Gold Analysis March 2016 (D,W,M)
Created on Tuesday, 01 March 2016 13:28
Written by Austin Galt
The gold price looks to have clearly kicked off the big bear rally so let’s update the situation using the daily, weekly and monthly charts. Keep in mind this chart does not include the data from the 29th February which was a positive day.
GOLD DAILY CHART
We can see the spike high at $1263.90 which was identified the day it took place. Price has actually held up pretty well since then and has consolidated above the previous swing low at $1181.60 which is denoted by the horizontal line. Considering this I am now starting to favour one last leg higher to put in a new swing high.
The PSAR indicator is bearish with the dots above price and we can see these dots held the high a few days ago. However, the fact that price has not traded down impulsively from this lower high is a reason why I now favour price to head back up and bust this resistance.
The Bollinger Bands show price finding support at the middle band and I am now looking for price to recapture the upper band and cling to it as it searches for the final high to this first leg of the big bear rally.
I have drawn a Fibonacci Fan from the low to recent high and it shows price finding support at the 38.2% angle.
The RSI showed a new high at the recent price high which is generally bullish and I am now looking for the next price high to set up a bearish divergence.
The MACD indicator is bearish but price rallying to new highs would see this change.
GOLD WEEKLY CHART
The lower horizontal line denotes the previous swing high set in October 2015 which price has already surpassed. The next major previous swing high was set in January 2015 at $1307.80 and I believe price is set to challenge this level. I will be looking for price to clip this level en then turn back down.
The Bollinger Bands show price remaining in touch with the upper band and I am looking for a strong move up that clings to this upper band before price eventually turns back down.
The Fibonacci Fan shows the low was at support from the 76.4% angle and price is now back at resistance from the 88.6% angle. It is certainly possible for price to head back down from here but I favour price being able to overcome this resistance.
The RSI is making a new high which is generally bullish in that this coming high is unlikely to be the final bear rally high as that would likely be accompanied by at least one bearish divergence.
The MACD indicator is bullish although the averages have diverged quite a bit so perhaps this move up is nearing its end.
GOLD MONTHLY CHART
There is no change here to the longer term outlook.
I am viewing this rally as wave B in a big ABC correction. It is common for a B wave to get the crowd thinking a new bull market is in progress and I expect nothing less here.
Price has just busted PSAR resistance denoted by the dots. This is the first time this has occurred since the gold bear market began in late 2011.
The Bollinger Bands show price is just under the upper band and I suspect price will hit that upper band before turning back down and eventually putting in a higher low.
The Fibonacci Fan shows price has finally been able to overcome the 88.6% angle which has pretty much held the downtrend all the way.
The RSI shows a triple bullish divergence at the wave A low while the MACD indicator has just made a bullish crossover.
How high do I expect this bear rally to trade?
I have added Fibonacci retracement levels of the move down from all time high to recent low and I am targeting the 61.8% level which stands at $1586.40.
Also, the green highlighted circle shows the area whereby price began to crash and price often rallies back to these exact areas just as price often corrects to areas from which price launched a parabolic move higher. This area is right around the 61.8% Fibonacci retracement level.
Once the expected bear rally high is in place I expect a big wave C to unfold which will take price down to around the $600 level which was outlined in previous long term analysis. This will obviously take some time to play out.