Gold..... a study in price weakness continued + the 'topping out' pattern

I am still moving towards reaching my goal of becoming a consistantly profitable trader but do believe that i have found a handful of overlooked observations that can be proved/discovered by anyone ( with enough time) which I have taken/ adapted and incorporated along with two or three other technical trading systems to produce my personal set of trading setup rules which work well but there is always room for improvment and often I am my own worst enemy pshycologically. These of course are not really based on my own theories rather observations on the theories of Alan Andrews and Babson and others who are mostly repsonsible for the large body of material i have mearly experimented with and tried to suit my style of trading. The truth is i am as much a contratrend trader (which is a dirty word for many and against many of the rules that you are taught) and as much as i trade continuations and continuation breakouts however I still tend to have more success with the contratrend approach. I try to anticipate markets highs and lows and changes in trend- not major ones as you never know at the time what is a major turning point and they are usually just another swing high or low. I have found that this best suits my character and once confirmed there is no need to pick th bottom or top but just catch the first retracement of the new trend.
This weekend i returned again (these posts. link2) to have yet another look at the gold market. A market that I have not traded until recently since early 2011 when it was at 1300$ and I posted this post on thursday 3rd Feb 2011.
The trouble with gold is we have been in a almost continious bull cycle for 10 year plus and as such i lack pivots to derive my forks and ultimately the reaction line from which i trade. My historical data for spot Gold goes back only to 1997/98 but Comex gold futures data goes back to the early 1970's and has all the major pivots that we need to produce a decent map of the market structure.
I use mutliple pitchforks and their WL/RL's selected using a mathermatical pivot formula to give a numerical value and end up with drawing a historical multiple pitchfork template which usually have predominantly horizontal reaction and median lines when viewed in lower time frames below the daily. These horizontal line are obviously not horizontal when drawn but as the time frame decreases their angle becomes slight. The angle of the line is critical and the probability of a horizontal reaction line ( from a daily/monthly or weekly fork) stopping/reversing price in the 60 or 240 min TF is quantifiably higher than reaction/median lines at 45 degrees for example.
Let me show you an example in the chart below where we have two forks ABC and ABD and also their reaction lines drawn at 50% intervals. These forks span over 20 years with their pivots and ( in my opinion) express only the relationship between these four pivots. There are other forks that should be drawn to reveal market structure but i am going to show you the effect of just these 4 pivots using 2 forks and their respective reaction lines.


Now below is the same chart in the 240 min time frame. It shows one the of the upper median line parallels from the blue fork ABD plus the two most recent reaction lines form both ABD and ABC. Not only does the UMLP of this blue fork describe perfectly the double tops and turning point of gold and the two reaction lines also show remarkable correlation with recent price in this 4hr chart plus this looks like a 'topping pattern'.

Now, once my chart is completed ( 2-5 hours manually for each instrument) and all forks
( 'historic' forks ( with pivots values over 65) and 'current' forks (values over 75) and 'controlling' forks values over 85) are added plus reaction and warning lines you end up with what i think is about as complete a picture of price structure as you can get. It may look very crowded in the daily time frame but if you drop down to the 5/15/30/60/240 min TF then you have a valuable tool.
Trend and direction are another matter altogether and that is why you have seen I combine these charts with usually at least two multiple indicator based systems across 3 charting/trading platforms.
Here is Gold today Monday 12 December during the morning London session just before the AM fix ( always a time to be alert) and my short 'bias' over the last few weeks was correct but i missed the move down overnight in Asia and now am looking to sell into strength ( a failed rally) if we see any. The outlook for Gold is bleak support at 1650$ then 1635, 1612 and 1600 are some levels just for starters. However a small bounce first perhaps today/tomorrow but watch the US$ and equity market performance. So how far will this market ultimately retrace? I would
be very surprised if we went back to the ABD centre line (Esignal monthly chart) at around

1500$ but we live in uncertain times and i would raise the probability of this option if the S&P/Dow/Dax/Ftse etc. should go lower than the late November lows.

Gold .........................failed again and looking sickly

Gold trade (S&R) continued

OK, as per my previous email the break came up and through the d/s RL. We took a profit on our short and have reversed trade direction and are long at 1712.73 (stop 1711) and profit objective is the CL at 1721.50 to 1722.75 area. If we fail this CL ( and we might) we will take a protective profit stop at 1716

Gold failed again at 1708$

I have seen this a thousand times. A channel created but a horizontal reaction line ( providing support) and a down sloping reaction line ( resistance) which pushed prices lower with lower highs but with support keeping us from seeing lower lows. You cannot guarentee which way price breaks and i still favour the downside however we will go up and test the reaction line again and will eventually break out either way. Break up over 1715.75$ would be a buy....or we may find price chanelled down to the 'corner' where we see a break either way. Whatever happens it will be a decent move as this pattern always ends in such a way. ML's/mini forks are of no use once this pattern is underway so cannot be used to predict price direction as you will find that if you draw micro forks they are always 'fails both upsloping and down sloping.

