Gold COT (Commitments of Traders) and Weekly Candlestick Charts; Overbot; Negative Divergence Developing; Upper Band Violation; Price Extended

Gold is a big winner this year as the US-China trade negotiations falter. Last September, the COT chart shows the red and green bars hugging the middle line hinting at a recovery. The stock market crashes in Q4 2018 so gold feels love. As this year began, gold felt more love during stock market tumult but chopped sideways into May. The COT chart shows price pulling in during April and May which was a bottoming process.

The purple arrows show tight standard deviation bands so you knew price was going to get squeezed sharply but the direction is unknown. It was up and price has been hugging that top standard deviation band ever since.

The COT chart shows gold prices at the opposite extreme as compared to a year ago so a pull back and regrouping would be expected going forward. The red lines show negative divergence with the RSI, histogram and stochastics which spank price lower last week. The MACD and money flow lines, however, are long and strong (green lines) indicating that more fuel is in the tank to provide matching or higher highs in price on this weekly basis.

The RSI, stochastics and money flow are all overbot agreeable to a pullback. Price has violated the upper band so the middle band, also the 20-week MA, is 1386, rising sharply, and in play. Price is extended above the moving average ribbon requiring a mean reversion lower. Trading volume on last week's down week was weaker than all three of the strong up weeks (brown circles) which is a positive for gold bulls.

Thus, assessing the spaghetti charts above, and sprinkling some magic technician dust on it all, gold price will likely remain buoyant until the MACD line and money flow go neggie d. This can happen in a jog move of up-down-up or if only one of the parametes go neggie d after this scenario, a jog move of up-down-up-down-up will be enough to create universal negative divergence and the top in the gold weekly time frame. Thus, this timing is 3 to 5 weeks out which places gold at a top in mid to late September or early October.

The gold monthly chart appears to have some further upside juice. So if a gold top is placed, say in 3 weeks, later this month (September), gold may slip for a few weeks, say during October/November, but the expectation would be for another rally again on the weekly basis since the monthly chart remains bullish. So gold may be at further new highs at the end of this year but it may have to go through that 1400-1430 congestion zone first (the rising middle band is also heading to this zone) to get to 1600.

Keystone is not holding any positions long or short in gold, silver or any of the metals currently. Since any upside in gold this month may be limited, there is no point in going long and since the chart is not yet set up with universal neggie d, there is no reason to go short. If you are a gold bull that enjoyed big gains since May, it is likely prudent to scale-out of the long going forward. Another high is likely on the weekly so in a few days or week or so, exit one-third of the long position. Then, 2 weeks after that, exit the next one-third and then 2 weeks after that exit the final third and close out the long. You may then want to play a gold short (if universal neggie d appears for all the chart indicators above) but as stated with the monthly chart comment, gold likely has more upside juice during November/December to finish the year, say above 1550, so you would have to be nimble with any short play. 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: The COT chart is provided by Cot Price Charts and annotated by Keystone. As always, the candlestick chart is provided by StockCharts.