This week gold formed a bearish reversal candle. It is strong enough to expect the lower prices for at least one week. Let’s explore the hypothesis from different angles.
Monthly (unchanged since Jul 1)
In June gold made a dramatic reversal and produced a solid Dark Cloud Cover (1 more point down and it would be a Bearish Engulfing). The move shifted the odds to the dark side on the monthly frame. However, the odds are not as high as they would be after engulfing and the candle requires a confirmation in July. From that perspective, a modest rally at the beginning of the month is quite possible.
The monthly indicators so far support further downwards moves.
Gold formed an Inside Out candle this week. This is a variation of Bearish Engulfing and should be treated as such. The candle closed below 8w EMA line and this kept the 8/20 EMA bearish cross intact.
The odds that gold has been consolidating after a sizeable move down are very high. It would be logical for gold to form a Falling 3 Methods as long as the price stays below ~$1815-25.
The weekly indicators continue to deteriorate:
– PSAR bearish;
– MACD line and histogram moved below 0;
– bearish 8/20 EMA cross.
From the 2-week ago weekly, still valid: “Possible development – horizontal within $1750-1815 channel. There is nothing bullish until we can see a solid green candle closed above $1815.“
Gold rallied for 12 days without a sizeable pullback. It was definitely due and today’s candle reflected it perfectly. My forecast from previous week worked precisely.
Based on the shorter time frames, it looks like the price could drop to $1790 rather fast, then take a pause and continue down.
Odds: Strong Bearish
My hypothesis that gold is working on a diagonal wave down and the is the best count I could come up with. Many uncertainties and assumptions and I need a clearer shapes/waves to develop for further projections. Possible next target – $1750-1770.
At times like this the candles remain the primary guide.
Gold was damaged greatly in June on the monthly and weekly frames. The long-term odds are on the dark side.
Expect gold to slowly move down (almost horizontally, but down) with many see-saw movements in the process.
1. If the next week closes below $1760, this would make a Falling 3 Methods I’ve been talking about for a while. The bearish odds would greatly increase if this happens.
2. If the next week closes above ~$1815-1820, this could be a first sign of the longer rally (low probability). For a confirmed rally, we should see the bullish signs at least on the weekly charts. So far there is none.
The longer term forecast and targets were discussed in details in the Monthly Analysis (link below).
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