Short Gold

Looks very weak. Sold at confluence of two reaction lines however..... Beware we could rally sharply if we repeatedly fail to break the reaction line at 1708$
Perhaps a big move today?.......EURUSD post coming...its a sell EUR + USD view

Gold...going down -next floor- test of 1702

strong reaction line support at 1702.25$ ( you can see it in the RH chart at the very bottom) will it hold there for the time being or will we see my first objective of 1680$ today?

Short Gold Closed

Closed with profit: The reason is that when price keeps knocking at the reaction line & making higher lows at the same time ( & the frequency is increasing) you know that all your instincts tell you to get out. I intend PERHAPS to fight another short Gold battle another day ( tomorrow) at the next RL above this ( see previous email). The profit on 1 contract was clsed at juts under 500$ but there was more on the table several times but this is my style. I am regularly stopped out at b/e or marginal profit/loss as i try to let trades run under these circumstances as long as I am in contro viz a viz the signals i receive. Maybe its a buy( on a RL touch back) and going to the next RL at 1715$ but it's the weakness and downside where i believe the opportunity lies.

Gold stop moved to 1712.25

Gold anatomy of a short trade trigger/reaction line

I dont have time to write this up yet but target its a break of 1700$ and ultimately 1680 ( see prev post) and i am not sure if i will close position tonight(on break of DS reaction line -arrowed) as we now have a HL and this is a big pshyc level (1700) and we may go back to the upper DS reaction line at 1714 (or higher) before going lower. Two template used one HTF and one low and entrey using stochs/bline/Bolly bands+ multi confirmation TF's +divergence and of course at the crux of this is the reaction line itself. All dashed dark red lines are RL's. See the divergence in the stochs in both 1 and 5 min TF's.

Gold...going lower

Gold...A study of recent price failure...continued

I posted last week about Gold and what i consider to be a very weak technical position from my point of view. As time goes on I am extremely wary of going against the trend ( after all, on the weekly chart its still intact upwards) and going against the vast number of pundits who all 'big up' the gold market both from a technical & fundamental point of view. Not only this but we are living in exceptional times where we can expect to see exceptional moves in markets. It often crosses my mind that most of the pundits who talk Gold up often have a vested interest in doing so and give numerous reasons either as part of portfolio diversification/equity hedge (and you know what i think of this idea), Bullion sales etc. The bottom line is that they must get their clients (be they private or institutional) into something apart from bonds/treasuries and equities in order to make a living and equities are hardly attractive at the moment and Gold is an easy sale to make....be honest if you had a large portfolio would you not have 10-15% in Gold ( ETF's or futures or bullion coins etc) and in such times as now would you argue with your advisor if he suggested you raise that to 20%?
Anyway, i am sorry to tell you i do not have the answer as to where Gold is going BUT this looks and feels and smells like a technical series of rounding tops being formed. Please take a few minutes to look at these charts:
1. You can see the reaction line that i attribute to the current resistance to go higher and see how it has carried price lower in each 'breath' or cycle of the market.
2. I have included a chart form the previous post showing ( viz- a viz Andrews) my unorthadox fork where price has failed and suggesting it lacks the 'energy' to go higher.
3. From the 700$ area in Ocotber 2008 we have seen price top out at just over 1900$ and we have seen an exceptionally shallow retracement of .310 and if you take the whole of the bull move since 2000 this amounts to a measly .25 Fib RT only.

You may choose to tell yourself and me that this indicates a strong market and i would not disagree, however looking at the fork I have drawn and where price has previously found support i would consider that a break below 1680$ and below this centre line would be extremely bearish and we are coming back to this centre line as price cannot get up and over the reaction line. The problem with charts that have long sustained sharp moves up ( Cotton& Rough Rice come to mind) is that they are a nightmare to get to grips with as there is a shamefull lack of pivots to use and so it is difficult for me to get my long term forks drawn and thus the reaction and warning lines that oppose/support price.



Here below is the chart ( red arrow) with the original basic fork explanation from last weeks post plus a much lower set of forks and reaction lines but the long term RL is there as well if you look but sadly not differentiated by thickness etc. I have included two identical charts but they differ because one is log scale and the other is arithmetical... when dealing with reaction lines on charts this is essential to use both scales in order to find the true location of a reaction line on a chart as the lines 'move' depending on the scale.

Here below is the MT4 CFD chart but with an even lower time frame but all lines drawn automatically by a custom idicator after you select your 3 pivots for the fork. I am interested in todays new low pivot at around 1701 and what happens after this new higher low is formed.

