GOLD UPDATE-BULL RUN IS OVER



On Feb 16th, I posted this headline from CNBC and indicated it to be a warning sign to Gold bulls:

Today from CNBC we get:
Gold Demand Hits New Records as Europeans Stockpile. Demand for gold hit an all-time high in 2011 as European, Indian and Chinese demand soared. Total demand around the world rose to 4,067 tonnes, worth around $206 billion – the first time annual demand for gold has risen above $200 billion

On Feb 16th, I posted this chart counting Fib Weeks and indicated a major direction change in Gold was possible that will carry on for the next 34 weeks.

Working our way from 2 years inward, we can see a big gap lower off a blow off top, which has now moved into defined 5 wave pattern. Most of the GOLD Fibs move in 61% increments, so my price target to complete Wave 1 of an epxected 5 wave bear move, is at Line 2.

The 1 year view has a better look at the alternate 5 of 5 count possibilities. Again, I put a higher probability at the 61% range down because of history; but, 38% at 1500 Gold for the end of Wave 1 is possible.

Keep in mind, the stock market doesn't even realize GOLD is in a 5 wave down.

This is 3 month chart. Price projection here supports the 50% level, which is standard for all markets. We simply take the length of the initial move into the bear flag, then add that length coming out of the bear flag.

On Feb 16th, I posted this chart showing the relationship between the Euro and Gold; they tend to move hand n hand.

Here is a current Euro Dollar chart. We are clearly in the process of forming a Head N Shoulder pattern, solidly below the 200 day moving average. Very bearish for the Euro, very bearish for GOLD.

Conclusion:

Gold has moved out of the Feb 21 week to the down side. Gold has crash below its 200 mva and is now working a 5 sub wave down pattern to complete Wave 1 of 5 Wave's down.

I was asked on Feb 16th; "Will Gold move higher because of Greece issue".  My answer was then and is now, NO. Because, Banks will have to sell gold to raise cash; because they are insolvent.

War with IRAN and $150 oil, might turn this around, but I suspect GOLD will complete 5 waves lower to finish up around $1200.

Remember, the bear market will not come to a close until Gold and the DOW are 1 to 1 in price. Which means GOLD once it completes the 5 waves lower, will be a great buy-but not until then.

According to Stock Traders Almanac, the last week of March is usually good for Gold-so expect WAVE 2 recovery maybe around that time frame. (If they are correct)

Tim Kathlina

TIMING UPDATE: SIGNS TO WATCH FOR FEB 29TH

On Feb 15th, I posted this chart of GOLD and indicated the FIB ENDING WEEK OF  FEB 21; the week ending FEB 24TH, was a significant time to watch for change in GOLD.

I indicated the move out of this FIB week would be of importance going forward for 34 weeks after.

Today, exactly 3 trading days beyond the FIB ending week of the 24th, GOLD DECLINED $100 dollars. The decline was on heavy volume, filling up gaps and creating a BEARISH ENGULFING PATTERN.

On FEB 15TH, I also pointed out the close relationship between EURO investment and GOLD investment. I also indicated that it is my belief, that a credit event either with a bank or country, could force the hand of banks or countries to unload their GOLD stock.

The EURO today saw heavy selling on increased volume, creating a lower high on daily chart.

The US Dollar found solid support at the 200 sma on daily; creating a bullish engulfing pattern.

It is my contention based on history, markets can not find bottoms unless the DOW:GOLD ratio moves closer to 1 to 1 or 1 to 2.  Currently it takes 8 Oz's of GOLD to buy ONE SHARE OF THE DOW.

This chart divides GOLD by the DOW and shows the relationship is testing an uptrend line of significance.

Conclusion:

The DOW/GOLD ratio is directly affected by the action in the EURO and the US dollar.

The parabolic move in GOLD has been quickly taken back and might foreshadow the next move in the indexes.

FIB WEEK analysis suggest the move by GOLD  after 21 FIB WEEK ending 24th, could  foreshadow the next leg in GOLD.

GOLD/DOW ratio shows the broad indexes can not move higher; if the commodity indexes are moving lower. A compression in GOLD, will mean a compression in stocks.

The EURO and US dollar play a pivotal role in the direction of GOLD and the DOW. Both currencies are at make or break pivot areas.

