Gold, this new rally confirms the 1130.40 low of November 7 as the primary, 17-month, and 34-month cycle troughs. Such an explosive move upwards is understandable when multiple cycles bottom at the same time like this.
We were prepared for this thrust up. As stated in last month’s Cycles Report 17th DECEMBER 2014, “For now, we will stay with the bullish outlook. That is, the low of November 7 was in the time band for the 17- and 34-month cycle lows. It was an expanded primary cycle (22 weeks), which is a form of distortion, which we like to see at long-term cycle lows. It has now exhibited a case of intermarket bullish divergence to Silver, which fell to a new long-term low on December 1. Unless prices fall below 1130.40, our outlook is now for a 4-10 month rally in Gold, with an upside price target of 1463 +/- 78.50, or 1281.50 +/- 36.80.” The high on Friday, January 16, was 1282.40. Not bad.
The 34-month cycle low was due October 2014, +/- 6 months. Its 17-month half cycle was due November 2014, +/- 3 months. The low on November 7 fits perfectly, time-wise. It is interesting to note that on the weekly chart, the decline below 1180 broke the base of a descending triangle, which is usually bearish. However, Gold moved back into the triangle in early December, which is bullish, and points out the power of cycles over chart formations in certain cases. When the cycle is due, a contrary chart pattern is subject to being negated. In cases like this, prices will usually break above the upper line of the triangle. That line is now at 1330-1335. A break above projects a continuation up to 1514 +/- 39.50, or 1564 +/- 51.50. A break back below 1180 would jeopardize this bullish outlook.
The longer-term picture offers two scenarios. The bearish scenario is that this starts the third 34-month cycle phase within the greater 8.33-year cycle. The second phase (December 29, 2011 through November 7, 2014) was clearly bearish. It made a lower high than the first phase and a lower low, suggesting the crest of the 8.33-year cycle occurred with the all-time high of September 2011 at 1920.80. Therefore, this third 34-month cycle phase would also be bearish. The rally would only be corrective, lasting 4-10 months (March-September 2015), with a normal price objective of 1463.40 +/- 78.60. It would find great resistance at the point where it broke down in April 2013, at the 1520 area. We note that the overlap of this price target with the price targets suggested if prices break above the 1330-1335 trendline on the weekly chart is 1512.50-1542. After that, Gold would continue to fall to a new low for this 8.33-year cycle, which is now due to bottom September 2017, +/- 6 months.
There is also a longer-term bullish outlook based on the combination of cycle studies and technical studies using price objective theories. The 8.33-year cycle could still be bullish because the decline so far (from the 1920.80 high in September 2011 to the low of 1130.40 in November 2014) is just a corrective type. A “normal” corrective decline in a bullish 8.33-year cycle would find prices falling to 1150.80 +/- 110.90. The November low was well within this range. And now Gold begins the third phase of the longer-term 8.33-year cycle. A mid-cycle pause (MCP) upside price target projects to 2370.40 +/- 199.40. We will have to monitor the pattern closely, but for now, the intermediate-term 17- and 34-month cycles look bullish.
The daily chart above also shows that Gold was trading in a triangle pattern. But here, it has broken out to the upside of the triangle, giving a price target now of 1367.60 +/- 28. A decline back into that triangle (i.e. below 1220) would negate this upside target. Until that happens, the chart pattern is bullish, pointing to higher prices.
January 19 starts the 11th week of the 15-21 week primary cycle in Gold. There was an 8-week half-primary cycle trough on January 2 at 1167.30. The MCP price target for the primary cycle crest is thus 1273.90 +/- 16.70, which is being met now. There is another upside price target to 1339.80 +/- 24.50. I like that one better because it is a test of the previous primary cycle crest at 1347.70. Gold needs to close above a previous primary cycle crest to force the trend indicator studies more bullish (it needs higher highs and higher lows of the primary cycle type to be considered a true bullish trend). But the fact that prices are making new highs in the second half of this primary cycle is yet another bullish trend indicator known as “right translation” (high in the second half of the cycle). Plus, prices are above both the 15- and 45-day moving averages, with the 15-day MA above the 45-day, which is yet another bullish trend indicator.
