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Gold Breaking Down

September 14, 2013

On Thursday gold broke down below important support, declaring, in our opinion, that the bear market rally from the June low is over. Today the decline continued, but at a much slower pace, so we should probably look for a short snapback rally very soon.

The PMO crossover sell signal gave us some advance warning of the break, but the Trend Model is slower to react, and it will probably take several days before the 20-EMA crosses down through the 50-EMA to generate a Trend Model SELL signal.

Hope is fading on the weekly chart as well. While there is a nice, clean PMO bottom and upside crossover, the weekly PMO topped today.

Conclusion: As of 8/21/2013 Gold is on a Trend Model BUY signal. The LT Trend Model, which informs our long-term outlook, is on a SELL signal as of 2/15/2013, so our long-term posture is bearish. The long-term technical backdrop is negative, and the mechanism at work is that of a collapsing parabolic. We expect that gold is eventiually headed for a retest of the June lows, and when they are tested, we do not expect them to hold.

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Technical analysis is a windsock, not a crystal ball.

Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.