Goldaholics Anonymous
Updated
Pour yourself a glass of Goldschläger and let's review the 12 steps before diving into this.
1. We admitted that we were powerless over the Fed -- that our balance sheet had become unmanageable.
2. Came to believe that a Power greater than our central bank could restore us to solvency.
3. Made a decision to turn our fiat over to the care of sound money, as we understood it.
4. Made a searching and fearless inventory of our finances.
5. Admitted to Peter Schiff, Lyn Alden, and Pomp the exact nature of our wrongs.
6. Were entirely ready to have big, fat Gains.
7. Humbly asked to avoid getting short squeezed.
8. Made a list of all the naysayers about to be harmed.
9. Sent direct messages to them to gloat in victory.
10. Continued to count our gains and polish our bullion.
11. Sought through fundamental and technical analysis to improve our entries and exits.
12. Having had a financial awakening as the result of these steps, we tried to carry this message to other goldaholics, and practice these principles in all of our trades.
Macro Fibonacci
Below we can see the magic of Fibonacci extensions, measuring the last macro bull run to the 2016 low.
Zooming in a bit, it is clear that these levels attract attention. Each one of these fibs acts as a step in the staircase. All we need to do is look at volume and price action to validate each level. The smart money had their sell orders at the 0.618 Fibonacci extension. The 0.5 could not hold which indicates that the next level down will be tested. Watch for heavy volume to come in there near the 0.382 level.
In the U.S. stock market and many other developed financial markets, about 70-80 percent of overall trading volume is generated through algorithmic trading.
Historical Price Action
Looking back to the last bull run there are a few simple patterns to watch for...
1. Weekly MACD flailing around above the zero level.
2. Mark the down trends and wait for the break.
3. Price action is above the 20 Week EMA.
Trading Setup
Using historical price action the trading setup becomes clear...
1. Weekly MACD is flailing above the zero level.
2. The down trend line is clear. Wait for the break.
3. Wait for 20 Week EMA support.
Now, the targets are the Fibonacci levels above, and the ghost bars look reasonable, however, it would be wise to take a look at what exactly is driving Gold on this path.
The U.S. Dollar
The Dollar index inversely pressures Gold prices so this is worth noting.
1. Momentum is shifting bullish as a bullish MACD divergence reveals itself on the daily chart.
2. This recent move was the 3rd wave down which often precedes a reversal.
3. The index is at the bottom of this future channel.
As this index recovers back towards the 200 Week EMA, it will surely scare the metals market. However, the macro downtrend is only on it's first wave down. From a technical standpoint, the second wave is often the deepest as panic sets in from the failed recovery.
Treasury Yields
Yields recently had a similar bullish MACD divergence with a very weak recovery that followed. The trend is still clear and it's highly likely to roll over as it timidly approaches the trendline in the coming months. Gold has been riding along side Bonds so this should continue to drive up prices. Depending on the severity of falling yields, it could trigger temporary crashes in the metals. But longer term, buying the dips is the way to go.
Trading is risky. Don't do it.
Long
Bullion: Gold, Silver, Platinum
Equities: GDX, PHYS, CEF, SLV, RIO, SPPP
Futures: (Not yet)
1. We admitted that we were powerless over the Fed -- that our balance sheet had become unmanageable.
2. Came to believe that a Power greater than our central bank could restore us to solvency.
3. Made a decision to turn our fiat over to the care of sound money, as we understood it.
4. Made a searching and fearless inventory of our finances.
5. Admitted to Peter Schiff, Lyn Alden, and Pomp the exact nature of our wrongs.
6. Were entirely ready to have big, fat Gains.
7. Humbly asked to avoid getting short squeezed.
8. Made a list of all the naysayers about to be harmed.
9. Sent direct messages to them to gloat in victory.
10. Continued to count our gains and polish our bullion.
11. Sought through fundamental and technical analysis to improve our entries and exits.
12. Having had a financial awakening as the result of these steps, we tried to carry this message to other goldaholics, and practice these principles in all of our trades.
Macro Fibonacci
Below we can see the magic of Fibonacci extensions, measuring the last macro bull run to the 2016 low.