However, even though our intermediate-term and primary cycle projection for Gold is now bullish, I do not think the market will make it easy for traders over the next four weeks. We are entering the sign of Aquarius, where brief but very sharp declines in precious metals tend to occur more frequently. Gold and Silver are especially vulnerable when the Moon is also in an air sign, such as Jan 21-22, Jan 29-30, Feb 9, and Feb 17-18. Additionally, the 15-day slow stochastics are overbought, suggesting a steep correction may be readying. What we need to watch for is a case of intermarket bearish divergence to Silver, where one makes a new cycle high and the other does not. That could set the stage for a sharp corrective decline.
Trading Strategies ......for Gold: Our last issue stated, “Thus, position traders may remain long with a stop-loss on a break below 1130. Short-term aggressive traders not in the market may look to buy a 5-7 week major cycle low due this week or next, at 1185.50 +/- 12.60, with a stop-loss on a close below 1150.” The low was 1167.30, so all traders are long. Position traders can remain long with a stop-loss now below 1167, or if risk adverse, then on a close below 1200. Start taking some profits (but not all) if prices test 1340. Aggressive shorter-term traders may wish to take some prices now, ahead of the new moon in Aquarius Jan 20-21, when sharp declines have a 35% chance of occurring. You could do the same ahead of January 29-30. However, we prefer to buy these declines, if they happen, as long as prices hold above the extension of the former downward trendline, which is now around 1220-1226. Our strategies will remain bullish as long as prices stay above 1220
January 19 starts the 7th week of the 13-21 week primary cycle following the 14.15 low of December 1. On Friday, January 16, Silver made a new high for this new primary cycle when it reached 17.86. Last month’s report stated, “A normal corrective rally in a bear market would take prices back to 1788 +/- .88. Last week’s high of 17.35 was in this range. However, that was only the first week of the new primary cycle, and it is very rare for primary cycles to top out only one week after the low. Thus, we expect prices to go higher than 17.35 before falling below 14.15. In fact, since the 14.15 low of December 2 was a distorted primary cycle, we don’t even expect prices to fall back to there for several weeks, even months. It is my view that December 1 was a longer-term cycle low, such as a 7-year or even 18.5-year cycle trough.”
Our price target given last month has been achieved, and this is a critical reversal zone. Silver is also now entering the time band for a 7-11 week half-primary cycle trough. Furthermore, January 20-21 is a new moon in Aquarius, which can coincide with brief but sharp declines, so do not be surprised if one happens now or January 29-30. If Friday, January 16 was a half-primary cycle crest, then a sharp 3-13 day decline back to 14.71-16.20 is possible. Also, note that the daily CCI is nearing +200, which is where 9% or greater reversals often occur from a high that forms within 7 trading days. If prices do go higher first, then we have another upside price target to 18.71 +/- .54.
For now, traders can buy any corrective declines, especially those that remain above 16.00.
Trading Strategies:.... As stated last issue, “…All traders may now look to buy on a decline to 15.75 +/- .50, if not already long, with a stop-loss on a close below 14.15 or at a time when both Gold and Silver fall to new yearly lows. We are looking for the next move up to 19.00 +/- .50 unless prices fall back below 15.00.” The low since that report has been 15.51 on January 2. There is no need to change this analysis. Aggressive short-term traders may wish to cash in on some profits ahead of January 20-21 and January 29-30, and then look to re-enter on any declines of 1.00-2.00.STOPS On a close below 15.50, we may have to change our bullish outlook. Until then, we will stay with bullish strategies
Short-Term Reversal Dates in Silver: Look for isolated highs or lows in Silver (and probably Gold) in these solar-lunar time frames, and from which prices reverse at least 2.5% (and better if 4%):
Jan 20-21***/ Feb 9* /Feb 12-13* / Feb 16-18*** / Feb 19-20* / Feb 23-24*
We were prepared for this thrust up. As stated in last month’s Cycles Report 17th DECEMBER 2014, “For now, we will stay with the bullish outlook. That is, the low of November 7 was in the time band for the 17- and 34-month cycle lows. It was an expanded primary cycle (22 weeks), which is a form of distortion, which we like to see at long-term cycle lows. It has now exhibited a case of intermarket bullish divergence to Silver, which fell to a new long-term low on December 1. Unless prices fall below 1130.40, our outlook is now for a 4-10 month rally in Gold, with an upside price target of 1463 +/- 78.50, or 1281.50 +/- 36.80.” The high on Friday, January 16, was 1282.40. Not bad.
