@V* - excellent Post.
@Forged @Ophir @AverageJoe
This is my take on Friday night (and much much more)...I did a 5 min by 5 min analysis of Tuesday smackdown on Wed elsewhere on HC, but got no response.
Going to be a long Post, but we are at a critical point (again). We've already discussed at length the loss of bullish momentum since early July on Gold Forum, (from which I am a refugee), despite a lot of "good" news for POG - Brexit, Poor US payrolls, zero interest rate hikes in 10 months, despite a promise of 4 (later reduced by Yellen to 2), low PMI etc. etc. Yet each time gold made a successively lower high. We've discussed this for weeks no, elsewhere (Gold Forum).
I'll try and annotate a 5 min Chart from recent Friday NFP Release 8:30 am US EDT.
This is my take on Friday: In words (cumbersome, pictures will follow), the NFP was a slight miss (but largely unexceptional Release, and I suggested on Gold Forum POG would probably close exactly where it started - see below), so bears started covering their shorts - they made good money during the week (if not longer), esp. since Tuesday's huge smackdown. In addition what S/Term trader wants to be exposed over a weekend, especially a Long Weekend (Columbus Day Monday, NYSE open, more importantly, CME closed) - any kind of Shiite can happen...good, or bad for gold (like the most recent Trump sex scandal -breaking news). Risk mitigation.
That was the initial short lived spike, and pretty lame, it was short covering, don't be fooled, it was not a rampage of the bulls. It lasted an hour or so. A lame spike.
The Market Makers (i.e. Big Banks) then moved in, and finally - and utterly decisively - took out what remained of the Brexit day lows (bull stop hunt /raid /sweep).
Note: the Brexit low of day, the "mother candle" low was highly visible to all (and I mean everyone) - and an area of hi liquidity - $1,250.11 - and the prior day, Thursday, that was taken out - low of 1,249.70..pennies below (not a co-incidence, but enough to stop most bulls out ....maybe not all). Those smarties with stops hidden lower were demolished Friday with a smackdown to $1,241.30
After the short Covering spike Friday, they whacked it even harder, selling into that high liquidity zone.
What is a bull stop? A sell.
Who do they sell to on CME? The Market makers (not to me,
@V*,
@Ophir,
@AverageJoe etc... - that's not how it works).
So the MM's - always on the opposite side, by definition - become buyers, hence net long, coming in at $1,241.30.
If long what do you want? Price to rise, and guess what? It then rose (magically) from the lows of $1,241.30 to a hi the session at $1,256.87 (then minor fall). That's, say, $15 profit from just before midday to 5pm (NYC time).
A CME GC16 Futures contract gives you control over 100 ozs gold, so, $,1500 profit / contract. Doesn't sound like much, heh?
How much to open a GC (gold futures) Contract? $6,000 on the table.
That's about a 25
% profit (per contract, and they buy them in the thousands, tens of thousands...remember these are the biggest of the big boys) for an afternoon's work. Not to mention the profit from the prior price action when they were net short, and making it on the way down...both ways.
Not bad work, if you can get it.
I have read elsewhere on HC Gold Forum that this "recovery" off the lows back up $15 was "capitulation", "the bottom is in" (i.e. bear is over) - this is 100% BS. It's also the most dangerous game you can play.
I lived in US several decades (working on Wall St.), seen many manias booms busts panics crashes and a few capitulations - this was no capitulation. I've tried to explain what it was. You know capitulation when you see one , and it means what it says...it's a military term....unconditional surrender by the bulls, they literally abandon all hope , the defense mechanisms and endless excuses to stay long are exhausted, the suffering too great: (Man to broker: "I can't take this bleeding any more, just get me the f*** out of here, sell everything, and do it NOW!!!") - that marks the end of the bear, and the start of the new bull mkt - the time of maximum blood in the streets. The optimal time to buy.
Buffett is well known for saying "buy when there is blood in the streets".....but this is half-baked. I ask, "exactly how much blood"? There is blood now....but not enough....we're not there yet. People are still bullish, long.
Still plenty of bulls still around . What I described above is how much blood is needed.
The Friday session finished at $1,255.35, a green bar, 0.85c above the prior close (a nothing day, when all is said and done, but the above indicates there was a lot going on, if digging deep into the psychology of the players). Is this close a "co-incidence"?
In percentage terms it's close to zero change, but it's an up candle! Throw the bulls a bone, however meagre (more below on the closing level) - some will - and have - even claimed capitulation on Gold Forum and the end of the decline. Very premature IMO. Bizarre, in fact.
Perhaps it's clearer with Chart and annotations -I hope so.
XAUUSD - 5 mins interval. Horiz axis - NYC timezone
The Daily chart is interesting:
XAUUSD - DAILY
Note Friday close 22c above Brexit day Open (Chart Support)..."co-incidence"? Did Support hold? Given the finely tuned engineering process?
