Chicagostock Trading

Chicagostock Trading

SP500's Trouble with 2665 and Thursday's Vol Windows Defined

On Thursday, the day after the FOMC statement, we review the intraday action in regards to Chicagostock's Volatility windows and pivots.  The highlighted blue box, is the cash market open, NYSE 930 AM.  After the open, the cash market had trouble overcoming the intraday pivots, seeing the range act as resistance.  This led the market to fall into the lower Vol window which was met with a defensive bounce.  The defensive bounce gave way for a retest of the open, giving sellers an area to defend and buyers major resistance to overcome.  For buyers that picked up the initial test of the lower Vol window, this provided a bounce to take some profits into.  Second or third attempt at the lower Vol window, increases the odds of seeing the level failing. After failing to overcome the opening range, the market drifted back toward the lower Vol window which was taken out. In order to establish a bearish intraday bias, a 5 minute hold below the lower Vol window needs to be seen.  Sometimes the market can establish a bias, and bounce back to the open to again force sellers to defend their intraday trend.  In this case, the second test of the lower Vol window saw the level taken out, establishing a bearish intraday bias.  Since there was already an early bounce off the lower Vol window, there was not another one and sellers expanded the market lower, forcing longs to liquidate into the close. 


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US Dollar Down 10%, Now What?


Since our last report on March 17th titled "Will President Trump Devalue the US Dollar?", the US dollar is down over 9%, falling from 100 down to a recent low of 90.79.  This does not mean a dollar devaluation has occurred, or will, however as we pointed out, there are risks out there that needed to be factored in, and the market is doing just that.  

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SP500-Tracking the Recent Correction, What Next?

Anyone old enough to remember the euphoric action on May 2, 2012 when Bin-Laden captured? $ES_F $SPY $SPX

— Chicagostock (@Chicagostock) March 2, 2017



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Will President Trump Devalue the US Dollar?

Before Mr. Ben Bernanke became Fed chairman, he made a speech before the national Economists Club in Washington, DC. on November 21, 2002, titled “Deflation: Making Sure "It" Doesn't Happen Here.” In these remarks, there were 5 major points Mr. Bernanke pointed out as tools the Fed could use to fight deflation:

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SP500's Consolidation


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SP500's ride from 1800 to 2040 with Chicagostock




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The Great Reset


In December’s article “The Yellen that Stole Christmas”, the point was to show how buyers in the SP500 were caught above 2040, and needed a Yellen rescue.  The market attempted to breakout to start December, however the rug was pulled from underneath as Yellen reiterated a rate hike later in the month.  After bluffing the market for 2 years on this rate cut, the call fell on many deaf ears.  So it was. Buyers were left caught at higher prices, betting on a “Santa Claus Rally” only to be hoping for Yellen to save Christmas.  For the first time in 6 years and exactly 3 years from December 2012’s FOMC that placed a 6.5% target on NFP for a decision on Fed Funds rate, the FOMC reset the market and hiked the Fed Funds rate by a quarter point.  Bulls did not get what they were looking for and saw the market fall back to retest 1982 support.  The level barely held on December 18th, as the market rallied back for Christmas holiday and the “Santa Claus Rally” was actually a gift from Yellen for stuck longs above 2040 to “breakeven”, or as we like to call it “get out of jail free card”.  

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The Yellen that Stole Christmas


When the FOMC decided to place a 6.5% target on NFP rates to justify raising the federal funds rate, the SP500 was trading 1427, gold 1718, US dollar 7985, and 30 year bonds at 148.  

“… the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent…” (FOMC 12/12/12 source).

Just days after this release, we highlighted the weakness in gold: Whats With Gold? FOMC Spooks Market. Double Top Eyes 1250.

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Pre-FOMC Market Update



Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

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How Does the Ali Baba Top Differ from 2011's Bin Laden Top?



