Hi Golden, have looking at the gold charts, the gold profile, the hedging stuff so don’t think I forgot. This is a preliminary look. Be aware I am not trading this actively myself yet, so I am out of sync with the gold futures.
I do not know if you are a long-term holder of gold itself or only the miners, my post about gold was mainly about investment stuff. I have not traded gold since my last post when I said I was going flat after the elections here. I assume you are not trading short term but understand how an investment can take the character of a trade at certain points on a trendline. We have two events to consider in the near term. First is this Friday's employment data for May, followed by more CPI on 10 June. And then you also have the upcoming FOMC rate decision on 16 June. They could color the following technical picture. Watch US Treasuries using the 10-year note at both those events. It generally moves with gold (yields move inversely). Rising yields from August of last year correlate well with the decline in gold to our recent base, while the stabilization of yields from 8 March to present (the 1.55 to 1.65% sideways) provided support for gold's move off the 1670 level. And be aware we are entering a slow trading season in general.
Overhead: Technically for GCQ21, using continuous contract daily chart, you are coming up on an important retrace of the downtrend from 7 August '20 to 08 March '21 -- at about 1930. This should make for resistance. As of tonight, we are less than 1% from that level. Next you have resistance at the two three session attempts from 5 Nov 20 and 4 Jan 21, with the latter being a false break of the primary downtrend from August of last year. Those two (2) three-day nodes start at 1962.5 and 1966.10 -- they correspond with the balance area/indecision cluster of 20 August-15-Sept 2020. Alternatively, you could choose to ignore that failed second spike/break of trend on 4 January '21, consider it anomalous, and just consider the primary downtrend intact until the mover through the 50-day average on 15 April and through that original downtrend line on 16 April of this year. You could take artistic license either way. Also note that if you take a look at the weekly chart, the bounce from the GC 1680 area corresponds with the fib retracement of 61.8% of the uptrend based at November through mid- March 2020 around GC 1450. If that is of any consequence, it would put the halfway retrace of that range near the 1770 area. Your drawings may vary. If I got any dates wrong just ask, but it should be right.
So, if we can get through that next fib level, we will be dealing with the area where the 5 November '20 attempt at breaking from balance failed, went to the other end of balance and then through the bottom on 23 November '20. That was followed by the V bottom from 30 November and subsequent trend up to that false breakout of 6 January, where we went above the downtrend from last year's high. The fall from that day was followed by more balance (11 Jan - 2 Feb) before the final decline along the secondary downtrend line into to the March 2021 double tap that precedes our current uptrend based at the turnover of March to April.
Downside: For downside from current price, there is the 50% retrace of the 20 August-based downtrend near 1880 to consider. It lies about 1.75% below current price. Next is the basic uptrend based at 31 March of this year and anchored from 29 April and the first week of May, about 3.5% beneath current price. This corresponds roughly with the ascending 20-day average, itself about 3% below current price. Next obvious support is 1832.0 followed by the ascending 50-day average around 1793. And finally, we have the ascending primary trendline based at May 2019. This is where the current trend originates if you agree with that way of shaping things. So, as you move into and beyond those upcoming events, keep an eye on how GC handles both the 1881.30 and the yet-to-be breached 1930.30. I don't think of these kinds of levels as absolutes (we can move around them) but they do have a self-fulfilling role to play; one that will intersect or be glommed with the short-term fundamental influences.
Market Profile: Much of the normal ta (trendlines to a lesser extent than retracements) has a self-fulfilling element so that is important, but what might also be important is the market information generated by the profile -- though I wouldn't be brazen enough to compare gold with the highly liquid, heavily traded SPX futures -- the world's biggest carry trade. Doing that would be like comparing gold's reaction to the DXY/US Treasury gyrations that follow changes in Fed posture. Gold has a mind of its own and is secondary to the equity and bond market. It and can get sold heavily to pay for losses in more heavily traded things, though it’s understood that part of the reason for trading it is its potential for becoming even more relevant. Never mind, we will try it anyway.
If you run the globex futures in the 23.15-hour session profile, I see that we are following a regular pattern of balance-to-trend as we go up. For the current contract for August delivery, I would start with the right side of double bottom from 30 March mentioned above. That is the start of the current uptrend in question at 1679.40. You can see we move from that second part of the double bottom and re-enter the balance that lies between that and the first bounce from 1678.40. After spending a few days there, we break out to rejoin the trend on 14 April and then balance again, going sideways until the next break higher on 5 May. From there we move higher to 1848.40 and bounce around in that bracket until the next break higher on 16 May. That puts us into a three-session trend with higher value areas, followed by yet another small four-session balance culminating on 24 May with a break into our current four-day bracket, which is framed at the top with the 25 May high of 1915.60. Trying to determine if the bottom of our impending balance should be put at 1893.20, the top of previous balance. Since our current station is only four NY sessions long, it is hard to tell. I would be interested to see what happens if it is violated again like it was on 27 May, when we moved lower to test 1884.30, moving back into the previous four-session bracket. At the time of this note we are trading around 1910. I have also divided the full GLOBEX session from the heavily traded NY session to see if that works. The breakouts from balance appear to be taking place mostly in the NY session. Recently, all the breakouts have been in that session.
June expirations take place two days after the FOMC meeting. For the first week of June, I see initial resistance at 1930 through Friday. Any break above that level puts those two spikes around 1960 into play. For next week I see the halfway retrace at 1880 as initial support. 1930 is again a prominent hedge for the week ending 18 June. This is all prone to change daily as positioning changes, but that is how it sits now.
The DXY monthly chart is a thing-in-itself but has obvious consequences for gold. Feels weird to chart this one as it is so prone to historical relativity. Is it even worth trying lines and squiggles? We see a declining 50-month and 20-month average with a flat 200-month average as we come into a potential double bottom at the 88.7 level that goes all the way back to June 2010. That 200-month average lines up with many prominent points going back for decades. There are two trendlines to consider as well. The primary is based at March 2008 and the secondary is based at April 2011, the latter being broken in November 2020 and proving resistant in March 2021. The weekly chart shows a steeply declining 50-week average and a flattening 20-week average. In that chart you can see that our current position is consolidation at the same level as the balance cluster that runs from January to April 2018. The daily DXY chart also shows declining 50 and 20 period moving averages and has us below the 200 day average.
Fundamental Stuff: Golden, I learned the hard way not to second-guess the Fed's ability to cope on-the-run with situational changes. I would say it is dangerous to bet against them in the long run, although you sure can have fun trading the rollercoaster that comes when the market throws a fit. I would not front run these meetings. Rather, I would trade them responsively. How this tack translates to a long-term holder will depend on how heavily invested one is in gold-related instruments and what they have made already. I do watch this as a matter of course because the ES is also prone to being bashed about by FOMC related things, so will work on that. Speaking of that, keep in mind that although gold is a hedge, it does take a hit alongside equities when people need cash to pay for their miscalculations and heavy risk taking. Anyway, I will try to watch the daily profile and get back to you.
