Wanted to see how gold played out today since the Chinese inflation data would have possibly affected the trade in gold/silver. A rate hike would have had a negative effect, at least temporarily, on the commodity sector. China didn’t raise rates and thus the rally we saw today, continuing now in after hours futures trade.
Even though we are back above 1,400 for now, I am looking for a reason to be cautious here and possibly lighten up as we enter a new seasonally negative period in gold. What I am looking for is the following –
- 1,408 Fib resistance – this will be the first logical point where gold could turn. Also equal to topping range in early Nov. (look left)
- 1,420 – Upper 1/3 of the Dec. 7 reversal day, where resistance is even stronger
- 1,432 – the recent high of this move, which was also on Dec. 7…..even stronger resistance
We could see a climb back to new highs, don’t get me wrong, but the action at each of these resistance levels will help define where stops will go and point to an intermediate correction or follow through. If we fail to make it back to highs, then we will have a lower low, and lightening up on the gas will have me more heavily in cash and waiting for the next intermediate phase up.
For right now, metals and commodities are bouncing on the weaker dollar and I will be watching that as well. It does feel as though we are losing positive momentum on gold, silver and the miners in the short run. But surprises always happen to the upside in a bull market, so hang in there for now and look to raise stops if we close Tuesday higher than today.
Trade well and trade the extremes!