Personally, I don't think so, but you could say it smashed through the Brexit low and bounced back...It's a tough call. I leave it as an open question.
Friday marked the end of the trading week, and Weekly is what the pros look at (and for stocks too)
Disclaimer: As
@V* remarked, we have discussed trend lines etc , and I am not a fan, not a supporter (will explain below), tho always a believer in going with the trend. But many are, so I have drawn a textbook perfect trend line from the highs of July 2011.
There's at least 3 touches here
XAUUSD - WEEKLY
The long term down trend line since the highest high to current is clearly still in play, like it or not.
But, does a trend line break a trend break make (different things)?....assuming we even broke out of the downtrend on the Weekly (we didn't)....On the Daily, definitely an uptrend since New Year...and much money been made...and hopefully booked....but it's now in strife too...in fact it's broken.
To answer my own question, no, you need more than a trend line break
You need confirmation. Any textbook will tell you that.
What's a good (the best) confirmation? A break of the prior swing low, or reaction low.
What was the last reaction low? Week of 20 June - Brexit week in fact, a low of $1,250.11 (critical level).
The week just ended made a lower low of 1,241.30 - so we have confirmation, a case can be made that the chart is broken, the long term trend line has been confirmed (and the shorter term uptrend broken) .
And the same case can be made for the uptrend line since New Year...the uptrend line is broken, and the prior reaction low taken out (but admittedly didn't close below it - but still a lower low).
XAUUSD - DAILY with uptrend line break, and confirmation of taking out the prior reaction low.
Support break tells me that by itself, but many (most on HC) are fond of trend lines, so I used one.
This is what I see with my own eyes, not what I think, hope or believe. I may not like it (I don't like it), but what I like is irrelevant.
We are literally sitting at Support, Brexit Day Open, and Support is typically the time to buy (buy into weakness = at Support i.e. on the "edge")....tho we could also fall through this any day, in which case you immediately know you're wrong, and can bail with minimal loss....
And I can see folks doing this...a tradable bounce up, can see an attempt to rally, try and break the prior resistance of 1,300 - 1,302, but there is so much overhead resistance, overhead supply, so many trapped bulls, so many failed attempts to stay above 1,300 / 1,302 thru 1,375 (remember the falling highs, the lack of momentum, even when above resistance on "good news" for gold), so much congestion, over so many months since July, it's hard for me to be optimistic.
There's only one proof. Break Resistance at 1,302, pull back, and successfully re-test it, thereby establishing a new support there (vs the current at $1,250). But then, as stated, there is a lot of overhead supply...a tough nut to crack, as we have already see...5 times, in fact.
I know this is not what people want to hear (I don't want to hear it)...but read my signature.
@V* is saying much the same as me, but with slightly different tools.
Of course there could be some kind of shock, an event etc that will push gold up (like Brexit...but even that was only temporary, we're back there now), but elsewhere on HC...I've heard global bank collapse (esp in Europe and subsequent contagion and derivatives implosion), Multi Year Great Depression, potential war between USA and Russia in Syria, failed global monetary policy, imminent US stock market collapse and all kinds of Shiite....garnering dozens of Thumbs Up....the potential is there, of course, but with so much global uncertainty, the harsh reality is that gold has fallen from $1,375 to$1,250 and broken 2 Critical Support levels in one week.
Finally (yes, at last!) that is a fall of about 10% (USD - different in AUD..perhaps worse), and given the implicit leverage in gold stocks to the gold price, (I reckon roughly 5:1, but can vary from stock to stock), is it any surprise many gold stocks have fallen 30,40,50% or more?
As one example, to take a popular stock - at random -TRY (USD based producer, as I understand it) fallen 51% from its hi to Friday. Even a horse like EVN, my favorite, the most resilient of goldies in the two years since I first bought it, Investment Grade, down over 25%.
But all gold longs know this.
Hope this helps,
Thanks
PS:
Comment on trendline usage from stockcharts.com, highly reputable TA website
"Trend lines can offer great insight, but if used improperly, they can also produce false signals. Other items - such
as horizontal support and resistance levels or peak-and-trough analysis - should be employed to validate trend line breaks. While trend lines have become a very popular aspect of technical analysis, they are merely one tool for establishing, analyzing, and confirming a trend. Trend lines should not be the final arbiter, but should serve merely as a warning that a change in trend may be imminent. By using trend line breaks for warnings, investors and traders can pay closer attention to other confirming signals for a potential change in trend."
http://stockcharts.com/school/doku.php?st=trendline&id=chart_school:chart_analysis:trend_lines
Personally, I find that this is sufficient.
horizontal support and resistance levels or peak-and-trough analysis
