"We've made no secret of viewing the current bullishness as a "sucker's rally" until proven otherwise, and will continue to seek verification for this view, with an open mind towards changing our outlook if dictated by price action. The current advance... could easily extend to the 5-week sma, at about $920. Strong resistance also exists at $955. Dollar strength seems technical and artificial, rather than based on strong fundamentals, but may yet last just long enough to provide the best gold buying opportunity in months." ~ Precious Points: So Far So Good, May 17, 2008
Though sentiment on the street has become practically one-sided, with the dollar sinking and oil reaching new records almost daily, last week's action in precious metals continues to unfold in the expected b wave rally. In fact, having found support at the still down-trending 50-day sma, in the $920 area, one more new high to complete c of b is likely.
The irony of counting waves in gold at the moment is the two opposite camps are both expecting the same short term wave structure and will inevitably interpret it to their favor. As always, TTC monitors both sides and responds to the market's decisions. So, as shown below, the blue count sees a three-wave correction off the recent lows, culminating in a 5-wave move up that will reverse and produce new lows. The red count represents the view of those who believe the low is in, and they see the current move as 3 of an upward 5-wave impulse.
The blue count reflects the primary expectation at TTC currently, but an early sign the impulsive red count may be working would be a prolonged consolidation in the $915-940 area. As gold approaches overbought in the RSI, it will be crucial to note whether price reverses sharply, or works off the overbought condition through sideways range trading. A move back below the 50-day sma would tend to contraindicate the red impulsive count, but overlap of wave 1 at $890 is needed to invalidate the impulse. TTC is also monitoring counts which will invalidate the possibility of i of 3 at last week's highs, by far the most explosively bullish count still working.
Like so many markets today, precious metals will continue to be cued by price action in oil is now undeniably parabolic. Some may be expecting a similar move in gold now to ensue, and while such a move is not impossible, if it happens it's very likely to end as parabolic advances always do: short term traders able to get out at the top will profit handsomely, while physical buyers who've chased the rapidly rising price are literally left holding the bag. At this crucial juncture, an unbiased outlook is more important than ever.
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