Use Gold’s Technicals To Lower Short-Term Risk

We’ll shun jargon today and make it as simple as we can for bulls who have patiently stood by gold since it began its long dirge nearly two years ago. Looking at the picture below of Comex August futures, the weight of selling in recent months should be apparent even to those who know nothing about charts.

It projects a potentially important low at 1219.40 that would imply a nearly 12% fall from current levels. That outcome, our worst-case scenario for the next 3-4 weeks, would become an odds-on bet if August Gold were to settle for two consecutive days beneath the red line at 1353.70. There would be no guarantees at that point that 1219.40, a major “Hidden Pivot" support, would hold, but we would be prepared to bottom-fish there aggressively in any event, albeit with a very tight stop-loss.

More specifically, we would use our proprietary “camouflage trading” technique to hold theoretical risk as low as possible.

Looking on the brighter side, the very best that bulls could hope for over the near term would be a strong bounce from 1368.20, which lies just below. Although that number is a minor “hidden” support according to the technical system we use, it is the very first spot at which bulls might hope to find good traction. Any lower, though, would indicate at least $26 more slippage, to a 1342.00 support that is a “cousin” to 1368.20.

Bears Struggling Too

Another possibility is that the futures will continue top-move sideways without breaking significantly higher or lower. The odds of this would appear to be low, since, as you can see in the chart, bulls have been struggling hard just to stay afloat. It should be acknowledged as well, however, that bears have been unable to push gold lower easily. In fact, they have made zero net progress since mid-April, when August Gold was trading exactly where it is now.

If you want to tune out the noise and set a wake-up call for when “something” happens, we would suggest monitoring price points at 1438.90 and 1353.60. Any rally that touches the first number would generate a robustly bullish “impulse leg” on the intraday charts.

If this were to occur within the next few days, starting with a bounce from the 1368.20 pivot noted above, bulls would have reason to celebrate, since a strong impulsive rally will have begun without the corrective downtrend having completed the big ABCD pattern shown. Such a sequence of events, precisely, is extremely bullish according to our runes. Indeed, it is how several bull markets we have observed over the years have begun — i.e., with an upward lurch from a place seemingly off the radar of conventional support-and-resistance players.