Let's start our analysis with the major signs of strength and weakness the Gold Futures have revealed the last years.
As for the major strength, let's have a look at the 5-Year chart. The 5 years of 2010-2014 ended the biggest rally the Gold has ever had as a big shooting star pattern. The first major test of a shooting star to be bearish is taking out its Low on the next bar. But that issue has been put into test on December 2015, but the market has respected the 5-Year bar's Low, reversing up immediately as at the most critical spot. All the thrust down the market could have yielded was a small Monthly Doji bar (December 2015) that taking out its High was a wonderful signal to go Long, and as we can see the market has rallied sharply from that point. In such case of price action, there are many chances to see the current 5-Year bar that is going to end by December 2019 reaches at least 50% of the Shooting Star's range, i.e. reaching the 1480$ area - prior to a major attempt to break it down - if any (!).
The major sign of weakness can be seen on the Yearly chart, where the whole decline since year 2011 closed on and below the 8 EMA short term sentiment line (short term in the Yearly meaning). The bars of year 2013 and 2014 closed on that line, year 2015's bar closed below, while the last year's rally bar closed eventually below that line. All of these are very important indications for weakness, that without further long term price action development should prevent us assuming a new all time High in the following years.
Gold Futures (contingent), Yearly and 5-Year charts (at the courtesy of prorealtime.com).
The above mentioned weakness on the Yearly timeframe doesn’t negate making a new Yearly High, as commented before, and even reach higher levels like the 1630$ as a spike -without negating a long term bearish market later on!
The Quarterly chart suggests that we might be in a major bearish market, and the last Yearly rally can be Elliott Wave 4 (corrective wave), before the next bearish market – Elliot Wave 5 that might bring the price down to test the High of Year 1980, at 870$ (where the Yearly 20 SMA and 5-Year 8 EMA lie), and even lower, such as the 730$ and 600$ support levels.
Gold Futures (contingent) Monthly and Quarterly charts (at the courtesy of prorealtime.com)
Concentrating on the lower timeframes as the Monthly and the Weekly, the Gold Futures are approaching an important resistance area. This is the first time for the price to reach back a level area from which it broke down sharply, right after the US elections on November. All the area from the current levels till 1270$ is a clear resistance area. Major Moving averages are lying on these levels as well: The Daily 200 SMA, the Weekly 200 and 50 SMAs and the Monthly 50 SMA.
For the shorter term, it would be clever to join short term bullish moves like Daily triggers only to their first target (Usually a Risk/Reward ratio of 1:1). Joining bearish moves on the Daily and above timeframes is very risky and not recommended. If you insist on the bearish side for the short term, I wouldn’t recommend on far targets other than the first targets (1:1), and it would probably be much better to wait for the first bearish triggers to fail (taking out stops) then joining the bearish side only by revealing new signs of weakness afterwards.
For the longer term (Weekly to Monthly), the current price action calls for waiting to at least a Weekly reaction from which new signs of strength can signal that we are still in a corrective bullish wave (at least), and a new Yearly High is very likely to be set.
Gold Futures (contingent), Weekly chart (at the courtesy of prorealtime.com)
By Gil Ecker, Market Technical Analyst and Trader, firstname.lastname@example.org 11-FEB-2017
Disclaimer: Anyone who takes action by this article does it at his own risk and understanding, and the writer won't have any liability for any damages caused by this action.