Zooming in a bit, it is clear that these levels attract attention. Each one of these fibs acts as a step in the staircase. All we need to do is look at volume and price action to validate each level. The smart money had their sell orders at the 0.618 Fibonacci extension. The 0.5 could not hold which indicates that the next level down will be tested. Watch for heavy volume to come in there near the 0.382 level.
In the U.S. stock market and many other developed financial markets, about 70-80 percent of overall trading volume is generated through algorithmic trading.
Historical Price Action
Looking back to the last bull run there are a few simple patterns to watch for...
1. Weekly MACD flailing around above the zero level.
2. Mark the down trends and wait for the break.
3. Price action is above the 20 Week EMA.
Trading Setup
Using historical price action the trading setup becomes clear...
1. Weekly MACD is flailing above the zero level.
2. The down trend line is clear. Wait for the break.
3. Wait for 20 Week EMA support.
Now, the targets are the Fibonacci levels above, and the ghost bars look reasonable, however, it would be wise to take a look at what exactly is driving Gold on this path.
The U.S. Dollar
The Dollar index inversely pressures Gold prices so this is worth noting.
1. Momentum is shifting bullish as a bullish MACD divergence reveals itself on the daily chart.
2. This recent move was the 3rd wave down which often precedes a reversal.
3. The index is at the bottom of this future channel.
As this index recovers back towards the 200 Week EMA, it will surely scare the metals market. However, the macro downtrend is only on it's first wave down. From a technical standpoint, the second wave is often the deepest as panic sets in from the failed recovery.
Treasury Yields
Yields recently had a similar bullish MACD divergence with a very weak recovery that followed. The trend is still clear and it's highly likely to roll over as it timidly approaches the trendline in the coming months. Gold has been riding along side Bonds so this should continue to drive up prices. Depending on the severity of falling yields, it could trigger temporary crashes in the metals. But longer term, buying the dips is the way to go.
Trading is risky. Don't do it.
Long
Bullion: Gold, Silver, Platinum
Equities: GDX, PHYS, CEF, SLV, RIO, SPPP
Futures: (Not yet)
Note
1. The daily MACD has crossed above zero... 2. The price action is supported, for now, above the fib level... 3. Sort of broke the down trend... If there is a break higher it could be time to buy... BUT the DXY is still poised for a rally so caution is important. Stay tuned. Trade active
I like buying dips in Gold futures now that price has stabilized above resistance with the daily MACD above zero...I'll be using the 4hr chart, the 50 EMA, and the RSI set at 10.
RSI is now near the bottom of the range and price is supported by the 50 EMA
+1 @ 1921
Note
Gold price is right at the 200 day EMA so could be a bounce here. The problem is DXY looks like it could make that reversal so I'll set a stop loss on Gold below that 200 day EMA. In that case I would take a short term loss and just wait to get in at a better price.Note
I'm going to play this by holding through this sell off and buying more if there's a bounce at the next fib level. But to hedge my losses, I'll look to short oil if this DXY rally continues to demolish the markets.Note
Still coasting above the main trendline. I think downside is limited but will remain cautious about adding here to a leveraged futures position. However, I am still accumulating a core position in gold/silver/metal equities like PHYS, CEF, SLV, RIO.Note
Once it gets back above that fib level (again) I'd expect a short squeeze.Trade active
Frankly, gold has been such a pain in the ass. I'm slightly net red from last years big win and this years big loss. Long @ 1734 on the August contract. Trusting the fib gods on this one. Note
Fib bounce, good. Above the 50 EMA, good. 1,800 almost hit, almost good. Probably will be a messy journey but the 0.5 fib is where I'd consider selling this long. Note
Taking a step back on the weekly view, the MACD is showing momentum is much stronger now than in the last few attempts to break trend. The downside risk is there but the upside looks much bigger but could take a while if there's a pullback from here. Another reason why I grabbed the December(z) contract on this one. Note
Gold prices are now approaching the target 0.5 fib extension. I'm up about $1,400 on this position but took a big fat L on the last dips. As of now I've broken even on Gold futures YTD. This setup looks to be the beginning of a larger move so I'm just going to hold it through in case of a squeeze up to $2000 happens sooner rather than later. Note
Momentum hasn't even kicked in yet. Note
Gold is forming a very similar pattern as the previous top in, price and the MACD. If history does repeat, the place to cut positions is where the MACD dips below 0 and price breaks the trendline. Note
next resistances and then longer term top.
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