Gold Shines Brighter - Cloud Looms Near 1137-1150

FX:XAUUSD   Gold / U.S. Dollar
1394 1 27
Wednesday afternoon, the Fed shares with us their view on monetary policy in the US. In advance of the news events, we like to take a step back and assess the patterns on the chart to identify some key levels to watch out for. This allows us to detach as best as possible when the news is released.

Going into the news Wednesday afternoon, we're following this longer term ending diagonal pattern that many have written about from an Elliott Wave perspective. Though the Dec             3 2015 low did get pretty close to the lower boundary of the diagonal, we're leaving the door open that it was only wave A of (5). That means the current rise would be B of (5). Once 'B' is finished, then another sell off would ensue in wave C of (5) which may be the final wave lower.

1137-1150 has been identified as a key level. This is the price zone where the (2)-(4) trend line and 61.8-78.6 retracement (of the Oct             - Dec             2015 downtrend) reside. There may be a reaction lower near that zone.

My colleague Ilya Spivak notes how the price of Gold             has maintained an inverse correlation lately to the Fed Funds futures . I would encourage you to read more about that in his Q1 2016 Gold             Forecast available here .

Another interesting point to consider is that FXCM's SentimentIndex flipped to negative earlier today. The reading has been positive for more than 2 months. So this flip to negative expresses the potential for additional bullish juice available. This may push the prices higher into the cited zone of 1137-1150. Watch the SentimentIndex in real time to see how it behaves if prices do make it in the potential reversal zone.

An alternate that we're considering is that the diagonal is finished which implies a break above wave (4). A move above the (2)-(4) trend line may provide an early warning signal to such a move.

Good luck and happy trading!
Comment: Gold is now hovering near the 200 SMA - still looking for another challenge towards the 1050 lows over the coming weeks.
Comment: Gold kissed the 2-4 resistance trend line...something is about to happen here. We either get a rejection or a break higher. Either way, the market tips its hand to the wave count.

More or less the same here:
XAUUSD in range (daily)
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