Will GOLD/DOW be supported at the up sloping trend line? Will the EURO hold its pivot?  Or will the US Dollar break higher and DOW/GOLD break below its upward trend setting up a new trend?

Tim Kathlina



BEFORE THE BELL: GOLD TREND UPDATE FEB 16TH

Yesterday I got asked a GREAT question: Is it true that if Greece fails, GOLD will move higher?

Without any technical analysis, my reply was no this is not true. The reason is, the bailouts are not for Greece, they are for the BANKS; this is important to understand.

If Greece defaults, the "derivative contracts" are due and payable to the counter parties that purchased this "insurance" against a Greek default. Because banks are leveraged, meaning loans extended, verses cash on hand, over 60 to 1 in many cases, the Banks simply do not have the money to pay.

What that means is, the BANKS, of which US Banks own 97% of the worlds derivative contracts, would be immediately insolvent. Margin calls would be issued, and I surmise the Banks would be forced to SELL THEIR GOLD. (All of this assuming Greece defaults, and it is ruled a default by the ISDA)

Today from CNBC we get:
Gold Demand Hits New Records as Europeans Stockpile. Demand for gold hit an all-time high in 2011 as European, Indian and Chinese demand soared.
Total demand around the world rose to 4,067 tonnes, worth around $206 billion – the first time annual demand for gold has risen above $200 billion.

Lets get technical:

First thing I tried to do is establish a time line. I have explained before about Fib Time Frames, the universal law of numbers in relation to each other.

If we over lay a Fib Time sequence on a yearly chart, GOLD in a yearly cycle, starting at zero in Feb 2011, the numbers line up PERFECTLY. The expectation is to look for direction out of each Fib time frame.

Notice GLD went up into FIB 5, down into 8, up into 13, consolidated into 21, which is THIS WEEK ending. Remember for the SPY, we have FIB 13 week ending next week, 24th.

Which way will GOLD go? I do not know. But, having this time frame we can propose, which ever way it breaks, up or down, the trend will extend out for 34 WEEKS.

Here wave GLD daily. I have elected to use ICHIMOKU CLOUDS as our technical indicator. Reason is they offer a wider range of resistance and support calculations and GOLD is very volatile; many fast trends within the big trend.

The daily for now shows NO OBVIOUS SIGN of weakness in Gold. We are above the support cloud, consolidating/distributing from Fib 13 into Feb 21.

This could very well be nothing more then a 2nd wave or 4th wave EW pullback in a larger uptrend. I will say 21 weeks is a very extended time frame for any 2nd or 4th wave EW consolidation.

21 WEEKS suggest a DISTRIBUTION TOP pattern; but I can't say for sure.

So, next step in our quest to answer the GOLD riddle is to compare it to something else; then look for CORRELATION. Try to find another tradable asset that seems to move lock step with GOLD.

I ran gold up against, Wal-Mart, big global player, IBM, Inverted GOLD Short etf and the EURO-BINGO!

GOLD/EURO correlate over the last 3 years almost perfectly. It seems the fortunes of the Europeans, has a direct correlation to GOLD. (Which goes back to my reply yesterday, so goes Greece, so goes GOLD)

Notice the 1st indicator is the correlation %. Stays above zero line, and many months above 50% line. The only below zero, was when the EURO and GOLD were in a correction, but the EURO corrected longer. Either way, both were correcting and both moved higher out of the correction.

Currently both are in a correction and the correlation is very high.

Having established the relationship between the EURO/GOLD; lets drill down and take a look at the EURO.

To compare apples to apples, I overlay the EURO with the same ICHIMOKU CLOUD. This time the picture is the opposite of the GOLD daily picture.

EURO for now, is not consolidating, but in a confirmed downtrend; noted by being BELOW THE CLOUD combined with several other sell signals.

Conclusion:

Gold chart is still bullish, above the cloud, and doesn't provide any conclusive evidence of a trend change. The amount of time spent consolidating, 21 weeks, is much longer then a typical wave 2 or 4 pullback, suggesting distribution, not consolidation.

Euro and Gold are confirmed to move lock step with each other over the length of my chart sample, 3 years.

The EURO for now is in a confirmed downtrend. No time analysis was offered for this, but I have to assume since its been going up for years, we are possibly in the EARLY stages of this trend.

I expect GOLD to move decisively in a direction within the next 5-10 days; this direction to be maintained for 34 weeks.

