Bearish Momentum Accelerates

Given the accelerated downward momentum seen today, it looks like gold is heading for a retest of support around the 50-Day MA at 2,638, if not lower. The next lower pivot is at the bottom of the bull flag at 2,600. That low is also a higher swing low and therefore part of the price structure of the rising near-term trend. If it fails to hold as support and gold falls lower, a violation of the trend structure will occur thereby providing another bearish sign.

Targeting 50-Day Moving Average at 2,638

Nonetheless, the higher 50-Day MA has a good chance of seeing support. The 50-Day line was reclaimed 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 couple minor swing lows. Following 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 consider the rising parallel trend channel with the lower line beginning from the mid-February swing low. A parallel of the trendline was then connected to where multiple highs and lows hit the line, as shown on the chart with red and green arrows. Subsequently, the market recognized resistance around the top channel line around the September high and then again with the most recent record high of 2,790.

The rally into new highs indicated a potential bullish breakout of the channel. Of course, given today’s bearish price action, a failed breakout has happened instead. Now that a bullish breakout has failed and key 20-Day MA trend support is broken, there is always the potential that gold falls to the lower uptrend line of the channel. When it is reached, if it is, will determine whether the 2,600-swing low is tested.

Weekly Bearish Pattern Triggered Today

As mentioned again yesterday, the weekly candlestick pattern (not shown) for last week was bearish. Gold ended with a doji shooting star formation that triggered below last week’s low of 2,725. The breakdown triggered today, and the subsequent bearish performance is what might be expected from such a weekly pattern.

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