Gold on the verge of a breakdown if we move much lower than today
INTRA-DAY NEWSLETTER ~ April 24 2015
Gold Long Term Chart
On a few occasions recently, we have been discussing the LONG TERM 2005 channel line and the action at that channel line in our view is what is causing a tight trading range as gold now has to make the decision of the next medium term move as to up or down. With the last five bars not being able to do anything more than hold the line, and with April having the smallest monthly price range we have seen in a long time, odds (as we have been saying) that a good sized move in gold arrives soon. The action at the channel line does favor the downside will win and gold’s last leg down before the bottom should get underway. The only exception is if the month of May can close above the highs of April. We have odds but never absolutes in markets. Gold can certainly hold here and turn higher but the odds are against that. A weekly close below 1172 will favor 1155-1163 on Monday and if we lose that, new bear market lows should be expected for gold. The next key support for gold (not shown on this chart) is 1080-1100 and then near 1000. Without getting into detail on this report, odds favor the bear market low in gold will be near 875. The only other exception we see is perhaps 990-1040.
Gold Short term
The seasonal rally (Mid-March to Mid-May) gave us one push that lasted just three week and since then gold is sideways. Thus the seasonal is WEAK as it has been each year since the bear market began and it’s looking like it’s going to be the same this year as well, especially if we lose the trend line we discussed above.
Resistance now moves to 1194-1206 and support near 1172. A close below 1172 leaves only 1155-1163 as support before new lows. I suspect we’ll get a small bounce at 1130 but odds favor it will be just that. If we do close below 1172 then the trading range we’ve been in favors a resolve to the downside. That low spike on the chart near 1170 on January 5th and the 1160 print low during the week of March 16th to the 23rd is last support in gold before new lows. In summary, the short term has to hold here. A close below 1172 favors lower into the 1st week of May.
Whenever we go into a narrow trading range like we’ve witnessed where we just go back and forth from 1180-1225, it makes the short term cycle turns difficult to interprit as opposed to when we are trending. A close below 1170-1172 will favor a cycle inversion and a low into the first week of May.
We believe the tight trading range is due to the BIG decision gold has to make at that 2005 trend line shown on the first chart in this report. For those who think a Greek exit is gold bullish we remind you of the aftermath of Cyprus when gold collapsed a short while later. For the record we were not BULLISH on gold then due to that event and we feel the same about Greece. We don’t see it as a bullish event. And we don’t mean the day after it happens but overall. We expect the liquidity squeeze we have been saying is coming for three years will have the same effect as 2008 did. While its not guaranteed that gold will go down, it is the odds favorite. As far as the global meltdown, its as close to guaranteed as it gets. The only greater guarantee is death and taxes.
Granted 2008 was just a DEMO using the corporate world to see what would happen when the Global one takes place. And it is expected to do the same. Gold will crash along with everything else and the true bull market in gold will only return after the crash. The loss of confidence in the system will trigger the end of low rates, and the bond markets 300 year low in interest rates will have completed. That’s when the gold turn most likely occurs.
On the short term cycle chart we’ve removed some of the higher lines for today and added a few lower ones which we normally don’t. This is just for the purpose of identifying where minor and important support is on the downside. The low at the end of March and the high at the beginning of April were both within the “window” of time for that blue cycle. It could have produced either. However the failure to move higher on the last red cycle and the fact we are breaking below the lows of that time, odds now favor a close below 1170-1172 means the next cycle turn (blue) due May 3rd will be a low.
If silver breaks its support line look for 1500-1525 as next support and then 1450. Any close below 1450 favors 1300.