GOLD Daily Chart Overbot Rising Wedge Negative Divergence

A couple weeks ago gold was at the 1800 prior high. At that time we saw the RSI and MACD histogram with higher highs (black circles). That told us that price will want to come back up above the 1900 level to place another higher high and at this time, more than likely, the chart would be set up with negative divergence across the board. Price came up to touch 1919 in the overnight session and we see at this higher high that the indicators are now set up with negative divergence across the board as the chart projected.

Thus, a spank down is expected form the overbot conditions, rising wedge and negative divergence, which is occurring now. A major top in gold appears to be in place. Note the four horizontal S/R levels; 1830, 1790, 1750 and 1720. Price currently testing the 1830 level. The gold weekly chart shows the RSI and MACD histogram with a higher high the way the daily chart had set up so this hints at an M Top forming, where after this shake out in the near term, price will come up again to this 1900+ zone to place its final top.  With commodities, however, they are prone to simply take drastic down moves after a parabolic move up, so the weekly chart can be overriden.

What does it all mean? The charts show one of two outcomes. The daily chart has topped and rolled over but the weekly chart would still like to see an M Top formed. Thus, scenario one would simply be a fall from grace that continues moving forward. Scenario two would have price receive its spank down currently but then price will come back up again to 1900+ one last time to set up official negative divergence across the board for all indicators on the weekly chart, thereby sealing gold's fate moving forward. Both scenario's are down.

The gold price move is most dependent on the gold margin raises by the CME. The first hike occurred on 8/10/11 efective 8/11/11, now two weeks ago. It is very surprising that the CME did not follow the silver playbook for the orchestrated silver slap down in April. Back then the silver margin raises came fast and furious and silver collapsed 35% in only a week or two. Since the first gold raise was exactly two weeks ago, and announced at 7 PM EST 8/10/11, keep an ear out tonight, and today, between 3 PM and 8 PM to see if the CME announces any additional gold margin raises. That large volume spike will want to be tested in the 1720-1790 zone, call it 1750-ish. Check the volume in comparison to that prior spike when price prints in that area.

The GLD is now the largest ETF in existence. Should the above scenario's play out, both of which point to much lower gold prices ahead, the exodus from GLD should truly be a sight to behold. All you can do is watch. The coming ten trading days will tell the story on gold. Projection is down moving forward, 1920's the top projection, the downside target 1300-1500 in the weeks and months ahead; as ridiculous as that may sound for such a phenomenal performer this year. Perhaps a lower gold price would be in concert with a deflationary environment where folks are seeking cash, not PM's. The wild card is when Chairman Bernanke will announce QE3 which should provide gold buoyancy. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links associated with this site. Consult your financial advisor before making any investment decision.