I am expecting stocks to continue lower this week as we are nearing the timing band for the first daily cycle low of this new intermediate cycle. There is a jobs report Friday which could mark the bottom of this cycle. Until then we have no signals that it is time to buy.
Gold appears to be trading in to a triangle. A triangle is just a sideways consolidation. It is not a drop in price so much as it is time that creates the break of the daily cycle trend line so the RSI may not get pushed into the oversold area as a result. The 1700 area has served as strong support over the past month as price has tested that area twice and support held both times. Technically speaking, we have broken the daily cycle trend line and the 10 DMA has turned down which we need as a bare minimum to say we got our daily cycle low.
Once the price of gold gives us a swing low, I am going to call this as a daily cycle low and recommend taking a position. This could happen as early as Monday. If the price of gold can move above 1715 we will have our swing. The next confirmation will be a close above the 10 day moving average. The next confirmation will be a break out of the triangle which would be around 1733. I am going to buy at the swing at 1715. This could be as early as Monday.
1800 is a long term resistance area dating back to 2011. Once the price of gold breaks out above 1800 there is no resistance for gold until it reaches it's all time high of 1923.
Margin on a gold futures contract is 10,065 per 100 troy oz contract. Every dollar gold moves is worth $100, so a move from 1715 to 1800 is a 85 point move worth $850. A move to the all time high of 1923 is 208 points. 208 points X $100 means this move will be worth $20,800.
There are micro mini gold contracts which are 10% the size of the gold contract, just like there are micro mini contracts for stocks. If the full size contract is more than allows you to sleep at night, then just opt for several micro contracts. No need to make this hard on yourself.
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