The 34-month cycle low was due October 2014, +/- 6 months. Its 17-month half cycle was due November 2014, +/- 3 months. The low on November 7 fits perfectly, time-wise. It is interesting to note that on the weekly chart, the decline below 1180 broke the base of a descending triangle, which is usually bearish. However, Gold moved back into the triangle in early December, which is bullish, and points out the power of cycles over chart formations in certain cases. When the cycle is due, a contrary chart pattern is subject to being negated. In cases like this, prices will usually break above the upper line of the triangle. That line is now at 1330-1335. A break above projects a continuation up to 1514 +/- 39.50, or 1564 +/- 51.50. A break back below 1180 would jeopardize this bullish outlook.
The longer-term picture offers two scenarios. The bearish scenario is that this starts the third 34-month cycle phase within the greater 8.33-year cycle. The second phase (December 29, 2011 through November 7, 2014) was clearly bearish. It made a lower high than the first phase and a lower low, suggesting the crest of the 8.33-year cycle occurred with the all-time high of September 2011 at 1920.80. Therefore, this third 34-month cycle phase would also be bearish. The rally would only be corrective, lasting 4-10 months (March-September 2015), with a normal price objective of 1463.40 +/- 78.60. It would find great resistance at the point where it broke down in April 2013, at the 1520 area. We note that the overlap of this price target with the price targets suggested if prices break above the 1330-1335 trendline on the weekly chart is 1512.50-1542. After that, Gold would continue to fall to a new low for this 8.33-year cycle, which is now due to bottom September 2017, +/- 6 months.
There is also a longer-term bullish outlook based on the combination of cycle studies and technical studies using price objective theories. The 8.33-year cycle could still be bullish because the decline so far (from the 1920.80 high in September 2011 to the low of 1130.40 in November 2014) is just a corrective type. A “normal” corrective decline in a bullish 8.33-year cycle would find prices falling to 1150.80 +/- 110.90. The November low was well within this range. And now Gold begins the third phase of the longer-term 8.33-year cycle. A mid-cycle pause (MCP) upside price target projects to 2370.40 +/- 199.40. We will have to monitor the pattern closely, but for now, the intermediate-term 17- and 34-month cycles look bullish.
The daily chart above also shows that Gold was trading in a triangle pattern. But here, it has broken out to the upside of the triangle, giving a price target now of 1367.60 +/- 28. A decline back into that triangle (i.e. below 1220) would negate this upside target. Until that happens, the chart pattern is bullish, pointing to higher prices.
January 19 starts the 11th week of the 15-21 week primary cycle in Gold. There was an 8-week half-primary cycle trough on January 2 at 1167.30. The MCP price target for the primary cycle crest is thus 1273.90 +/- 16.70, which is being met now. There is another upside price target to 1339.80 +/- 24.50. I like that one better because it is a test of the previous primary cycle crest at 1347.70. Gold needs to close above a previous primary cycle crest to force the trend indicator studies more bullish (it needs higher highs and higher lows of the primary cycle type to be considered a true bullish trend). But the fact that prices are making new highs in the second half of this primary cycle is yet another bullish trend indicator known as “right translation” (high in the second half of the cycle). Plus, prices are above both the 15- and 45-day moving averages, with the 15-day MA above the 45-day, which is yet another bullish trend indicator.
