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Secular Gold Bull Defines New S-T Risk; Silver Too

Posted 08/26/2019 10:05AM CT | RJO Market Insights

DEC GOLD

Overnight’s break above 13-Aug’s 1546.1 high reaffirms the secular bull market and leaves Thur’s 1502.1 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to even defer, let alone threaten the bull.  In this regard we are identifying 1502 as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bullish policy and exposure.

Given the extent and dominance of the secular advance, 01-Aug’s 1412.1 low arguably serves as the next larger-degree corrective low the market is required to break to threaten the portion of the bull from 02-May’s 1267.3 low.  Former 1450-area resistance-turned-support stands in the way of this larger-degree corrective low that remains intact as our key long-term risk parameter.

Due to the extent and uninterrupted nature of early-Aug’s resumption of the secular bull, there’s a lotta green between 1502 and 1412, so acknowledgement of and adherence to technical and trading SCALE is crucial.  If you’re of a risk profile that cannot absorb risk to 1412, you’re considered a shorter-term trader and would be advised to neutralize longs on a failure below 1502.  For truly long-term players a 1502 risk parameter would be too tight and expose whipsaw risk, leaving 1412 as an objective and appropriately scaled risk parameter.  We see no levels of any objective technical merit between 1502 and 1412.

From a long-term perspective, the weekly (above) and monthly (below) charts show the secular bull tend as THE DOMINANT technical factor currently.  Despite merely derived Fibonacci retracement and progression references around current 1530-area prices, we see NO levels of any technical merit above the market shy of Sep’11’s 1920 all-time high.  This does not mean we’re forecasting a move to 1920.  But it certainly does mean that until and unless the market fails below a corrective low like 1502, the market’s upside potential is indeterminable and potentially extreme, including a run at the 2011 all-time high.

Some traders might note the currently historically frothy sentiment levels as a reason to doubt the bull’s staying power.  While admitting that such frothy levels are typical of major peak/reversal environments, traders are reminded that sentiment/contrary opinion is not an applicable technical tool in the absence of an accompanying confirmed bearish divergence in momentum.  Herein lies the importance of corrective lows and risk parameters like 1412 and even 1502.

Indeed, and while this monthly log chart below does not show it, the first time the Bullish Consensus ticked 68% (its current level) following Aug 1999’s 253 low and major base/reversal was in Sep 2001.  That new secular bull trend didn’t stop for ANOTHER 10 YEARS in which the Bullish Consensus resided continuously between 47% and 93%.  Until and unless this market starts confirming bearish divergences in momentum below prior corrective lows, sentiment/contrary opinion levels will NOT inhibit not only further gains, but potentially monstrous, accelerated, even relentless gains that could span years.

These issues considered, a full and aggressive bullish policy remains advised with a failure below 1502 required for shorter-term traders to move to the sidelines and for long-term players to pare exposure to more conservative levels.  Commensurately larger-degree weakness below 1412 remains required to threaten our long-term bullish count enough for even long-term players to move to the sidelines.  In lieu of such weakness, further and possibly accelerated gains remain expected.

DEC SILVER

For most intents and purposes the technical construct and expectations for silver are the same as those detailed above for gold with today’s resumed bull above 13-Aug’s 17.49 low leaving smaller- and larger-degree corrective lows in its wake at 16.915 and 15.935, respectively, that now serve as our new short- and longer-term risk parameters to a still-advised bullish policy and exposure.

If there’s a difference between gold and silver, it’s that, remarkably, the Bullish Consensus measure of market sentiment remains nearer to historical LOWS than highs DESPITE the extent and impulsiveness of the past couple months’ rally.  We believe this is extraordinary and reinforces our bullish count that calls for potentially extreme gains straight away.

UNlike gold, silver has thus far “only” returned to the middle-half of the past 4- or 5-year lateral range.  We’ve noted the general 16-to-18-area as a huge former resistance area that cannot be ignored as a new and equally huge resistance candidate.  But the market has been doing a great, impulsive job and working its way through this area, exposing a run to at least the upper-quarter of this range and possibly an upside breakout above Jul’16’s 21.225 high just like the gold market’s JUl’16+ bust-out.

These issues considered, a full and aggressive bullish policy and exposure remain advised with a failure below 16.915 required for shorter-term traders to move to the sidelines and for longer-term players to pare exposure to more conservative levels.  In lieu of such weakness, further and possibly accelerated gains remain expected in what could be a run to and possibly through Jul’16’s 21.225 high.

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