The recent reversal in the SP500 has reminded us of a similar time the charts and reversal felt and looked the same.  The above chart is from 2011.  As seen the market made an early high of 1335 in February, correcting down to 1241 before rallying back to new highs.  New highs were made on what was called the "Bin Laden" high. On the news of his capture, the SP printed the highs for the year at 1373.50 and turned lower to retest the previous 1335 lows made in February.  This retest was followed by a "U" shaped reversal that recovered back to where the market failed at 1348 on the 1st of June.  This reversal failed to stabilize and push through the highs, leading into what developed the right shoulder for the 2011 head/shoulder top and crash down to 1080 that was fueled by the debt downgrade.  QE 2 ended in July 2011, just as QE 3 is expected to end 10/29/14. 


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Since reversing off the year lows of 1732 and through December's high to squeeze shorts, the SP coiled in a sideways range in attempt to find new buyers following that V shaped short squeeze.  The first peak high was made at 188750 in March on Non Farm Payroll numbers.  This was followed by a reversal down to 182350 mid March, before climbing back up to 1877 as the pullback was bought and the 6 month pivots turned into support.  Breakout attempt was seen early April, having to take the FRB chair to say stimulus is still needed to in order to trigger new buying to run the market into new highs setting up a jump ball on the NFP numbers that were released early April. New all time high were made by 5 points up to 189250, again on Non Farm Payroll numbers and was followed by profit taking and sellers pressing the market post NFP release. Both peak highs being made going into the jobs numbers that were both followed by immediate profit taking. The last high is more troublesome as new highs were made only to fail to continue higher, seeing a reversal back down to press and retest the March lows of 182350.  First test of this led to a bounce this week on the FOMC release the 6.5% unemployment target for the fed funds rate would be removed.  The initial reaction was an embracement by the market, seeing a bounce up to 1867 before running out of gas and reversing back down to close below the recent low of 183075 prior to that FOMC release.  Once again the market brushing off stimulus promises and a pull of the 6.5% unemployment rate that suggests rates can remain low longer. 

Going forward, pressure is being put now against the prior low of 182350 made in March to shake out longs and confirm a short term double top.  A weekly close below 1850 is bearish and creates a new range of resistance within 1850-189250.  Looking at the action made in 2014, with the early sell followed by the V shaped recovery that was fueled by shorts being squeezed, the market traded above those prior highs for 2 months in attempt to build a base and attract new buyers following the short squeeze. Failure to build the base and hold above the 2013 highs, suggests enough new buyers are not coming in to sustain the V reversal to expand higher.  If new buyers are not coming in, then the bus may be too full and this gives room to expand lower to target the year lows and confirm a failed breakout with major support at 1700 based off the October low.  Failure to hold the 2014 low of 1732, breaks the series of higher lows the market has enjoyed since the last major low of 1553 in 2013 when investors feared tapering before being squeezed up 300 points.  By taking out the last major low at 1732, this breaks the upward momentum, and gives room to move down into testing levels from 2013 and attempting a gap fill down to 1420.  Support off the year lows is seen down to 1750 for buyers to defend.

VIDEO: Watch Chicagostock's day trading signals on both peak highs.

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Bonds, Gold, and the Fed



Just a little over a year ago, in December of 2012, the Fed for the first time during its low interest rate policy, attatched a 6.5% unemployment rate to its fed funds rate.  As highlighted in December of 2012, this spooked the gold market, which at that time was trading 1655 with a range of 1526-1798 in 2013.  Bonds on the other hand closed the month of December at 148.  Since this new FOMC policy, both gold and the 30 year bond market front ran the unemployment rate target, seeing gold break its 2012 range of 1526-1798 to expand lower, making lows of 1179 in 2013, and lows of 12723 in the 30 year in January.  On January 10th, 2014, the BLS reported an unemployment rate of 6.7%, down 1.2% from Dec of 2012, and only .2% from the Fed's 6.5% threshold.  So with gold and bonds moving ahead of this target, and now the target coming into play, it only makes sense to see gold and bonds recover and turn the other way.




