Gold Is Forming A Half Cycle Low

 

Although gold has yet to surge far in a new Investor Cycle, I still like the action and find it to be very constructive.  The key question these past 2 weeks has been foremost whether this is a new or an extended Investor Cycle.  The difference between the two would show up here as either an extremely Left Translated Daily Cycle or a long and steady Right Translated Cycle.  Quite a difference between the two with vastly different trading options.

As I outlined this past weekend, this action does not resemble a late Daily Cycle.  Although gold has been flat since the weekend, I believe gold is forming a typical Half Cycle Low “bull flag” in preparation of a continuation higher in the 2nd portion of this Daily Cycle.  The underlying technicals remain strong, and I like the feel and “read from the tape”.  Although still plenty of time for downside, I believe that a late Daily Cycle would have collapsed by now and well on the way to fresh bear market lows. 

This is especially true since equities made new all-time highs today.  The negative correlation between Equities/Gold has been consistent lately, so I find this divergence to be healthy (for gold).  Of course, gold is not out of the woods, it first must follow through and show us that traders want to bid this higher.  Too much doubt remains, only a new push back above $1,255 will leave no doubt that this will be a Right Translated Cycle.  In turn, that would be enough to confirm a new Investor Cycle too.  Until that occurs, I will remain optimistic, but guarded.   

Traders need to also prepare for another day lower, possibly two, into what should be a Half Cycle Low.  The 10dma is always breached during those declines, often serving to shake out the few weak longs that have recently taken up positions.  Not to be alarmed, such a quick drop, possibly to $1,225, would be normal at this stage of the Cycle.  But anything more than that, on a closing basis, would be a concern. In a healthy 1st DC, a HCL sell-off should be short-lived and reverse quickly to make new highs.  The upside target in a 1st DC should be around $1,300.

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