GOLD..

Although the charts show a continued weak outlook for gold there has been the first real reversal signal that we have seen since this 4 week correction began. A bull hammer candlestick was formed yesterday as gold hit a low of $1197.60 only to then rally intraday to close at $1212.60 which was the high of the day. This means that today’s candle is important to the near term outlook as a close below $1212.60 today would put doubt in the validity of the reversal pattern. Momentum indicators, for now, continue to drift towards bearish configuration and we must view the hammer with a degree of caution for the bears. A feature of bear market moves is that there will be lower highs as well as lower lows and I have been expecting the next lower low as likely to come in the range $1216.50/$1225.10. The intraday hourly chart shows that we have now had a bounce into this range and if there is now a decisive sell signal this could be the opportunity. Clearly the appearance of a hammer on the daily chart adds the element of doubt, however for now I am still with the bears. A move above resistance at $1236.50 would question the bear phase, with the 4 week downtrend today coming in at $1240.