Monday, December 12, 2016
Gold Commitments of Traders (COT) and Weekly Charts; H&S Pattern
Gold has been slapped silly since the summer time dropping from 1375 to 1160, a 215-point drop, -16%, in 5 months time. That beating will leave a mark. The COT chart highlights the gold tops in red circles and the gold bottoms in green circles. The COT is tucking itself in towards the center line consistent with where a rally would be expected.
On the weekly candlestick chart, the stochastics are overbot and positively diverged and the money flow is possie d agreeable to a bounce in this weekly time frame. However, the RSI and MACD line and histogram are weak and bleak wanting to see lower lows after any bounce in price occurs. The purple H&S is in play with head at 1375 and neck line at 1215. The difference is 155 points so the downside target for the head and shoulders pattern is 1060 if the 1215 level fails, and it did. Price may want to come up for the back test of the neckline which would jive with the stoch's and money flow agreeable to a bounce.
Volume is robust over the last month. Investors are throwing gold overboard as the US dollar index rises. The previous dollar chart indicates that the move higher in USD may be petering out. This would jive with gold printing a relief rally and recovery bounce now. A lower US dollar will help send gold prices higher.
The ADX shows that the trend higher that started at the beginning of the year was a very strong trend--until October. The ADX drops below 27-ish signaling that the strong uptrend in gold prices is over. Watch the ADX if the price downtrend continues since if it moves up to 27+ and higher that will signal that the downtrend is very strong. If you are a gold bull you want that ADX to subside lower. If you are a gold bear, you want the ADX to drive higher which will guarantee a lower price trend and move to the 1060 H&S target.
Gold is violating the lower standard deviation band for the last five days so a move back to the middle band, also the 20-day MA at 1283, and falling, is on the table. A bounce would be expected say over the next week or two for gold, but the RSI and MACD will reintroduce weakness again after that. Price may move up to back kiss the neckline at 1200-1225. By then, the middle band and 20-day MA should be much lower perhaps closing in on the same area. If you are thinking of exiting gold, that may be the point to get out due to the weaker RSI and MACD indicators calling for lower prices and the lower H&S target looms at 1060. Gold is at 1156 on Monday morning. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note: COT chart is available at Cot Price Charts website and is annotated by Keystone.