By Andrew Kassen Remember that selling cascade the metals complex tumbled down a couple weeks ago? Though Copper and Silver also suffered a disastrous couple of days (from which they’ve barely recovered), the move that will remain etched into the memory of most occurred in Gold, where futures (symbol: GC) fell from the 04/12/13 1560 open to a 1370 close 3 days later, breaking multi-year support at 1520 before putting in a low just above 1300 in the interim.
Since that 04/16/13 bottom, Gold has recovered well over 50% of the losses incurred in those 3 days, with GC on last check at 1476. Not surprisingly, the agony and ecstasy experienced in different quarters that raised the ever-present Gold-sponsored cacophony to a fever pitch has largely dissipated. And no news is usually good news: right?
According to GC and GLD (pictured below), it may be too quiet. (click image to zoom)
GLD has rallied back in a rising channel (green) to the major short-term resistance left behind overnight 04/15 by the massive 4 point gap down (white rectangle) from 143.55 to 139.57.
2 weeks later, that gap is just filled and GLD is steadily testing the 61.8% retracement of the plunge (A’ to B) at 143. This level, once reached, has spun out a congestion channel that makes for a clear, tradable setup inside the 142-143 boundary created by channel support below and 143 resistance above. That congestion round the 61.8% ret is visible on GLD above, but here it is with greater non-gap clarity on GC:
Barring further congestion in which gold drifts aimlessly through mid-week’s heavy calendar (Wednesday: ISM, FOMC and Thursday: Weekly Unemployment Claims, ECB, US Trade Balance), GC’s pennant will likely resolve in a break above the 61.8% retracement, or below the rising channel. (Pennant targets on GC, by the way, measure down to 1427 or up to 1513).
In the former case, because of the dramatic decline there’s little but air all the way to 150-152. However, if GLD’s 143/gap/cluster resistance (GC: 1475-1480) holds and the pennant breaks lower, the rising channel breaks down, placing a retest at 130 on the table. Below that trough, measured move down targets further away at 121 and 116 come into consideration. Either way, though we’re not likely to see a repeat of the crashy price action of a couple weeks ago, it looks like things in gold may be about to get louder.
Twitter: @andrewunknown and @seeitmarket
Author holds no positions in any securities mentioned at the time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
