GOLD Daily Chart Overbot Negative Divergence

Big upside run in gold the last few days, fueled by short covering and Euro woes that pop gold.  Price moved from the bottom of this three month range to the top of the range in only seven days. Back in the January-February area, gold, oil and other commodities were rolling over but the Middle East turmoil hit. The ME turmoil causes the run-up since February. The bull flag in early March forecasted to 1500+ which was readily attained.

As price hit the late April top, note how all the indicators (except stochastics and MACD histogram which were negatively diverged wanting a spank down), wanted to see another higher high after a pull-back. A gap was left behind as well at 1560 that would require filling in the future.  So the move down occurred in May and price has moved sideways ever since. Now we finally see the higher price high that the indicators (green circles) wanted.

Now looking at the red lines, price has made a higher high but all the indicators are negatively diverged indicating that price will receive a spank down. Sometimes divergences are divergences--until the aren't, so you have to watch this chart the next few days. Other bear friendly aspects would be the 20 MA crossing down thru the 50 MA. Note the ADX and how during the April run-up in price the trend was strong with readings of 25 and higher (black line).  For this stupendous run in only seven or eight days, note the ADX, a paltry sideways move around 15-16, indicating no real trend strength in this explosive move higher. Watch this in the days ahead to see if the ADX can move towards 25 or 30 to indicate actual strength in this price move.

Note the price low in May and the price low in July. Price never closed lower than May so positive divergence never occurred, but, price jumped anyways due to Euro fears.  The light blue lines for these lows show that the indicators wanted price to keep moving lower before the Euro fears hit.

The large volume days are interesting starting from the February bottom. All large volume days correspond to price below 1525. Gold bulls need to see higher volume to confirm this higher move. The negative divergence forecasts a move down in price coming but the short entry is tricky due to this momo.  Keystone's 80-20 rule says once price achieves an 80 level it typically moves to the 20 level, so this close at 1586 hints that 1620 is coming. Independent of the entry, gold is now set up as an attractive short in this 1585-1620 zone.

Chances are the move down will occur in short order, within the next couple days, or, as price moves up into the 1590's if this does not occur, the short set-up will be from 1620-ish.  Projection is that we are making a major top in gold currently, and gold price will move lower over the weeks and months ahead.  Of course this projection sounds proposterous considering all the quantitative easing and inflation expected moving forward. Perhaps traders are not considering deflation as much as they should? This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.