A Technical (And Cyclical) Look At The Gold Market

Last week's trading saw the gold market holding in more of a sideways-to-down pattern, with the metal forming its high in Monday's session - doing so with the tag of the 1749.40 figure (June, 2021 contract). From there, a decline was seen into Thursday's session, here dropping down to a low of 1721.20 - before bouncing off the same to end the week.

Gold, Short-Term

For the very short-term, the next smaller-degree low is due to materialize, coming from the smallest-tracked wave, the 10-day component, shown below:

In terms of price, any reversal back above the 1748.00 figure (June, 2021 contract) would be our best indication of a turn back to the upside with this 10-day wave. If seen, the probabilities should favor additional short-term strength in the days to follow, while below this figure will keep the metal in a more bearish configuration.

Stepping back, more key is the position of the 72-day cycle, which may well have bottomed out with the recent tag of the 1675.70 figure, seen earlier this month. Having said that, this has yet to actually be confirmed, with the exact confirmation level noted in our Gold Wave Trader report. Here is that 72-day wave:

Should an upturn in this 72-day cycle be seen going forward, additional strength would be favored in the days/weeks to follow.  In terms of patterns, however, the next upward phase of this cycle is favored to end up as a countertrend affair - due to the position of our larger 310-day component, shown again on the chart below:

In terms of price, key resistance to any short-term rally phase (with the 72-day cycle) looks to be into the 1810-1850 region for Gold, which encompasses several key levels, up to and including the 72-day moving average, as well as the upper (and declining) 310-day cycle channel, shown in dashed red on the above chart.

For the mid-term picture, once the 310-day cycle does bottom out, the largest rally of 2021 is expected to play out with gold. In terms of price, the upper 310-day cycle band would be the ideal minimum magnet to that rally, which would be expected to last into later this year and/or early-2022, before peaking our larger four-year wave.

Technical Considerations

With the recent action, I wanted to take a closer look at the accompanying action from technicals. With that, of key note is that our Mid-Term Breadth index for gold has just recently turned back to the upside - off a divergent low:

A turn higher off a divergent low with mid-term breadth is seen a bullish signal for gold, and would support the idea of a 72-day cycle upward phase playing out going forward - but only on a push above our upside reversal level for this wave.

The second technical observation comes from the cumulative version of the gold miners advance/decline percent index - which is shown on the chart below:

With the above, the cumulative version of the gold miners advance/decline percent index has recently spiked to the upside - but has since turned back down. This particular indicator is key. That is, at larger degree tops and bottoms, it will also tend to show a divergence (or several) from the price of Gold. A minor divergence was seen at the most recent new low in price, and with that is also seen as a technical positive.

With the above said and noted, technical action is seen as supportive of strength in the days/weeks ahead, though only on a break above our key upside reversal levels. If the coming rally is followed by lower lows on the next swing down, we will need to take a harder looking at the accompanying action from technicals, with any larger divergence being the impetus for a much bigger rally into later this year - coming from the aforementioned 310-day time cycle. Stay tuned.

Jim Curry
The Gold Wave Trader
http://goldwavetrader.com/
http://cyclewave.homestead.com/

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