30 Year bonds put in a failed breakdown early January as the lows from 2013 of 12801 were taken out down to 12723, and failed to hold.  This has thus far led to a reversal and short squeeze, seeing the market recover above 13100.  Overall trend remains down as seen in longer term weekly chart with major resistance for this trend coming within 13320-13524. Breach of this range will change trend and momentum in the 30 year, confirming the weekly double botom and giving room to retest the March 2013 lows at 14014.


Gold's 2012 range of 1526-1798 (272), was expanded (272) lower into 1254.  This did not stop as panic selling came in and gold saw a flush down to 1179 before quickly recovering up to 1434. For the next few week's, gold's downside pressure from its new found downtrend below 1526, forced the market to retest the 1179 lows. Tax selling also put pressure into the end of year 2013 as investors sold gold to lock in losses and balance some of their stock gains.  In January, just as the bond market made a new low, gold also made a new low down to 1181.4, however managed to hold the 2013 low of 1179.4 by $2.  This has thus far led to a small bounce, retesting resistance from the prior high of 1267.5 made in December.  Today gold ran into these highs but has fallen short in taking them out by .5.  A move through the December 1267.5 high confirms a short term double bottom and gives room to retest next major resistance up to 1380s based off the 1434 high in mid 2013 before falling back below 1200.  This 1380-1434 level will be huge for the change in momentum and trend. As a break above this confirms a double bottom and gives way to retrace back up to and retest the 1526 level from where the market failed. 

Just as in December of 2012 with gold at 1655 and 90% of community being bullish after 90% was bearish sub 1000, this did prove correct and we did see a correction down to 1179. So at 1179, down $744 off the highs and unemp rate reaching 6.5%, is this the time to be short gold? Opposite as majority of community is back to being bearish metals, this is the time to start looking back into gold, and picking up physicals.  A flush below 1179 can still be seen, but should provide opportunity for longs as a reversal after the flush would be expected.

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Does Bernanke Leaving End the Bull Parade?



In the aftermath of what was Bernanke's last testimony to congress, equity markets squeezed new highs for the year just as the testimony wrapped up. Most congressmen were applauding the chairman for his service, somewhat having the feeling of a farewell party. The question is, if the chairman is leaving, does this mean the QE party is over and who will be last to turn off the lights? The uncertainty of the next chairman and actions is unknown. It's been quite a ride for the year, opening above 1440, last year's resistance, and seeing a gap and go breakout. Moving through all resistance and squeeze shorts in the process. This took 5 waves in the first half of the year, with 2 being minor corrective waves as tops failed.. Shorts squeezed and investors piling in, forced into equities on a QE high. This saw record highs of 168575 last May before longs began to sell into the squeezed bid to take profits. Bernanke scared investors out on June 19th with worries of tapering QE, seeing the market reverse lower from 1649.  This started a shakedown and panic into testing major support based off 1530 which originally began the leg up through 1600. The bull strongly defended this test holding in the low 1550s to prevent the reversal in trend. The market was walked back up to the 1649 level just in time to give Bernanke a second chance on another FOMC release of July 10th, and creating a "V" bottom. Bernanke was able to calm the market enough to break through 1649, triggering a short squeeze to give way to take out the all time high from May.  The latest and "last" testimony to Congress from the Fed chairmen had the market sitting on all time highs.

The SP500 followed the Transports lower Wednesday after failing to take out 3 day highs and setting up a small flat top.  The bounce to test the highs was seen as Apple earnings led the stock to jump $20 higher, luring in buyers to the SP500 for a run through 1700, only to reverse lower and close below 3 day lows. The reversal has the market pressing against major support, within 1681-1665, based off last week's pivot higher.  Failure to hold this range sees weakness in buyers and a reversal on the daily chart.  This creates the potential for a double top with the market failing to attract new buyers after taking out the May highs.  New money at these levels have new risk of uncertainty of the next Fed chairman. Next support seen at 1650, followed by 1615 with sell stops below 1550. Breach of 1550 targets 1530 Cyprus lows and the pivot that led into these all time highs. Minor upside resistance 1688-1696, break through needed for buy side to continue momentum.


