Gold's Monthly Reversal

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We have taken a number of questions already this week concerning Gold. We thought it appropriate, then, to make mention of it in our blog today. We also are very appreciative for being provided with the subject matter.

We will keep it simple as best we can. Simple, is good!

The first thing that we will point out is that Gold finished the month of December making a monthly reversal. It made a new high for its move while reversing and closing lower than the previous month. We also notice that the size of the monthly bars for both November and December were nearly identical in size. November’s range spanned $152.80 and December’s $151.40. We might consider this as a variation of the double bar reversal pattern.

There have been other monthly reversal bars that did not result in much of a follow through move such as the reversal bar high in June 2009. But both July of 2008 and March of 2008 produced monthly reversal bars which were part of the move that took the price from its March 2008 high of 1033.90 to the October 2008 low of 681.00.(basis monthly continuation data).

We are not predicting the same as the 2008 scenario, necessarily, but we do find significance to this occurrence. Other factors that help sway us to a more bearish than bullish attitude is the structure of its pattern to the highs and that everybody and his brother was bullish at the high and touting the long side (allegedly). Finally, it appears to us that the move since the December 22 low is corrective in its composition rather than the restart of the bull. This though, can change easily and quickly.

The other point that needs to be made is that the December 22 low was an approximate .618 Fibonacci retracement off the highs when measured using the significant September 2009 low. This gives it potential as a key support level.

The U.S. Dollar may play a role in the direction of Gold too and we suggest staying aware of its whereabouts and its trading pattern if and when making trading decisions for Gold.


Good trading all

Jeff
CB&S