Gold today tested the trend line drawn from the May high, which has been tested numerous times in late September and early October, and which is drawn parallel to a sequence of trend lines that have proven significant throughout the decade (see second chart here for long term view). A close below that line would raise the odds of a move to 1500 or lower.
Thursday, 20 October 2011
No clear bounce down yet, and each extra day that the line is tested raises the odds for a bullish break. Trend lines don't predict price action, but they do provide levels against which we can calculate our risk, and the good trend lines tend to provide both bullish and bearish set ups.
This chart doesn't add much to this morning's post, it is more or less a Note To Self. While the bounce downwards from the trend line earlier in the week supports the bearish potential, so long as the market continues to trade above the bullishly crossed 18 and 40 day moving averages, the bears should not get too carried away.