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Gold Stems Corrective Rebound, Re-exposes Bear

Posted 11/25/2019 11:16AM CT | RJO Market Insights

DEC GOLD

This morning’s break below 18-Nov’s 1456.6 low confirms the bearish divergence in momentum we alluded to in 20-Nov’s Technical Webcast and renders mid-Nov’s recovery attempt as a 3-wave affair as labeled in the 240-min chart below.  Left unaltered by a recovery above 20-Nov’s 1479.2 high, this 3-wave recovery is considered a corrective/consolidative event that warns of a resumption of early-Nov’s downtrend that preceded it to new lows below 12-Nov’s 1446.2 low.  Per such, last week’s 1479.2 high serves as our new short-term risk parameter from which the risk of a still-advised bearish policy and exposure can be objectively rebased and managed.

This latest smaller-degree corrective evidence remains consistent with our broader peak/reversal count introduced in 10-Sep’s Technical Blog stemming from that day’s bearish divergence in momentum, historically frothy bullish sentiment and a complete wave sequence up.  Given the extent of May-Sep’s impressive (and prospective 3rd-Wave) rally, the past couple months’ relapse still falls within the bounds of a (prospective 4th-Wave) correction ahead of a resumption of the major bull.  But to resurrect such a count, the market has to recoup at least 1479.2 and preferably 01-Nov’s 1519 larger-degree corrective high and key risk parameter.  Until and unless such strength is proven, there’s no way to know that a major reversal lower isn’t at hand, with a dramatic 3rd-Wave down just ahead.

These issues considered, a bearish policy and exposure remain advised with a recovery above at least 1479.2 required to threaten this call and warrant paring or neutralizing exposure.  In lieu of such strength, further and possibly protracted weakness is anticipated straight away.

DEC SILVER

while the silver market hasn’t yet broken its respective 18-Nov low at 16.705, we believe the technical construct to be similar enough to that detailed above in gold to identify Fri’s 17.21 high as the end of a 3-wave and thus corrective recovery from 12-Nov’s 16.615 high, warning of a resumption of early-Nov’s downtrend that preceded it.  Per such, we are identifying that 17.21 high as our new short-term risk parameter from which a still-advised bearish policy can be objectively rebased and managed.

If there’s a difference between gold and silver, it’s from a long-term perspective with silver still locked deep within the middle-half bowels of its 4-year range shown in the weekly log chart below.  Such range-center environs are considered fertile ground for aimless whipsaw risk that we believe warrants a more conservative approach to risk assumption.  Herein lies the importance of smaller-degree corrective highs and risk parameters like 17.21.

In sum, a bearish policy remains advised with a recovery above 17.21 required to threaten this cal enough to warrant its cover.  In lieu of such strength we anticipate a resumption of Sep-Nov’s downtrend to indeterminable levels below 12-Nov’s 16.615 low.

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