Gold Is Heavy But Could Rebound Here

Although December’s heavy sell off in the Gold (and Silver) market confirmed a significant set of monthly and weekly cycle highs, highs that may take this metal some time to meet/exceed, there now appears to be plenty of credible technical evidence to suggest that Gold may be ready to mount a minor rebound rally back up toward the $1,125 to $1,135 price zone. There are a couple of key market analysis tools that we can rely on to see if we can both confirm and then capitalize on a possible swing back up to a major Fibonacci resistance zone. Let’s take a closer look right now.



On December 22, March Gold made a major cycle low on its 78 minute chart at $1,075.20 (See point ‘A’ on the chart. Yes, ‘78’ is close to a significant Fibonacci ratio) and then began to slowly reverse higher. The spread between the 50 and 200 period exponential moving averages (EMA’s) was near an extreme at the time of the dead low but have begun to progressively narrow since then. Along with the narrowing spread (which typically indicates a period of price consolidation), March Gold also managed to make a higher swing low (point ‘B’ on the chart) on December 30, 2009. This higher swing low also permitted the plotting of a major uptrend line (gold dashed line), one that will be a wonderful trend determining assist for both intraday and daily based swing traders in the days and weeks to come.

Higher Lows
Once the first higher low was made (which was also a cycle low) at point ‘B,’ prices accelerated higher, bouncing back lower after colliding with the 200 period EMA (pink rectangle) before forming yet another higher swing low. Not surprisingly, this fresh 78 minute swing low has allowed us to plot a slightly more aggressive uptrend line (blue dashed line), which, if it should hold, is a prime clue that Gold intends to meet and then likely exceed the 200 day EMA (currently near $1,106) on a close. As most technicians know, a close above the 200 period EMA is a bullish development, and one that a zillion traders and money managers use to determine the long term trend for a given time frame. Additionally, if the 50-period EMA (red line) crosses above the 200 period EMA (blue line) a second bullish confirmation occurs, one known as a ‘Golden Cross.’ Traders frequently wait for a pullback toward the 50-period EMA after such a crossover to initiate new long positions. Should we see this crossover occur, that might also be an excellent way to help time a series of daily or intraday (60 or 78 minute) swing trade(s), looking for Gold to move higher into significant Fibonacci resistance.....Read the entire article

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