Yesterday afternoon’s nondescript recovery above 06-Sep’s 1212.7 high could have long-term bullish implications.  This rebound renders the recent sell-off attempt from 28-Aug’s 1220.7 high a 3-wave affair as labeled in the 240-min chart below.  Left unaltered by a relapse below Tue’s 1192.7 low, this 3-wave setback may be considered a corrective/consolidative affair that warns of a resumption of Aug’s 1167.1 – 1220.7 uptrend that preceded it.  The Fibonacci fact that that 1192.7 low was less than a buck from the (1193.6) 50% retrace of Aug’s 1167.1 – 1220.7 rally would seem to reinforce this bullish count.  Per such, we’re defining 1192.7 as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

This admittedly short-term analysis becomes very compelling when considered against the backdrop of evidence warning of a much broader base/reversal count discussed below.

Gold 240 Minute Chart


Gold Daily Chart

Our broader base/reversal proposal is predicated on:

  • the prospect that 16-Aug’s 1167.1 low COMPLETED an arguably textbook 5-wave Elliott sequence down from 11-Apr’s 1369.4 high as labeled in the daily chart above
    • the suspected 5th-Wave down of this sequence came within a few bucks of its 1.000 progression relationship to the length of Wave-1 since the 3rd-Wave “extended”
  • the market’s recent foray into and rejection of the (1183 – 1124) lower-quarter of the past couple years’ range shown in the weekly log chart below amidst
  • historically bearish levels (36%) in our proprietary RJO Bullish Sentiment Index not seen since Dec 2001!

Gold Weekly Chart

Lastly, traders are reminded that the extent and impulsiveness of Dec’15 – Jul’16’s rally, in fact, BROKE the secular bear trend from Sep’11’s 1920 all-tine high, exposing a major correction or reversal higher.  Until and unless this market breaks at least Dec’16’s 1123 low and preferably Dec’15’s 1045 low, all of the price action down from Jul’16’s 1377 high is arguably a (B- or 2nd-Wave) correction ahead of an eventual (C- or 3rd-Wave) resumption of 2016’s uptrend that preceded it.

Might 16-Aug’s 1167.1 low be the END of this 2-YEAR correction and start of a trendy, impulsive rally to levels above 1377?  Of course, the past few weeks’ recovery attempt is grossly insufficient to conclude anything so long-term.  But what this recovery HAS done is identify some specific levels and risk parameters at 1192.7 and 1167 from which the START of a bullish policy and exposure can be objectively based and managed.

Subsequent strength above 28-Aug’s 1220.7 initial counter-trend high will be the next reinforcing evidence of a count calling for at least a larger-degree correction higher and possibly that long-term bullish count while a relapse below 1192.7 will threaten this count and further weakness below 1167 will negate it.  These issues considered, traders are advised to neutralize all previously recommended bearish exposure at-the-market and first approach setback attempts to the 1207.5-area OB as corrective buying opportunities with a failure below 1192.7 required to negate this specific call and warrant its cover.  A break above 1220.7 could expose steep, accelerated gains immediately thereafter.  This constructive call on gold would also seem to be consistent with our bullish counts in the euro, sterling and CAD.

Gold Monthly Chart

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.