Gold near term outlook:
Gold etf (GLD) accelerating higher after the Feb 7th upside break of the bearish trendline from Aug, and yesterday's break above the late Jan high at 122.51. Note too that the market is continuing the upside from the Dec 31st low at 114.46 (failure, had warned for months of a slight break of the Jun low at 114.68, see longer term below). At this point the market may be approaching overbought (with risk rising for at least a few weeks/month of consolidating), but the nearer term upside pattern is still not "complete" (currently within wave 3 in the rally from the Jan 31st low at 119.46), arguing at least some further upside ahead (see daily chart below). Additionally, the gold miner etf (GDX) which has led the metal higher, also remains bullish. Nearby resistance is seen at the rising resistance line from Jan 6th (currently at 124.75/00) and 125.85/10 (50% retracement from the Aug 137.55 high), support is seen at 123.40/65 (broken Jan 29th high) and the bullish trendline from the Dec 31st low (currently at 121.00/25).
Strategy/position:
With at least some further upside favored, want to trade from the long side. But given the risk for a few days of consolidating (before resuming the upmove) and rising risk for a more substantial period of consolidating (few weeks/month or more), would wait for lower levels toward 122.75 to buy (lower entry, lower risk). Would then stop on a close 25 ticks below that bullish trendline from the late Dec low. Note was stopped on the Jan 21st sell at $1242 (basis spot gold) on Jan 23rd above the bear trendline from Aug (then $1256, closed $1264).
Long term outlook:
For months, had been discussing the need for a final decline below the June low at 114.68, but that such weakness may be limited (versus the start of a more major, new downleg). The market did reach a slight new low at 114.46 (Dec low), potentially completing the whole fall from the Nov 2011 high at 175.46 (wave 5, see numbering on weekly chart/2nd chart below), and in turn suggests that an even more major bottom (for at least 9-12 months) may be in place or at least close. Note too that technicals did not confirm that marginal low (see bull divergence on the weekly macd). At this point however, there is still no confirmation of such a low "pattern-wise", silver has not yet broken below its June low at $18.19, and the GLD has come up just short of the longer term 113.00/50 support area (50% retracement from the Feb 2005 low at $41.02, markets have a way of eventually reaching these key, longer term areas). This in turn raises scope for another few month of a broader ranging (with a downward bias)/basing before a more major low is finally seen (see in red on weekly chart/2nd chart below).
Strategy/position:
Bearish bias was put in place on Sept 6th at 134.07 (equivalent to $1380 in spot). At this point with some potential of a more important low, would just switch to neutral here (currently at 124.36). But given the risk for a more extended period of bottoming (and even further, but likely limited lows) over the next few months, would not yet reverse to the bullish side.
Current:
Nearer term: at least some further upside, see strategy for entry above.
Last: short Jan 21st at $1242 (spot), stopped Jan 23rd above t-line from Aug ($1256, closed $1264).
Longer term: scope for another few months of ranging as part of a more major bottoming.
Last: bearish bias Sep 6th at 134.07 to neutral Feb 11th at 124.75.
