.

In sum, a bearish policy and exposure remain advised with a recovery above 1286.8 required for shorter-term traders to take defensive steps and commensurately;y larger-degree strength above 1308.3 for long-term players to do the same. In lieu of such strength further and possibly accelerated losses remain expected with former 1285-1290-area support considered new near-term resistance.

Gold Weekly Chart

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