Tim Kathlina

After The Bell-GOLD Trade Update-Time To Sell Jan 24th

On Dec 14th 2011, I posted this chart of Gold and suggested it was time to go long the metal, buying the exhaustive dip at the $153 level. I also indicated the climb up would be at least 9-13 days in length.

On Dec 14th I posted this chart of GLL, which is short Gold etf, and suggest a good way to play the rise in Gold would be to short GLL at its 200 day sma around $20-21, betting the shares would fall as Gold rises.

Here is a chart of the etf GDX today, which is the Gold mining companies. GDX formed a perfect Head-n-Shoulder top, confirmed when the shares broke the neckline downward. Notice the reaction/action of this break was to find buyers, move back up to the neckline, creating a failed retest as it moved lower again.

We take the length of the Head to the neckline, and add that to the bottom of the neckline to get our price target, which is around the calculated support level around $45.

Here is Gold GLD chart today. GLD has reached the top of a down slope channel. We recommend exiting this trade asap.

Finally, here is today's GLL chart. The stock has moved down nicely from the recommended short of $20, and now is touching calculated support at a rising uptrend line. We recommend this trade be covered asap.

Conclusion: GOLD seems to have found a near term top, thus we recommend taking off the Dec 14th trade of going long GLD and/or shorting GLL.

The patterns suggest GOLD will begin a fast down thrust to the lower channel, which should only take 6-10 trading days. However, if the FED signals QE3 or some derivative of, then these patterns could be broken.

We advise locking in these profits, then waiting until the next market signal direction appears. I did hear that Dennis Gartman is long Gold now, so for sure I expect the pattern to hold and Gold to decline; he is a great contrary indicator.

Tim Kathlina

After The Bell- Gold Update Dec 14th

Short term trading, we use RSI<2> instead of RSI<14> to indicate trend change; short term. Studies show RSI below 2, outperform the following week or weeks verses stocks above 90 RSI<2>. We also like to see an exhaustion/panic move into the RSI<2> low.

As noted on the chart below, GOLD is providing that set up now. I believe it could also be the general foreshadow of the broader indexes to make one last push into a final high. Notice each push off the lows resulted in a lower high, with the latest exhaustion move taking out the 200 day.

Make no mistake, commodities are signaling a massive market pull back; expect collapse in all leveraged investments.

How do we play this trade?? We don't go long GLD, we short GLL.

Tim Kathlina

After the Bell-Before The Fed Dec 13th QE3 or No QE3?

What happens when the FED monetizes things? More dollars are printed and chase after the same amount of product, thus increasing the products price and decreasing the value or purchasing power of the money.
So, in a QE3 scenario, that would mean Gold goes higher, US dollar goes lower against a rising Euro dollar.

Stocks and Bill Gross from Pimco and other Wall St players are convinced the FED is soon to begin QE3. But as we see in the charts below, GOLD investors, and currency traders so far seem to think otherwise.

So who is correct??????????? Your guess is as good as mine.

Tim Kathlina

November 7th After The Bell Stock Trend Set Ups

Gold continues it's melt higher:

Gold is still in an uptrend noted in the CCI(30). RSI<2> and CCI(5) indicates an overbought condition. Candles have not given a loss of mojo signal-but note the August drop. GOLD tends to not provide a signal. Extension above upper Boilinger suggest setting a tight stop or harvesting profits.

GOLD short is in confirmed downtrend (noted CCI<30>). The divergence noted in RSI(2) verses todays closing price, indicates a potential snap back trade. Take down half position now, 2nd half after lost mojo signal in candles. Because this is downtrend-this is snap-pop trade only. Thus expect the trade to be exitied within 1-7 trading days with tight stop.

Financial Sector closed with a 5/15 bear cross-and Bearish Harami Pattern. Close outside upper bollinger, suggest potential move to lower end of the range. Since CCI(30) still is uptrending; the trade is a short below $13, expecting to cover within 1-4 trading days; tight stop above $13.10.

OIL closed outside BB today. CCI(5) showing a negative divergence. RSI(2) at 95, historically suggest underperformance in the week or weeks to follow. Because in confirmed uptrend, with no loss of mojo in candles apparent, take 1/2 half short position now, with cover stop above $26.

These are the best high probability/low risk sets ups for November 7th. Set-ups can take 1 week to play out.

Tim Kathlina