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Accurately Predicting Gold Trends Using Technical Analysis


(click chart to enlarge)

Gold in 2008 was the first time the market breached the $1000 mark, hitting highs of 1033.9 in March just as the Federal Reserve Bank of New York provided an emergency loan to Bear Stearns to keep the company solvent from it's bets in subprime mortgages.  This was followed by a correction and liquidation in the fall just as the equity markets began to crash in September.  The panic and liquidation selling led gold to fall into lows of 681 in October before retreating back to retest the $1000 mark in February of 2009.  This created an Elliot Wave pattern that saw the first wave 651-1033, second wave being the corrective wave from 1033-681, third wave being the move back up from 681-1007, fourth wave which was a very small 38.2% correction of the 3rd wave, setting up for the fifth wave to try and continue higher.



(click chart to enlarge)

The fifth wave completed with gold moving from 865-1227.5 just as the Federal Reserve bank lowered their federal funds target rate to 0% in January of 2009.  This gave gold the fuel to move back through $1000 and continue this 5th buying wave to take out the old $1033.9 highs.  Showing gold's strength and proving naysayers who did not see gold breaching over $1000 again wrong.  As the 5th wave completed with highs of 1227.5, this led to profit taking and a small correction as gold corrected 50% of the 865-1227.5 move as well as coming back to retest the old 1033.9 highs with the gold making a low of 1044.5 in February of 2010. 


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What to do with Gold.


Back in December of 2012 on the 12th, the FOMC released their statement that “… the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent…”.  This was the first time since having rates at 0% the committee attached an unemployment rate “target”.  Since this statement, gold made a high of 1725 on that day, and never looked back.  It has been straight down since then. But this was not the beginning of selling in gold.  This was just a catalyst for long term holders to take profits. As we pointed out back in December “What’s With Gold? FOMC Spooks Market, Double Top Eyes 1250.”   Again this was not the beginning of selling.  Gold had a target of just above 1900 when it created a “diamond” pattern in August of 2011.  This was a continuation of the parabolic stage the market went in after the debt deal passed earlier that month.  Sure enough gold squeezed through 1900 into 1923.7 and reversed down into lows of 1535.  This was a major shakedown in the market place and left a lot of late buyers holding the back at parabolic prices above 1700.  Throughout 2012, the year was one major consolidation period.  After an early high of 1792.7 in March, the market pulled down to put in lows of 1526.7 in May. Not ready to breakdown, the market squeezed shorts and rallied back to take out the March high and print new highs for the year at 1798.1.  These new highs for the year once again failed to push past 1800 and the failure turned into a double top attempt.  Since this 1798 high, gold has been in profit taking and selling.  When the FOMC released their statement in December, this just gave excuse to continue the profit taking and move lower.  To start 2013, gold attempted to rally, only to put in highs of 1697.8 and roll over.  The reversal in January of 2013 to break the year low of 1626, continued the selling pressure, targeting the 2012 low of 1526.7.  With the 2012 low of 1526.7 being taken out in April, this confirmed the 2012 highs against 1800 as a double top.  By taking the range of 1526.7-1798.1 or 271.4, this gave a downside target of 1255.3. 


Most recently, we have seen gold complete this downside target of expanding the 2012 range down to 1255.3.  Of course the market did not stop there and went into further selling as longs panicked and stops continued to be shaken.  This led the market to fall below 1200 into lows of 1179.4, almost retracing 61.8% at 1155 of the 681 to 1923 move.  The breakdown below 1200 after completing 1255 put the market into extremely oversold levels.  The bear in gold is not new, this bear has been around since that 2012 double top, and the trend down since that high has been a $618 decline in prices from 1798.1-1179.4.  Short term gold is oversold, thus the bounce being attempted.  Gold below 1250 gives investors who patiently waited for prices to turn lower an opportunity to come in and pick up some physical and or invest long term at a 50% discount.  Gold remains in major downside pressure until it can close above 1300.  Doing so can give way to squeeze late shorts and attempt to retrace the market back to the 2012 low of where the market failed at 1526.  This old support should then act as new major resistance, however gives an upside target for buyers sub 1250 to target.  Bottom line: As we were bearish gold in 2012, we are now cautiously bullish and like putting some powder to work.  Failure to hold 1150 sees next major support at 1126-1045. Regardless, gold was trading 1900 just a few years ago, at 1250, this is a steal. Yes we can move lower, but it will only allow more opportunity to buy at lower prices, and NOT at parabolic prices.