However, even though our intermediate-term and primary cycle projection for Gold is now bullish, I do not think the market will make it easy for traders over the next four weeks. We are entering the sign of Aquarius, where brief but very sharp declines in precious metals tend to occur more frequently. Gold and Silver are especially vulnerable when the Moon is also in an air sign, such as Jan 21-22, Jan 29-30, Feb 9, and Feb 17-18. Additionally, the 15-day slow stochastics are overbought, suggesting a steep correction may be readying. What we need to watch for is a case of intermarket bearish divergence to Silver, where one makes a new cycle high and the other does not. That could set the stage for a sharp corrective decline.
Trading Strategies ......for Gold: Our last issue stated, “Thus, position traders may remain long with a stop-loss on a break below 1130. Short-term aggressive traders not in the market may look to buy a 5-7 week major cycle low due this week or next, at 1185.50 +/- 12.60, with a stop-loss on a close below 1150.” The low was 1167.30, so all traders are long. Position traders can remain long with a stop-loss now below 1167, or if risk adverse, then on a close below 1200. Start taking some profits (but not all) if prices test 1340. Aggressive shorter-term traders may wish to take some prices now, ahead of the new moon in Aquarius Jan 20-21, when sharp declines have a 35% chance of occurring. You could do the same ahead of January 29-30. However, we prefer to buy these declines, if they happen, as long as prices hold above the extension of the former downward trendline, which is now around 1220-1226. Our strategies will remain bullish as long as prices stay above 1220
January 19 starts the 7th week of the 13-21 week primary cycle following the 14.15 low of December 1. On Friday, January 16, Silver made a new high for this new primary cycle when it reached 17.86. Last month’s report stated, “A normal corrective rally in a bear market would take prices back to 1788 +/- .88. Last week’s high of 17.35 was in this range. However, that was only the first week of the new primary cycle, and it is very rare for primary cycles to top out only one week after the low. Thus, we expect prices to go higher than 17.35 before falling below 14.15. In fact, since the 14.15 low of December 2 was a distorted primary cycle, we don’t even expect prices to fall back to there for several weeks, even months. It is my view that December 1 was a longer-term cycle low, such as a 7-year or even 18.5-year cycle trough.”
Our price target given last month has been achieved, and this is a critical reversal zone. Silver is also now entering the time band for a 7-11 week half-primary cycle trough. Furthermore, January 20-21 is a new moon in Aquarius, which can coincide with brief but sharp declines, so do not be surprised if one happens now or January 29-30. If Friday, January 16 was a half-primary cycle crest, then a sharp 3-13 day decline back to 14.71-16.20 is possible. Also, note that the daily CCI is nearing +200, which is where 9% or greater reversals often occur from a high that forms within 7 trading days. If prices do go higher first, then we have another upside price target to 18.71 +/- .54.
For now, traders can buy any corrective declines, especially those that remain above 16.00.
Trading Strategies:.... As stated last issue, “…All traders may now look to buy on a decline to 15.75 +/- .50, if not already long, with a stop-loss on a close below 14.15 or at a time when both Gold and Silver fall to new yearly lows. We are looking for the next move up to 19.00 +/- .50 unless prices fall back below 15.00.” The low since that report has been 15.51 on January 2. There is no need to change this analysis. Aggressive short-term traders may wish to cash in on some profits ahead of January 20-21 and January 29-30, and then look to re-enter on any declines of 1.00-2.00.STOPS On a close below 15.50, we may have to change our bullish outlook. Until then, we will stay with bullish strategies
Short-Term Reversal Dates in Silver: Look for isolated highs or lows in Silver (and probably Gold) in these solar-lunar time frames, and from which prices reverse at least 2.5% (and better if 4%):
Jan 20-21***/ Feb 9* /Feb 12-13* / Feb 16-18*** / Feb 19-20* / Feb 23-24*
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