Gold in cruise control. Cautiously going long before NFP
Gold has been squeezed into the apex of the wedge and is now in cruise control. Denied break out, and well respected support. Non-farm payroll data coming up tomorrow morning, which falls within the wedge's time frame so it's very likely that a big move is coming up 9:30 tomorrow morning.
From the chart, notice that there are 3 trendlines:
1. Long term trendline.
2. Short term trendline for recent 3 cycles (the last one may not have completed yet)
3. Short term trendline for the first 2 of the recent 3 cycles.
Notice the similarity between the scenarios we have now and back in July 2017, when gold tried to stay above the trendline but failed, only to rally from some point below. This suggests that a breakdown is still not impossible.
Nevertheless, I favor the breakout due to the following reasons:
1. The miners did not give consent towards gold's recent breakdown below the 1304-1350 trading range. In fact, GDX/GDXJ are squeezed tightly without anywhere to go. Failure to hold trendline 2 may very well send GDX/GDXJ tumbling, invalidating all those consolidations they had in recent years, which in return suggests that the outlook in gold is bearish. This is definitely not true given all the economic warning signs we are seeing recently.
2. EURUSD had worked off its overbought RSI on the hourly chart, consolidated, and ready for another leg up, while dollar ready for further correction.
3. We had worse than expected ADP data on Wednesday, suggesting that the payroll data may be worse than expected as well.
4. Unemployment rate had been at all time low at 3.9%. However, we have seen several companies laying off workers to cut back expenses, including Qualcomm and Deutsche bank, suggesting that it's unlikely that unemployment rate reduces further.
All these point towards the possibility that gold could very well start its next leg up from here. Plus, we haven't visited 1295 level since broke above, a level that trapped quite a lot of bears ready to be squeezed. Nevertheless, it's still possible that the data will trigger a sell off and send the price back down to as low as 1250 level.
From the chart, notice that there are 3 trendlines:
1. Long term trendline.
2. Short term trendline for recent 3 cycles (the last one may not have completed yet)
3. Short term trendline for the first 2 of the recent 3 cycles.
Notice the similarity between the scenarios we have now and back in July 2017, when gold tried to stay above the trendline but failed, only to rally from some point below. This suggests that a breakdown is still not impossible.
Nevertheless, I favor the breakout due to the following reasons:
1. The miners did not give consent towards gold's recent breakdown below the 1304-1350 trading range. In fact, GDX/GDXJ are squeezed tightly without anywhere to go. Failure to hold trendline 2 may very well send GDX/GDXJ tumbling, invalidating all those consolidations they had in recent years, which in return suggests that the outlook in gold is bearish. This is definitely not true given all the economic warning signs we are seeing recently.
2. EURUSD had worked off its overbought RSI on the hourly chart, consolidated, and ready for another leg up, while dollar ready for further correction.
3. We had worse than expected ADP data on Wednesday, suggesting that the payroll data may be worse than expected as well.
4. Unemployment rate had been at all time low at 3.9%. However, we have seen several companies laying off workers to cut back expenses, including Qualcomm and Deutsche bank, suggesting that it's unlikely that unemployment rate reduces further.
All these point towards the possibility that gold could very well start its next leg up from here. Plus, we haven't visited 1295 level since broke above, a level that trapped quite a lot of bears ready to be squeezed. Nevertheless, it's still possible that the data will trigger a sell off and send the price back down to as low as 1250 level.
Comment:
Gold is down at the moment, however GOLD and miners are showing incredible durance. In case market collapses today, buckle up.
