A Technical Update on the Mini-Crash in Gold
Nobody predicted that gold would drop from 1690 to 1625 inside of 48 hours this week. So what happens now?
With that said, let's try to let the dust settle but take a look objectively at some possibilities.
1. We all know that some FOMC minutes released did in fact cause some major downside in gold based on potential for eventual end to QE in the US down the road. It did cause stops to trigger, probably some margin calls, and then more stops creating a mini crash of near 4% on the metal.
2. The ABC pattern appeared to be completed at 1634 last week, especially when we rallied over 1681 pivot. A brief dip to 1625 spot took place this morning early, and we now trade again around the 1631 pivot.
What are the technical options?
Well, if we stick with traditional Elliott Wave Theory, we can see a potential 3-3-5 pattern still unfolding and wave 5 of C is now in play. 3-3-5 patterns have 3 waves down, 3 up, then 5 down to complete the entire ABC Structure.
To confirm this, we will want to see gold bottom here fairly soon in wave 5 of C.
Below is the updated chart of SPDR Gold Trust ETF (NYSEARCA:GLD) showing you this pattern. It's the best I can do right now. I will keep you updated as things unfold. To be sure, I count this as cycle year 13 in the gold bull market and I had gold peaking in June of 2013 at 2280-2400 ranges per ounce, but we will have to see now if that is still valid or not based on whether this C wave can hold and reverse hard soon.
Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.