Gold's strength and vulnerability

WEEKLY GOLD CHART

The market’s run from the hesitation and pause at the 1980 high is clear.

The resolution of that pause was the creation of a Head and Shoulders continuation pattern.

That catalyst set in motion the next leg of the market.

The bull momentum has been maintained by two more continuation patterns – triangles.

But note well the acceleration of the market after the second of those.

Note too, the violent price action of this week in the light of a self-evidently overbought situation.

If the market closes beneath the low of last week (1730.80) on Friday, a weekly Key Reversal will have been created. This would suggest further falls – at least to the diagonal trendline support of the move from 2010?

There are, of course, good supports before that, at 1577.40 and the horizontal from a prior High at 1432.50.

The important thing to note is that a fall of $400 in the Price, some 20% from the Highs, would only bring the market back to the bull trend, rather than break it.

DAILY OCT 11 GOLD CHART

The market’s pull-back today broke beneath the short-term bull trend, but bounced off the 50% retracement support. And that support is close to the 1683.50 support from the Prior High there.

We think a break of the band 1683.50/ 1700 is the critical short-term test of the market. If broken expect a retest of the top of the triangle at 15879 or so. And a break of that would of course signal the weekly Key Reversal (requiring a close beneath 1730) in the weekly chart.

(Note the close coincidence of the Fibonacci 23.6% support and the Prior High 1815 – when broken they added great energy to the bears). For the complete and illustrated version of this and future Updates be sure to sign up at www.sevendaysahead.com