Yesterday was bad news. Using our indicators, the market settled within the BBand upper boundary, it did not maintain the gap created on yesterday's open, worse, it did not take out longs and reject that area higher and worst of all, it started a volatility cycle on the hourly pointing to more downward movement.
From yesterday's post
Update 12:45pm - if we do not hold the $1312- 1310 area in spot there is a lot of trouble ahead.
The 60 minute is looking at an inflection point in the area
Sure enough, that area broke lower and now Gold is vulnerable again. Here we are now
Spot Hourly
Last night we saw $1312-1310 as both a classic technical level and a volatility based level for support. That did not hold. As you can see the BBands widened last night as the market broke this area. The saving grace is this usually indicates a wash out in 2- 5 hours and none happened. Another one is that new lows were just made at $1304.69 without a confirmation of new RSI lows
Now we are in another BBand pinch that gives us natural hourly support and resistance coming in at $1306.18 and $1313.44 this hour. Failure to break either side on a closing 60 minute basis will just coil the market for a more exacerbated move. The trade hereris go with the band penetrated only after the hour is up and only if the bands widen in opposite directions.
Right now it looks grim as these hourly Vol cycles repeat 2 to 5 times before they run out of steam. You can see them on the way up. They are almost oscillator-like. For us, the trade here is to be flat here, go with a break out outside the hourly bands and be able to reverse in the first hour on a negation.
Spot Daily
Not helping here as we settled and now reopened inside a widening band. This indicates poor risk reward ratios for bulls. Shooting star anyone?
Looking at Michael Moor's numbers we get a better idea of where to place our stops, especially if the breakout is "first way, wrong way"
Moor Analytics
chart via Michael Moor Phone: 646-708-4612
Michael, without getting too specific into his proprietary work, acknowledges we are in a bull leg, but discounts it for now due to a late day formation breakdown. In Dec. terms he sees $1294- $1296 as key support for a continued rally. Looking at his numbers, there are more places to sell right above than there are to buy right below. He warns of liquidation on the fringes above us.
While a break through these areas like we had Monday night would be welcome, we are definitely biased to be short here for the following reasons in summary:
All numbers based on spot analysis except where indicated
- Our Vol Based System says momentum is broken higher or at least needs a pause for a few days before resumption
- The Hourly VBS Trigger says be short below $1306 with a stop / and reverse at $1313 for the next 2 hours
- Open interest dropped yesterday. This is a big deal and implies: strong hands sold to weak hands, and some longs sold to some shorts. The former being bearish, the latter being neutral
- Gold traders open interest at 544347 off only 7000 implies a lot more weak hands from strong hands than pure liquidation
- Also opens door to stronger shorts getting in I.E. commercials how get short when buying dries up, then their algos gun momo sell stops underneath
The lowest lying fruit in Gold today is to be short December futures under $1310 on an hourly close and either cover at $1306 or trail a stop if we truly break down to $1297. Alternatively do nothing and wait to see how it handles $1306 with an eye on buying it
On the upside sell rallies approaching $1321 in Dec. and be ready to reverse above that.
The advanced play for us is to buy a hedged put spread and do not hedge gamma in a lower move. Otherwise Gold is a good trading vehicle right now and should be played as such.
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