Gold short term cycle and support and resistance line update by Bill Downey

Gold chart

Tonight we zoom in on gold and on this view it shows that a downtrend line is holding gold from moving higher out of this consolidation that has taken place since the Friday low. Since the Tuesday high at the trend line, gold keeps trying to get above it. The market will not put up with this much longer and if we going to break higher it must develop pretty much by sometime tomorrow or we’ll head and test that lower line near 1250. The line is steep so by Thursday it will already be down near 1140. So that is the support points into Wednesday. Resistance is the 1173-1178 and up to 1183 area. But the most important thing is to get above this channel line ASAP.

CYCLES

The short term cycle window turn is open with the ideal date of Nov 6th (plus or minus 72 hours). With gold hitting the lower trend line and only 1 dollar above it since the window has opened, it is possible that we have already made the low. Unfortunately, if we look at an 8 hour chart of gold (not shown), it does leave the potential that we have only completed 3 waves down since the 1256 high and that we are now in the 4th wave since the 1160 low last Friday. That means odds favor we still have one more drop to go in this sequence.

It is possible that we could see that downdraft occur with a bottom on Friday/Monday coming up. The other side is that gold can continue bouncing higher into the 1192-1206 area if the cycle turns up here into the 20th of the month and then turn down. But in order for that to happen first we must get above that trend line we touched on Tuesday at the highs of the day. A failure to do so will usher in another down wave back to that lower red channel in the 1141-1151 area. We discussed a close below 1165 would be the 1st sign that we’re still moving lower. Tuesday’s close was 1165.40 so we just barely made it.

As long as price is under the RED CHANNEL LINE, the bears have control of the overall situation. The blue cycle low here has a 75% chance of turning up into the 20th. But if we do fail and get another inversion, odds favor it will be strong and most likely lead to the 1100-1120 area by Nov 20th. An intraday break below 1155 that doesn’t turn on a dime would also be a signal that we’re moving lower.

In summary, gold either cleared the stops at 1180 in a flush out and is heading back to test 1200 into the next cycle turn on the 20th or price is going to fail in the 1178-1182 area and the failure there will most likely turn down hard towards 1100.

Gold Medium Term
Long Term Trend ~ Bearish since Oct 2013 @ 1361
Long term Moving averages 1458 – 1524
Medium Term Trend ~Bearish – Gold needs a monthly close above 1292 to return to a bullish mode. 1281 - 1294

The triple bottom myth we discussed has been shattered as forecasted. If price can reverse at the 1144-1156 area, then a reflex rally back up into the latter part of November should take place to test the gold trend line near 1200. Otherwise we’re heading towards 1144 next and most likely 1060-1111 in the not too distant future.

All trends are in bearish mode for gold and the next key support on the medium term is the 1060-1111 area if we take out 1155 on a weekly basis.

On a longer term perspective odds favor we are finally in the 5th and final wave down for this bear market. The only exception is if gold reverses immediately in the price zone and makes a bee-line higher. That would leave a SMALL chance that the breach of 1180 was a flush out and we are still in wave 4. But to repeat, the odds of that are small so we will consider this to be wave 5 down. Odds favor we’re eventually heading to the 1100 area we described above. The only good news about this is that the bear market in gold looks to be in the final stage and a new bull market in gold is going to develop. While gold is not out of the woods by any means, we are beginning to hear what might be the sounds of vehicles and thus a highway on the other side of the bend. In summary, gold is in the latter stages of its final downside purge and looks like it has entered the FINAL wave down. With that said it is very important to understand that the LOWER RED LINES on this chart go all the way down to the 875 area. It’s too early to say if gold is going to go that low, but it is important that you understand it could. The inverse of that is gold could bottom near the 1060-1100 area also. That’s a wide range but we are talking long term trends here. When we finally do get to the bottom, there should be important signals that help us determine that the low has taken place.

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