To be honest i have no position so care not one way or another if it goes up or down but have time since I am out of EURUSD until we trend again . The bigger time frame E-Signal charts are of greater importance for me as they show the current picture and the short stochastics on the weekly chart also interest me. Remember any pattern with price is theoretically possible and this goes for the short stochastics ribbons as well so even though they look like water about to fall over a waterfall doesnt mean they will carry price with them....also the long stoch is no longer pointing down and the 21-10-4 stoch has narrowed its band showing me the trend is weakening... all telling me that it would be crazy to go short. Where does this leave me? It seems that a break up and through the reaction line at 1740-50 would be a longer term buy signal if we saw some daily close above it and would need closer examination. We have held at 1701 and this is a healthy sign but we may just pop up to the reaction line and fail again and in the back of my mind I keep coming back to this topping out pattern.

EurUsd and Dax/CAC/FTSE...Crisis? What crisis!

I have just returned from a long weekend in the UK for a wedding and was not in the office for US data on Friday and now I still am uncommitted about the future direction of markets after the shock of concerted C- bank intervention last week which sent all my charts and views into chaos . I spent the flight over and back reading the UK business papers relentless coverage of the Euro zone crisis. Many wise words infact almost too many wise words of all shades and opinions both covering possible total meltdown or disaster and then the opportunity that maybe there. One article caught my eye as the charts below did. It said that with cash piling up everywhere and no fund manager would want to be infamous for missing the start of a new run up which could be a sackable offence.
My point is that press coverage has hyped this up to the point that is is being made out to be the most shocking event since WW2 yet just look at the charts below. This recent sell off is nothing more than a shallow retracement and indeed hardly visible in the cash S&P charts below and at it's worst was just over a .382 Fib RT form the March 09 low to this summers high:

Perhaps more visible in the right hand chart but still miniscule compared to 2008/9 falls.
The CAC40 and DAX and FTSE have all held at critical levels and then there are some worrying forks. Whe i say'worrying' what i mean is that although i have no long term position i do not want to miss out or be surprised by a sudden move in the opposite direction to what everyone expects. The equity markets are seriously disjointed from the fundamentals and as i keep mentioning operate with a long or BUY mentality. Looking over the european indices this morning i noticed some major forks where price has failed to get to the CL. Andrews says that price will reverse etc. Please look at this...both the CAC40 & the DAX ( both Dec 11)

On it's own to be honest i wouldnt trust this centre line failure as a signal but in both these cases ( and i am sure i could run through the North American Indices if i had the time and find the same equivalent forks) price has reversed and we are now at or above the UMLP of each of these forks so in effect its a long way down for a second attempt or retouch.
In addition the Euro ( below) which there is no doubt is in serious trouble has struggled to get below 1.30 against the USD. It's found support on a ML ( LMLP) that is truely historic and dates back to the early 1970's and one of the original pivots you can chose ( there are about 3) from the start of this instrument being charted when the Euro or ECU was calculated using mostly the DM value

Now we have what used to be called a nice 'double bottom' with the right hand pivot having a higher low...bullish in the short term if i say so myself. We may have another cycle up and a failure and come down to retest the old thick LMLP and go lower but i am just begining to wonder....perhaps not. I wonder what the market would do with good news now at these levels? That is the TRILLION Euro question... The 'T' word could take us knocking at the door of 1.40 in hours perhaps minutes and God only knows where the S&P/Dow?Dax etc would end up- how much higher? Perhaps beyond where we were in July?
All this and yet we are told that we are days away from a meltdown. I have to tell you that i am disappointed with the downside -so far. Lots of 'noise' since the summer but not really the critical effect/fall on the markets we were told. So my advice is dont get caught short becuase this looks suspiciously like the begining of a stampede UPwards. Of course its to early to be sure and we wont know until some more time passes but this option seemed out of the question a few weeks ago and now its a viable scenario.There is also the fact that this is a political problem as well as a fiscal one and to follow politics on mainland Europe you need the patience of Job and do not expect any resolution soon on that front.

EURUSD...I'm confused & flat ( literally)

Apart from some distant buy stops above 1.35 i am flat and staying out today. Yes, i was short at 1.3310 when the central bank/Fed announcment came out yesterday and yes, i was stopped out at 1.3335 and yes my stop was not filled at the price (1.3325) but it was not more than 25 basis point loss- a car crash stop - i always use one . But it's perhaps my pride that is wounded more than anything. I am also watching the DAX as we have a potential failure and as i write EurUsd is making very heavy weather of 1.3500 and has just dropped 30 points after the 1st reaction line in this fork proved too much for price. Perhaps this is just not going to make the difference i thought it was. Maybe we are going back towards 1.34?? Its looking a distinct possibility now we have a lower high and a lower low