Tuesday, 13 January 2015

Gold beginning move to new all time highs? Rally from trend line supports say it's possible

Since mid November I have been suggesting that Gold made a significant low early that month. Many die hard Gold bulls retweeting the vomiting camel chart was an important psychological indicator that a bottom was near, and my less imaginative charts confirmed that potential. Gold has ground its way higher since that time.

In this post I'll look at the recent action in Gold, then zoom out to look at two monthly charts, as the big picture juncture is quite exciting.

The daily chart shows that Gold has now beaten two important down trend resistance lines.

Zooming out now to the log scale monthly chart, suggests that Gold may have been forming a bullish flag from the 2011 high. The recent rally began at trend line support, and implies that a move to new record highs could be underway. Yes, there is resistance overhead, but the potential is clear and risk levels are relatively nearby.

Next let's switch the monthly chart to arithmetic scale, and redraw the trend line to fit. Gold is showing a brief false break under trend line support. The rally back above the trend line opens the way for the up trend to resume, toward new record highs. There's no guarantee of such a move, of course nothing can predict the future, but the potential is clear and so is the risk management level. Let's see.

AUD/USD testing long term trend line resistance

Weekly chart shows the AUD/USD testing long term trend line resistance, drawn from the 2008 and 2010 highs. A rally above this week's high would suggest that the line had become support. Further rally would next meet trend line resistance at 84-85. Only a move back up above the nearby blue down trend line would open the path for a rally of much significance.

Dow's turn lower at trend line resistance suggests big bearish megaphone still in play

Weekly chart shows the Dow turning lower at trend line resistance.

Monthly chart zooms out and shows that the market is turning lower to retest the top of the big bearish megaphone. A move below the top line of the megaphone would open the door for a decline toward 6000 over the next couple of years. Needless to say, until/unless the market drops below that line, further upside is on the cards. A good level to measure risk against, in my view.

EUR/USD attempting rally from trend channel support