Last week's strong start laid an egg as expected, leaving yet more paint to dry on an indisputably bullish picture. The constipated price action cries out for a swoon beneath the three lows near 2330 that have occurred since April just to clear the air. We'd be 'voodoo' buyers down near 2351 in any case, but let's not kid ourselves into thinking the futures would do us such a kindness. In the meantime, they remain tradable on intraday signals that have been plentiful, even in bullion's increasingly tedious holding pattern. Stay tuned to the chat room if you care.
The futures rallied nearly $40 last week from within a dime of the target provided here a few days earlier. This has not made me especially bullish, however, even if I am open to the possibility the rally will achieve new highs without requiring five to eight weeks to recharge, as has been the case since April. That scenario would become more like if the October contract lunatics above the external peak at 2456.70 recordeed last Wednesday on the way down. Until such time as that occurs, be alert to the possibility of a punitive relapse.
Three successive, marginally higher tops in the last three months have made this vehicle more than a little tiresome. The futures will need to come down to at least p=2352.00 of this latest, bullish pattern before we can get a confident read on how long the tedium might last before gold blasts off toward 3000. We might be able to determine trend strength accurately as early as Monday or Tuesday by looking at patterns going in either direction on the lesser charts, so stay tuned.
Although GDXJ broke out last week, the chart shown in the inset, for August Comex futures, leaves me skeptical. I would remain at least somewhat so even if the rally were to surpass the 2477.0 peak recorded on May 24. However, I wouldn't hesitate to buy a pullback to the red line (p=2340.60) mechanically. The by-the-book stop-loss would be at 2295.10, so we'd need to craft a less risky set-up to leverage the opportunity. For the moment, though, this vehicle remains on a 'mechanical'-short signal.
Just a little higher would trigger a 'mechanical' short on the weekly chart, but the pattern is not of the highest quality, and my gut is saying not to resist the rally. A better opportunity may lie in bottom-fishing the next correction, which could be as much as $78 or as little as $39. We'll let bulls deal with resistance from July 7's top-let at 2406.70 first, but stay tuned to the chat room and your email notifications if you trade this vehicle and want to stay attuned in real time. Please note that a worst-case relapse could bring the August futures down to as low as 2204.20 without diminishing the bullish look of the long-term charts. This is unlikely in my view, but it never hurts to be prepared for whatever pain bullion is capable of dishing out.
Last week's thumb-wrestling match ended in a draw as bears failed to push the Auggies down to the 2281.00 target shown. The best they could muster was to diddle the secondary Hidden Pivot support at 2306.40 for nearly two days. The week ended with the futures mildly on the upswing, although a further push to the green line (x=2357.20) would trigger a 'mechanical' short. The opportunity looks second-rate, so I'll recommend watching from the sidelines. A bigger picture shows a nearly three-month consolidation with potential to 2520 or higher. Somewhat lower prices remain likely for now, though.
The easy move through p=79.55 in mid-June strongly suggests the August contract is bound for at least D=86.66. We can hope nonetheless that p2=83.11, the secondary Hidden Pivot, slows crude's ascent; otherwise, pump prices, along with the price of nearly everything else, will receive a turboboost before summer is over. If there's a silver lining, the pattern is compelling enough to imply there's no great likelihood of a further push into the 90s.
There was hubris in my assertion last week that the perfectly formed head-and-shoulders pattern that has been taking shape since April would mutate into a 'surprise' breakout to the upside. However, the chart shows what to expect if this forecast proves to be flat-out wrong. There is that possibility. The August futures would fall to 2204.20, completing the H&S pattern, before they could find traction. Moreover, the Auggies would become a juicy 'mechanical' short if they rally over the next week or two to the green line (x=2408.80). The pattern is quite gnarly because of the double top, but I've seen this set-up work perfectly in the metals before (do NOT tell your friends if you plan to bottom-fish there, as you should). Rest assured, however, that even a $200+ dive as described would not mar the otherwise bullish look of the long-term charts. If you're still worried, here's a continuous monthly chart that shows the ostensibly distributive head of the H&S to be occurring above the 'D' target of a completed pattern stretching back 15 years. That is inarguably bullish no matter how nasty this correction gets.
August gold finished the week with a second consecutive bottom at the 2304.40 'd' target of the reverse pattern shown. Equally encouraging was a reversal at week's end that left the futures sitting more than $40 above the lows. Someone in the chat room argued that gold's $430 run-up earlier this year needs and deserves more consolidation, and that may be so. However, we should be alert to the possibility that this newly resurgent bull market will not be so accommodating of investors who want more time and better prices to do their bargain hunting. Bull markets in their dynamic stage are characterized by nasty swoons and quick recoveries. In any event, our short-term bias should be bullish as the new week begins, and we should look for minor, uptrending ABCD patterns that reach or exceed their 'D' targets. Correspondingly, we'll also watch for corrective abcd patterns that surpass their midpoint Hidden Pivots. That is the most finely nuanced signal we have for flagging changes in larger trends.
Although we expect the bad guys to inflict as much pain and doubt on bulls as possible, Friday's $102 plunge seemed just a tad excessive. The low fell a hair beneath early May's 2308 low and $4 above round-number support at 2300. Many bulls would have been stopped out there, lightening the load for whatever bounce occurs this week. It may include two or three false starts, since few bulls could have expected the selling to reach the untested levels that it did in a single day. At best, the rebound will mirror the plunge that took place after August Gold slightly exceeded the record high 2471 achieved in mid-April. Any less than that will put the futures in jeopardy of falling another $100 to test a plateau formed there in March.
