A bearish technical case for Gold

Cory

September 29, 2016

Here is a technical outlook by our friend Peter Brandt on gold. I like to read up on different opinions on both fundamental and technical outlooks then make up my own mind. It is amazing how the same chart can read so differently to people. a couple days ago I posted an analysis that was presenting charts that showed a strength in gold for the fall (click here to visit that posting) and now we have Peter with a more negative outlook.

We will be having Peter on the show next week with further technical analysis on a number of different markets.

…

Remember three things as you read this:

An opinion is not a position and a position is not necessary an opinion
I deal in possibilities, not probabilities and certainly not certainties
A chart pattern does not become a pattern until it is completed — and even then it may fail

Summary

A bearish chart case can be made for Gold based on five factors.

1. According to Sentiment Trader, the sentiment of Gold hedgers is at an all-time record negative level.

2. Similarly, the large spec holdings are coming off of a all-time record long position. Most every trader I speak with on a semi-regular basis is long Gold.

3. The daily chart is holding above a 10-month trendline originating from the Dec 2015 low. While I do not consider trendlines to be important, other traders do. The violation of this trendline could bring in long liquidation.

4. The daily chart also exhibits a possible 3-month topping pattern, subject to several possible labels (including a descending triangle, a sloping top or a horn). See the chart above.

5. While support exists at 1305 to 1310, each advance since Jul has found resistance at a lower level — this behavior tends to occur during a topping process.

Conclusion

The dominant trend in Gold remains up. The current 3-month trading range could be resolved on the upside as a continuation pattern. Such an upside breakout would be very constructive for further gains. However, a move and close below 1300 would complete the 3-month topping pattern, penetrate the dominant trendline and put every long position since Jun 24 at a loss. The target would be 1200. Additionally, there is some evidence (not presented herein) that the speculative public has been a huge buyer of the mining ETFs. I potentially view this as “weak longs at the top.”

Caution — While I would view a violation and close below 1300 as bearish, there is ALWAYS the chance such an event could be a massive bear trap. I am always alert for a bear trap when a market penetrates a level where sell stops are logically clustered. Nevertheless, I will be prepared to go with a short trade if offered a defined risk entry point.

Discussion

16 Comments

Stephan B. Feibish

Sep 29, 2016 29:43 AM

So what you’re saying is “markets will fluctuate”.

Chris

Sep 29, 2016 29:05 AM

I would not be surprised to see an “under cut” low to just scare the sh*t out of everyone. Looking at the world from North of Tucson, I will stick with my “guns, gold & other preps”. If any of you have better ideas,,,,,,,,please pass them along.

CFS

Sep 29, 2016 29:25 AM

http://etfdailynews.com/2016/09/29/silver-etf-sees-record-demand-in-q3/

CFS

Sep 29, 2016 29:29 AM

Palladium continues its gains, up double digits today.

brian

Sep 29, 2016 29:16 AM

Matthew, EX, others
Any comments on the Newmarket/Kirkland Lake merger?
I could go either way on this one …

Matthew

Sep 29, 2016 29:57 AM

It appears to be a better deal for NMI than KLG but I don’t have a strong opinion about it either.

Excelsior

Sep 29, 2016 29:03 PM

Brian I wrote you and posted on the Doc blog about it. Didn’t see this post earlier.

Cheers!

Matthew

Sep 29, 2016 29:07 AM

Globex Royalty Property-Authier Lithium Project Update

http://juniorminingnetwork.com/junior-miner-news/press-releases/431-tsx/gmx/25130-globex-royalty-property-authier-lithium-project-update.html

CFS

Sep 29, 2016 29:10 AM

The difference in withdrawals between active and passive hedge funds is somewhat surprising to me.

http://www.zerohedge.com/news/2016-09-29/outflows-active-funds-surpass-record-200-billion

Xriva

Sep 29, 2016 29:27 AM

The images [ charts? ] did not load – but the text is visible.
Using Chrome. This has not been a problem in the past.

Matthew

Sep 29, 2016 29:47 AM

I can’t see them on my trading computer or my Apple.

confused

Sep 29, 2016 29:13 AM

Nobody knows which direction the next gold move is going. Garry Savage says “under-cut” fakeout then up, Peter Brant clearly is split, the sentiment readings according to Taylor Dart are a low and perfect gold go up…..Doc says “sideways and down….Avi probably has 4 or 5 scenarios on the go….this is good in my books…..lots of technical confusion/contradiction out there by many smart folks. The resolution will come when it comes. I’ve got my spare underpants at the ready.

Paul L.

Sep 29, 2016 29:21 AM

With market falling hard today gold could not come up with any rally. It is looking dead. Oil appears to be the safe haven today instead.

Matthew

Sep 29, 2016 29:05 PM

GLD is down less than one-tenth as much as the Dow today (at 3pm eastern). That is bullish action in my book considering that some people must be selling GLD today for a few possible reasons such as satisfying their margin account requirements or plain old fear.

Gold has been capped by the last falling trend resistance and the 233 EMA for the last 12-13 weeks so there is clearly a well-matched bull-bear battle going on.

PHYS:
http://stockcharts.com/h-sc/ui?s=PHYS&p=W&yr=6&mn=3&dy=0&id=p06858120861&a=370904138

confused

Sep 29, 2016 29:21 PM

Kent H. CFA

Sep 30, 2016 30:43 PM

Why listen to anyone who missed most of the rally? All you need is a monthly chart with the proper moving averages. It got you in early January and still has you in until it changes. There is no guru people. Put in the time, find what works, and you won’t have to read or sell newsletters!

Welcome!

A bearish technical case for Gold