What a difference 5 days can make

Today I’d like to begin with my conclusion on the precious metals: Gold and silver are swaying on a cliff alarmingly.

Last week I worked out that we would have to reckon on a correction on monthly basis. Isn’t it still surprising that only 4-5 days later both shiny metals would test the worked-out monthly supports? On Monday some important monthly and weekly resistances were reached. That resulted in an intense sale of gold and silver. On Friday some weekly and monthly supports were reached making possible an immediate resume of the upwards trends. But the daily situation in gold and silver looks pretty bearish. I think we’ll correct still lower.

Monthly supports: Within the monthly 8 Candle GUNNER24 Up Setup with Friday closing gold is sitting on the “monster support” of 1362 we worked out last week.

Silver closed at 28.715 on Friday lying in its monthly 8 Candle GUNNER24 Up Setup exactly on the support diagonal marked above.

Weekly Supports: With the week closing silver is sitting exactly on the extremely important 2*1 Gann Angle after the weekly and monthly resistances released the sell-off on Monday.

The 2*1 could resist because with 28.325 the week low was below it but the market rescued itself above it. Besides, the test of the lows fell on the intersection point of the horizontal support line and the 2*1 Gann Angle, on an important price and time magnet then. It keeps on being a matter of the first test of the 2*1. That should make a rebound become likely. Next week we’ll see how strong the rebound will be. A possible up target for next week is the lower line of the 3rd double arc. If the 2*1 breaks (a day closing price of about 28.10 and below) the correction should last 21 days. First target then will be the 27.13. That’s where we would enter into the first long positions.

In Gold, too, a first test of the 1*1 Gann Angle took place. As long as the prices in a GUNNER24 Up Setup are quoted above the 1*1 Gann Angle the market will be bullish and it’ll be bearish below it. Here again applies that in the first test actually a rebound should occur. Let’s zoom into the setup for further analysis:

So, gold is still quoted above the 1*1 Gann Angle. It did test the monster support at 1362 and besides it’s backed by the weekly support at 1369. Furthermore the green 4th double arc seems to offer some support, it was tested successfully for the fourth time within the last five weeks. The corresponding week lows are spiking into the 4th double arc. But we haven’t seen any closing price within the 4th double arc. Everything is “only” pointing to an extensive test of the important price supports.

A little painting in the daily chart is bolstering that theory:

The fact that the green trend line is supporting the market should have attracted the attention of every market participant. That’s why a rebound from it was very likely in case of the Friday low. Really interesting is that the three sketched correction legs have the same length. I saved me the work to draw in the obvious HSH constellation. There’s plenty of analysis on it in the web.

So the price supports seem to resist, backed by the GUNNER24 Setups and our little painting in the chart.

The problem I see in all that support testing is at first the time factor on daily basis, as to say the temporal course of the occurring correction… There’s something that doesn’t fit:

Friday was the 23rd day of the correction. It’s unlikely that now the low was marked already. Maybe it’s near enough to 21 to really mark a significant low. But I reckon it’ll be the 34th day. Also reaching the first double arc – we once threw up that question for us to be thinking about it – may release the change. Pay attention to that item in GUNNER24 Forecast, Issue 12/19/2010.

A rebound from the first double arc would logically coincide with the monthly and weekly supports. In case of a strong upwards trend in the GUNNER24 Down Setup we further have to work on the assumption that the trend will resume its original direction. But since the power of the trend in gold decreased in the last quarter there’s a 41% of probability that the correction will end at the 2nd double arc. That would correspond to the same course of the correction in January/February of last year. http://www.gunner24.com/newsletter-archive/february-2010/07022010/

The whole course of Friday is fueling some doubts whether the lows can resist: On the one hand the low marked the long term trend line too obviously (our painting). Every trader/investor saw that. There was a good upswing later on. The market participants could have cleared everything by setting an undisputable intraday reversal with a reversal candle. However Friday didn’t close at the highs but narrowly below the opening. And Friday also closed below the first square, thus it is to be understood as another sell signal. All the same the Friday candle had an extraordinarily long lower wick. So the buyers are at the lows there. That’s why I’m tending to the conclusion that the market participants will have to test the Friday low once again. As analyzed it’s rather questionable whether it will resist.

The possible course of the week, you might say our trading plan: On Monday, the Friday high near 1380 should be called at again. There’s the residence of the 1*1 Gann Angle which actually can’t be broken on the first go. Then gold should newly run up to the first double arc in order to test the lows. A closing price within the first double arc would activate the 1327 (2nd double arc) as another important target of the correction. A day closing price below the first double arc is another sell signal with target 1327. In case of a day closing price under 1350 the rallies in the 4 and 8 hour time frames would have to be shorted.

But if the 1*1 Gann Angle including the lower line of the first square are broken upwards significantly in the course of the week (closing price basis about 1392-1395) the daily situation would have eased up, the weekly and monthly supports would have resisted. If the first double arc resists and if even a reversal candle is produced with a simultaneous significant break of the 1*1 resistance Gann Angle that would be a strong signal for a resume of the main trend. On the other hand, at the 2nd double arc near 1327 we’ll be looking for our long entry after a reversal candle sign.

Altogether next week may become very interesting: Possibly a further sell off in precious metals. The dollar may take off for new highs, the European indexes are pointing to further corrections on daily basis – all those are really good conditions for releasing the correction on daily basis in the US equity markets expected by GUNNER24. GUNNER24 Forecasts, Issues 12/26/2010 and 12/19/2010:

On reaching the 4th double arc last Monday we covered all our S&P 500 long positions on daily and weekly basis at 1271:

long since 09/17/2010 at 1126. Closed on 01/03/2010 at 1271(Exit). Profit +145

Entry: http://www.gunner24.com/newsletter-archive/september-2010/19092010/

long since 09/24/2010 at 1148. Closed on 01/03/2010 at 1271(Exit). Profit +123

Entry: http://www.gunner24.com/newsletter-archive/september-2010/26092010/

long since 10/22/2010 at 1183. Closed on 01/03/2010 at 1271(Exit). Profit +88

Entry: http://www.gunner24.com/newsletter-archive/october-2010/24102010/

long since 12/23/2010 at 1257. Closed on 01/03/2010 at 1271(Exit). Profit +14

Entry Strategy: http://www.gunner24.com/newsletter-archive/december-2010/12122010//

long since 12/20/2010 at 1247. Closed on 01/03/2010 at 1271(Exit). Profit +24

Entry Strategy: http://www.gunner24.com/newsletter-archive/december-2010/19122010/