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Gold–Breakdown Or Building A Base?

 February 12, 2013 04:44 PM


In its correction since October gold has been confined in a symmetrical triangle formation. The direction of its break out of such patterns usually determines its next direction for awhile.

At our sell signal we gave our initial downside target as 1,650 an ounce. Gold has come down to that level four times now. It bounced off the first three times, but its rally attempts each time continued to fail at either the 30-day m.a., or the upper limit of the triangle.

[Related -Perfect Storm Driving Gold Higher]

Each time it became closer to the tip of the triangle where it would have to break out one way or the other.

It potentially broke out of the triangle to the downside yesterday. But did it? The jury is still out. It could still potentially be just building a base at the 1,650 area.

Not all global markets are moving in  tandem anymore, at least short-term.

Global markets have a very strong history of moving in tandem with each other. That is particularly true regarding annual seasonality, as shown in several independent academic studies. This is a link to more info on that: Market's Seasonal Patterns in Global Markets!

And so it has been that most global markets pulled back along with the U.S. market from October into mid-November, but have been in significant favorable season rallies since.

[Related -SPDR Gold Trust (ETF) (GLD): 3T Analysis: Target $1,400 but Box Bound]

Most also became short-term overbought above short-term 21-day and 50-day moving averages along with the U.S. market.

But now it's become a mixed picture, with some global markets continuing on to higher highs while others have begun to pull back from the overbought conditions. For some the first potential support at 21-day moving averages did not hold.

And for still others the potential support at 50-day m.a.'s has not held either. They include some important economies and markets like:

 

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