Market News

TREND REMAINS STRONG AND INTACT

Price action in gold has traded in a narrow window over the past few weeks, winding into a tight coil as it begins to consolidate for another leg higher. The wave counts suggests that gold is in the early stages of a Wave 5. In the chart above, the key near term level to watch to the downside is $1540. This level served as resistance in September 2019, and has been support for the last month. This level also roughly coincides with rising support from the uptrend channel that commenced in August 2018.

A break of $1590 to the upside would represent a breakout of the symmetrical triangle gold has been forming since December 2019. The measured moved would imply a run to the top end of the channel around the $1750 level.

If gold breaks the $1530-40 level to the downside, it would likely fall swiftly back to support at $1450, at which point a full backtest of the six-year breakout at $1380 would remain in play. By all indications, this seems like the least likely scenario. Probabilistically, I think gold is more likely to break up from this coil, or at worst, retest $1540 before making a thrust higher.

As always, I hope this is helpful, and I welcome any feedback or questions.

GOLD BREAKS OUT; SILVER GEARING UP FOR A MOVE

Gold bugs should be pleased with the monthly performance of gold in January. The definitive monthly break of the $1520 level, which had acted as strong monthly support six times between 2011-2013, before serving as resistance during this recent consolidation period between August and December, has sent a bullish longer term signal to the market.

The monthly gold chart (above) has honored the 38.2% and 61.8% fibonacci retracements religiously over the last nine years, which makes this month’s recent breakout all the more significant. In the chart below, you will note that I drew the beginning of my Fibonacci levels from the secondary high in 2011, and not the primary high (the absolute peak). In this case, the year long shelf following the peak is an area of much greater significance and the better location to start the ratios. Thus, the recent break of 61.8% is all the more notable.

Gold bulls would now like to see follow through in the price of silver, which has lagged throughout the recent run up. Silver now sits at the nexus of a nine-year falling channel (falling resistance) and an 18-month rising channel (rising support). The long-legged January doji candle is a symbol of indecisiveness. A breakout in February would set up a run to the 23.6 fibonacci retracement at ~$21, which is an area of overhead resistance. Bulls would need 16.20 to hold on the downside in the event of a price reversal.

BULLISH TAILWINDS IN US HOUSING

In this video, I review key technicals in the US housing market, specifically the real estate ETF REZ, home construction ETF ITB, mortgage rates and lumber. I also explore some key demographic trends that could help fuel the rise in the US housing market.

https://www.youtube.com/watch?v=wd28lpDwSAE

SILVER TESTING KEY LEVEL

In this video I take a look at the prevailing long and short term trends in the price of silver. While the decade-long trend remains down, the one year trend remains up. Yesterday’s .60 drop in price now has silver testing rising channel support from the bottom in May 2019. Bulls will want to see this price hold for another leg higher. If price breaks down from this rising support, the key levels are 16.90 and 16.20. Bulls especially need silver to remain above 16.20 for the longer term bullish picture to remain in play.

https://youtu.be/3cK9R2jYJBY

FAILED BREAKOUT DISCONCERTING FOR COMMODITY BULLS

In early January I got very bullish copper as price was breaking out of a multi-year symmetrical triangle. The trade worked well initially, but price subsequently reversed and fell precipitously. In this video, I take a look at this price action, explain how I build a chart, and what the copper price means for the commodities sector.

https://youtu.be/cHk3jkwP2Ig