“Buy weakness, sell strength’



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SP500 Maxes 100% Fib and Reverses


As soon as the SP500 hit its 100% Fib extension level of 1685.50, sell programs kicked in as the SP500 printed highs of 1685.75.  The move occurred after a squeeze through previous highs of 1673, seeing shorts capitulate which gave way to the 1685 print.  Smart longs sold into this bid to take profits. With longs taking profits, shorts already being stopped, the market fell down to retest its open. After trying to retest the highs and failing to find buyers at 1681, the market fell off to take out its session lows to reverse the intraday trend as more longs locked in profits and short sellers sat on the sidelines looking at the market drift lower.  With shorts out the market, this created a chase to the downside into 164650 to retest the pivot low of 1646 made last Thursday prior to Friday's move into 1665.75. A 40 point rejection off the top level of 1685 and a press to test the downside resistance range at 1656 to see if that old resistance acts as new support for a retest of the mid level at 1666-1670.  This has raised the stakes for bears as the range to defend has widened.  Failure to hold 1646 sees more shorts left on the sidelines and a wider range (40) to defend the high.  Market remains in its 5th wave that began on the breach of the old 1593 highs with a pivot low of 1530.75 occurring during the "4th" corrective wave.  As market moved past 1593, buy side chased and shorts squeezed from the 1593-1530 giving way into 1656.  Sell stops have built along this wave 1530-1685 below 1646, 1620, 1607, 1570.75, and ultimately the 1529.50 low from Cyprus.  Wave 5 ends on a breach of that pivot low that began the wave at 1530.75.  With that taking place, a confirmation will then be made that the move above 1593 was a failure and an "abc" corrective pattern can be seen should the market be able to bounce after breaking 1530 to retest the 1600 level and see if it can get back above. 


See: "SP500 Wave 5 How High Will It Go"


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Going into May 6th, 2010, the SP500 was already having trouble on a daily basis, distributing within 1180-1220. After originally making a high of 1210.50 on April 15th, the market fell down to 1179.75 before recovering to take out the 1210.50 high and stop out early shorts.  This higher high up to 1216.75 failed to hold, seeing the market reverse to take out the previous 1179.75 low.  Lows of 1176.75 before another bounce was seen to retest the failed higher high at 1216.75.  The retest turned into a right shoulder as the market failed to push through the April 26th highs and fell through the previous low of 1176.75 to confirm a head/shoulder pattern.  Going into May 6th, the market had already broken below 1176.75 and had a target of 1136.75.




On the day of May 6th, 2010, the market was well below its 1176.75 neckline, opening at 1157.50 and making highs of 1165.00.  Pictures and videos of Greece riots being shown  added fuel to the fire. Things quickly deteriorated after the market fell below 1154 and turned the level into resistance.  This led to the head/shoulder target of 1136.75 to be completed.  With this target completing, this is when the flash crash flushed the market from 1130 down to 1056 before recovering back to the 1130 level into the close.




