The FED left rates unchanged as expected. The dollar has crashed the last few days and needs to find support immediately. Oil prices continue to drop as inventories grow and production freezes were just talk. How metals and miners close out the day is key.
CYCLE UPDATE
Trading is based on probabilities. There was roughly a 75+% chance of one-more-quick drop into November, according to our price model.
Several factors supported this theory:
- There wasn't any buying into weakness numbers for the miners during the October low. We expect to see some buying my smart money at an intermediate low. Instead, we've seen selling.
- The price action out of the October low was corrective in nature, not impulsive (active rallies). Usually, prices rise quickly out of an intermediate bottom; that didn't happen.
- The commercial traders in the COT (commitment of traders) report still had fairly large outstanding short positions. I expected to see a reduction in their shorts by another 50,000+ contract before forming a low.
- The Japanese Yen trades hand-in-hand with gold and was due for a significant pullback after a 9-month rally. Prices should have retraced a minimum of 38.2% of the rally and tested the 50-week EMA. It didn't even come close to a standard correction. So, either the correction isn't over (bearish gold scenario), or this was one of the shallowest corrections recorded.
What does all this mean? Well, we expected prices to drop into the election and bottom with a surprise Trump victory. However, the bombshell news regarding the FBI investigating Hillary's emails again altered that course. This is why gold started to rally last Friday.
The unexpected news event appears to have inverted the gold cycle. Meaning, instead of forming a low early in November, we are now likely to see an interim high between $1,300 and $1,315. This interim high should lead to a pullback and subsequent buying opportunity.
Expect frequent updates as the price structure develops. Once a short-term top is confirmed we will estimate pullback targets for members.