On March 15, our computer models generated a cycle low signal for the weekly chart of gold,
indicating that the latest intermediate-term cycle low (ITCL) was
likely in place. Price behavior during the last two weeks has confirmed
that a new intermediate-term cycle is in progress.
In September 2011, our computer models predicted the likely development of a long-term correction in the gold market.
The top formed as anticipated and the subsequent correction developed
into a consolidation pattern that favors an eventual resumption of the
secular bull market from 2001. However, the current intermediate-term
cycle faces an important test and market behavior during the next
several weeks could provide a meaningful signal with respect to
long-term direction.
The short-term cycle has maintained a bearish translation for the
past several months. However, a cycle low signal was nearly generated
today, indicating that the latest short-term cycle low (STCL) may have
formed during the previous session, and the short-term cycle is on the
verge of transitioning to a bullish translation.
Technical indicators on the daily chart are effectively neutral
overall, suggesting that direction is in question as prices hold above
previous lows of the downtrend from October.
Our Gold Currency Index
(GCI), which tracks the intrinsic value of gold as an international
currency, is also holding near comparable short-term highs. However, a
slight positive divergence has developed between the GCI and gold in US
dollar terms. Notice that the GCI momentum indicator (MACD) has moved
into positive territory, while the gold momentum indicator remains in
negative territory. As longtime readers know, divergences between the
GCI and gold in US dollar terms usually forecast the direction of the
next meaningful move, so the slight positive divergence is a bullish
short-term development. It will be important to monitor this divergence
during the next several sessions.
The consolidation formation in gold is undergoing an important test
and a meaningful signal with respect to long-term direction could occur
during the next several weeks. Therefore, it will be important to
monitor the character of the rebound off of the last ITCL closely.
Best Regards,
Erik McCurdy
Senior Market Technician
Prometheus Market Insight
www.prometheusmi.com
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