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Toby Connor

Toby Connor

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Time for a Brief Pause?

Now that gold has broken its daily cycle trend line I think we can assume that the daily cycle decline has probably begun. My best guess is that we will see gold drop into next week's employment report and test the support zone and intermediate trend line around $1340-$1350.

Spot Gold Daily Chart

We knew this was coming, as gold will enter the timing band for a daily cycle low on Monday, so no one needs to freak out. That being said, daily cycle declines need to make traders freak out in order to reset sentiment and prepare for the next leg up. So I suspect what is going to happen is that the bulls will try to defend that $1400 level for a few days, followed by a very scary $30-$40 crash day that will bring gold back down to the aforementioned support zone and form a final daily cycle low possibly on the employment report or the following Monday.

Spot Gold Daily Chart 2

I don't pay as much attention to the point and figure charts as I used to. I probably should as it spotted the daily cycle top at the declining trend line perfectly. I think we will break through that trend line during the next daily cycle.

Spot Gold Point and Figure Chart

The bullish percent chart is also suggesting it's time for a minor rest. It hasn't reached levels indicative of an intermediate top yet (80%-90%), but the big surge off the bottom needs to pull back and consolidate before the next push higher.

Gold Miners Bullish Percent Chart

All in all, I think traders need to prepare for some whipsaws early next week as the bulls try to defend $1400, followed by a hard move down into the daily cycle low at the end of the week or the beginning of the next week.

Once we put this daily cycle bottom behind us I think the next daily cycle will test the April stop run level at $1523. Then depending on what unfolds in the dollar we could very well see a fourth daily cycle higher that tests the QE 4 manipulation level at $1700-$1800.

 


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