The bearish momentum is accelerating
Given the accelerating downward momentum we’re seeing today, it appears gold is headed for a retest of support around the 50-day MA at 2,638, if not lower. The next lower pivot point is at the bottom of the bull flag at 2,600. That low is also a higher swing low and is therefore part of the price structure of the short-term uptrend. If it does not hold as support and gold falls, a violation of the trend structure will occur, creating a new bearish sign.
Targeting the 50-day moving average at 2,638
Nevertheless, the higher 50-day MA has a good chance of support. The 50-day line was regained in early July after natural gas traded below the line for about 17 days. After the subsequent rally, a pullback successfully tested support around the 50-day line with a few small swing lows. After the August 5 test of the 50-day line, the bull trend accelerated and the faster 20-day MA began to identify support for the rising trend.
Trend channel failed breakout
Let’s also look at the rising parallel trend channel, where the lower line starts from the mid-February swing low. A parallel of the trendline was then connected to where multiple highs and lows touched the line, as shown on the chart with red and green arrows. The market then recognized resistance around the upper channel line around the September high and then again at the most recent all-time high of 2,790.
The rally to new highs indicated a potential bullish breakout from the channel. Given today’s bearish price action, a failed breakout has obviously occurred. Now that a bullish breakout has failed and the key 20-day MA trend support has been broken, there is always the possibility of gold falling to the channel’s lower uptrend line. When this is reached, it will determine whether the low of 2,600 swings is tested.
Weekly bearish pattern activated today
As mentioned again yesterday, last week’s weekly candlestick pattern (not shown) was bearish. Gold ended with a doji formation of shooting stars below last week’s low of 2,725. The collapse took effect today, and the subsequent bearish performance is what you would expect from such a weekly pattern.
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