Eventually, the market retraced back to its broken neckline of 1176.75 by making highs of 1174.75 before turning back lower to "back and fill" the flash crash lows of 1056.  Lows of 1002.75 were made in July of 2010 before reversing off the lows and into 1127.75, being were the market failed the prior month in June.  With the markets back to whipping back and forth in attempt to consolidate and build a bottom, a retest of the 1002.75 lows was made with the market falling down to 1037.00 on August 25th just before Ben Bernanke's Jackson hole meeting.  During this meeting "Bernanke Says Fed Will Do `All It Can' to Ensure U.S. Recovery".  With the Federal Reserve promising to defend the markets, this turned the retest of the summer lows into a bottom and the markets turned higher to see a breakout "gap and go" on September 13th with the market making lows of 1108 and holding above the prior day's high close of 1105 to leave a small gap open, giving way for a short squeeze to move back higher and take out the earlier April high of 1216.75 which eventually led to 1373.50 on May 2nd, 2011 before going through another consolidation period that presented another correction, filling the 1105 gap. Another volatile period and more promises of support from the Fed led to another gap and go breakout to start 2012 with a gap open higher with lows of 1259.75, keeping open a gap down to 1252.50 from December 30th and giving way for another short squeeze to move back higher and take out the May high of 1373.50. Throughout 2012, the market kept this gap at 1252.50 open to create another bottom during summer, targeting the year highs.  Small correction in fall of 2012 as the 1441 upside target was completed, making highs of 1468 before falling down to 1340.25 in November to retest where the market broke out in August.  Since these lows, another gap has been made, with 2013 opening above 1440 with lows of 1438.25 and a previous close of 1420.  This has led us to where we are now as the market has gone through another major short squeeze, bubbling throughout the year to take out the all time highs of 1586.75 and breaking above 1600 on the latest non farm payroll number reported on May 3rd.  


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Where to Buy Gold



Since the December 2012 FOMC meeting that "Spooked the gold market" as the FOMC members attached a 6.5% unemployment for a target on rates, gold has fallen $362.6.  However since the failure to break above 1800 in 2012 and double topping at 1798.1, the market is down $442.8. So why the sudden crash over the past 2 days? As we know the market ran from 681-1923.7 as the FOMC cut their rates down to 0%.  The year of 2012 was all about consolidation.  It traded in a range of 1526.7-1798.1 which lured in a lot of late buyers betting on "hyperinflation".  As gold has most recently failed and broken below this 2012 low of 1526.7, it has confirmed the highs in 2012 as a double top.  This range of 271.4 (1798.1-1526.7) can now be subtracted below 1526.7 to give room to expand the market down to 1255.3.  This target when put out in December was looked at as a crazy and a lot of "gold bugs" were insulted. Today the market is bringing pain to these gold bugs as it shakes them out.  The current breakdown clears and shakes out buyers who came into the market above 1500.  The move is good for "smart" money who have been sitting on the sidelines awaiting for the market to go on sale. Completion of this move is seen at 1255 which also retraces the market 50% of its 681-1923 move. In the big picture, that would offer a 50% sale off the highs and bring the market back to where it broke out in 2010.  This range of 1200-1300 will offer an area of major support for the market to attempt to build a base for long term buyers to watch for to come in and buy the sale.  A break of 1150 would give room to test major support at 1000 being where the market broke out in 2009.  Failure to hold above sees the 681 low  targeted and at that point the long gold story would be all over. Short term yes the market is very over sold and the long community is in shell shock, the old lows of 1526 is now new major resistance with next level of sell stops below 1309.1 as the 2011 lows.


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Fear Turns to Greed at Breakeven.

2011 vs 2012 Patterns compared


Click charts to maximize.

The SP pattern from January of last year gapping open at 1259.75 above resistance just as the gap open at 1108 in September of 2010, is now mimicking the % move. The first breakout in September of 2010 at 1108 recall was just after the year of the Jackson hole QE start in August and the volatile period during that summer range to put in a bottom at 1002.75. The breakout in September squeezed a 24% rally leading the market into highs of 1373.50 to test the range from May of 2008 of where the fall out began. Last January this pattern was mimicked again with the market gapping higher at 1259.75 to start another breakout following another volatile period during the summer with lows of 1068. This gap at 1259.75 has held open and the wave has now squeezed the market up 23.1%, putting it right at the door steps of resistance from the range off all time highs of 1586.75. At this point the market is testing major resistance based off the all time highs and seeing a small pause. Whether the market can muster enough strength to squeeze through and stop out shorts to follow the Dow Jones average into new all time highs is yet to be known. The next major resistance would be the 1600 level as everyone sees, keyword everyone. The biggest risk is the SP500 not taking out the all time high, thus buyers remain complacent looking for new highs, buying pullbacks which gives way to setup bag holders.


