The rally out of the February intermediate and
yearly cycle low has now traveled far enough and long enough that it is due to
take a breather. That breather would be in the form of a short term pullback
into the mid cycle low.
The initial move out of the July intermediate
cycle low lasted 22 days before forming a short term top.
The current rally is now on day 21 and very short term overbought (see chart
above). Traders should now start looking for a brief pause in this market. A
move back down to the 1120 support zone is probably in the cards some time soon.
I’m also starting to see divergences in breadth and signs that institutional
traders are stepping aside for the moment. More on that for subscribers in
Tuesday’s market update to subscribers.
are on the Brink of an Asset Explosion, as I think we are, then traders should
be prepared to position long in virtually any asset class as we make our way
down into this temporary correction.
I expect the stock market will also exert some
influence on the precious metals market when it sinks into the low. As a matter
of fact, at 21 days it now appears gold has already begun the trip down into its
next daily cycle low.
As this short term gold cycle is right translated (topped later than 12 or more
days) the expectation is for this move to hold above the last cycle low at
$1044. It would be a big plus if gold can hold above the last short term dip at
$1087 and keep the pattern of higher short term highs and higher short term lows
If it can, then I would be looking for
gold to move above the critical $1161 level during the next short term cycle.
If gold can take out $1161 then the pattern of
lower intermediate lows and lower intermediate highs will be broken. That will
also force a rephrasing of the last intermediate cycle low from December to
February. Again, more on that in the subscriber newsletter.
Suffice it to say that it is critical this rephrasing take place if gold is
going to continue higher and not go through another multi month consolidation
phase like it did from March 08 to Sept. 09.
So, short term expect some weakness in the
stock market which will probably continue to rub off on the gold market, but be
prepared to buy the dip as this bull rally in the stock and gold markets is not
A financial blog with an emphasis on the gold bull market.