I find the price action in gold to be highly interesting at the moment, and I will outline why here. First, please take a look at the following chart:
We can see the 1816-1533 range that was created in 4 days, and the fib bouncing that was created off that (still, this is more significant on shorter term time frames given how price traded). Also, note the arrows, which signify bounces off the 23.6% fibs and very, very important Magic-D points. The first arrow shows the making of a bottom in Magic-D, which means that a lot of uncertainty has been removed from the market and that this would have been a good time to go long, and the second arrow shows a failure to make a new bottom in the indicator, thus being a sentiment-change confirmation at only slightly higher levels of price. So, coming up is the MACD/Average cross which is nearly at zero, and we also have the move away from the 50%-fib, even the 61.8% fib, and topping the 63 SMA.
In short, price action is with gold and unless there is a drop back to less than 1600 there will be significant obstacles for it falling lower. There is not very much technically stopping it going higher, especially since a dollar-selloff appears to be in the cards. Now, I will get a little bolder than I usually get, and this is mostly to try my views of how the price action looks prior to the 1816-1533 range.
The most important thing to remember here is that my fib is not a top-to-bottom fib. It tracks price action during a relatively market-changing single move, and has been trading off that very strongly since there was a slight lack of better support/resistance lines in the 1600-1700 range. Now, at around 1800 we get back into a whole slew of the price-determining market action in the August-September period! After ~1785 there is basically one new daily top in a strict declining fashion every 10-20 dollars up to 1920 so there will be quite a bit of laddering play to go with coming into 1800. After entering this area, if price continues rising – which I expect it to do – then the most likely fashion I see it doing so in is a more controlled rise as there are strong forces hemming it (both up and down) once it is in there. If this is the case, it could set the stage for what would be an extremely bullish signal combination for me.
The chart shows quarterly Bollinger bands contracting, but the upper is still so far off as not to provide much in the way of hemming the price. The more interesting thing to notice is the upwards slope of the SMA, which should continue relatively unabated as it is removing days in the 1600-1650 range and adding days at 1700+. This will add positive price pressure over the next week, possibly two if a quicker rally is sustained, after which the MA tapers off and price can enter the tight-range trade again without posting bearish MA signals. What will happen at that point? Well, the volatility will start increasing again from the MA running away from the bottom postings, and the upper Bollinger would therefore start rising, setting the stage for “band surf” on any gold push above 1820, where price sticks to the band while the MA follows, and the band rises, allowing price to go with it (this was a characteristic feature on shorter timeframes on the upswing from 1600 in the summer). What could set this off would be a cross of the 63 SMA by the 21 EMA in 2-3 weeks time, clearing the technical stage for a set up that would signal for pushing 2000 by the end of the year off leaping 1920 and continued band surf.
[Edited for atrocious spelling and missing a few key words. Analysis is identical.]