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Whats With Gold? FOMC Spooks Market. Double Top Eyes 1250.



When gold made highs of 1033.9 on March 17, 2008, it was a day later when the Federal Reserve came out with a FOMC statement, lowering the target for the federal funds rate aggressively by 75 basis points down to 2.25.  It was during this year this federal funds rate had begun to see drastic cuts from the Fed, until it finally got to 0-.25% early 2009.  Throughout all of 2008 the funds rate dropped from 4.25-1.00%.  Throughout this time, gold also saw a correction as the economy crashed in fall of 2008 seeing gold prices down to 681 in October.   Having already seen a 99% increase in prices from 519.5 to start 2006 into 1033.9 in March of 2008 this gave some reasoning for people to sell and take profits.  The shakeout brought prices down to 681 in the fall before bouncing off these lows.  This led to another push back at the 1000 level where the market coiled like a spring looking for direction.  During this time, 90% of the investment and trading community did not expect to see gold to run through 1033.9 anytime soon.  Sure enough,  with the third attempt in 2009, the breakout was seen:  This breakout created a parabolic run seeing another 86% added on top of 1033.9 to run into highs of 1923.7 in September of 2011, just 3 years after making the 681 lows.  All throughout this time, the fed funds rate remained 0-.25%.  The investment community jumped on the bandwagon and commercials for gold investments skyrocketed.  Since making this parabolic high of 1923.7, a correction began as the market looked to consolidate the move (


2011 closed out with prices trading at 1566.8.  For the year of 2012, it has been all about consolidation.  The market once again ran into the 1800 resistance level early in the year with highs of 1792.7 before seeing another correction down to 1526.7 in May.  Not ready to move lower, the market held the December lows of 1523.9 and squeezed shorts and sellers as the market returned back to the highs of the year, once again pressing that the 1800 level.  The market put in highs of 1798.1 in October.  Once again, failing to push through 1800 for the THIRD attempt.  This created a double top for the year of 2012 with highs of 1792.7 and 1798.1.  Thus far the market has fallen back to the mean of the year inside the 1660 level.  This pullback has the market retesting where it broke out in  August of 2012 where the market pushed above the 1640 resistance level that troubled it during the summer.  This is now MAJOR support for the market and for gold bugs to defend.  The pullback offers the gold bugs this retracement to defend this pullback where the market originally broke out, turning old resistance of 1640 into new support.  Unfortunately, gold bugs defending this pullback must look to risk a break below the 2012 low of 1526.7.  Since gold is in a trading range of 271.4, this trading range gives the target on any expansion outside the range. Meaning a breach of 1526.7 gives room down to 1255 which would retrace the market down to the June 2010 high and just a little over a 50% retracement of the 681-1923.7 move.  Conversely, should buyers be able to hold the 1526.7 lows (which I don’t expect), a move through 1800 can see an upside target of 2069.5 by simply taking the range of 271.4 and adding it to 1798.1.  This is the task for next year, 2013 to find direction in the gold market. Throughout 2012 the market consolidated and traded within this range of 271.4 and put in a failed higher high at 1798.1 which gives the potential of a double top.  Of course just as 90% of the community was bearish gold sub 1000, 90% of the community is now bullish gold.  Regardless, we have a range bound market seeing pressure to break lower and shake down to 50%. This comes on the heels of the latest FOMC statement where for the first time since dropping the Fed funds rate to 0-.25%, the Fed finally attached a target to how long they will keep interest rates this low.  In the latest FOMC statement on December 12, 2012, “… the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent…”. After 3 years of having low rates with no target, a target now given, the gold market is being cautious and since this FOMC statement, already down $82 to 1636.



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