This week should prove to be important for nearly all markets. It stands on my trading models as what I call a “timing pivot point”, which means we will see one of two things happen. Either …
A. Current trends will pause and temporarily reverse for a few days. Or …
B. The current trends in place will violently accelerate.
Either way, it’s important to note that neither of the two above options means a trend change. It’s simply a matter of whether or not there is going to be a pause first.
The sole exception being the stock market, where a trend reversal (to the downside) does appear to be in the cards for this week.
Let me further discuss via gold. Gold’s plunge last week was devastating to gold bulls, yet right on target with the cycles. After topping right on cue in mid-October, gold has plunged – shedding $108, a whopping 9.1% in less than a month – and is now plunging into a November low.
Here is my latest neural net forecast for gold, updated over the weekend. Importantly, the model now shows gold moving lower into Wednesday, November 25.
HOWEVER, gold is deeply oversold on a short-term basis. That means a bounce is likely.
And indeed, as I pen this issue, gold is up about $5 (6:03 AM EST).
That’s not much, but I suspect we will now see up to a three-day bounce in gold, into Wednesday’s trading session. This is largely based on the fact that gold avoided a weekly sell signal on Friday by coming within three dollars of hitting the important July low at $1,074. Close to breaking it, but no cigar.
That in itself is a short-term sign that gold is not yet ready to plow through that low (to a new record low for gold). Instead, it may need to pause and gather some strength to do so.
The same can largely be said for the euro. It plunged last week, yet held minor support levels. So it too is likely to bounce for up to three days, then resume trending lower. Ditto for the Japanese yen.
Same for the dollar, but in reverse: It came within a hair of a major breakout, yet failed to do so on Friday. That means the dollar should pull back for up to three days, then resume its rally.
Importantly: If those bounces (and pullback in the dollar) are strong enough, I will use them to your advantage and recommend adding additional bearish positions in gold, the euro, and the yen – as well as a new bear position in silver. And conversely, an additional long position in the dollar.
THEREFORE, for the current open positions:
We are going to simply hold with the expectation that the favorable trends will resume, after a short-term bounce.
To review:
– Hold your open position in UUP, with your protective stop at $23.74 in place on a good till cancelled basis. Also hold your remaining UUP call options.
– Hold your current open position in EUO, with a good till cancelled protective sell stop at $21.56. Also hold your remaining EUO call options.
– Hold your current open position in either FXY (yen put options) or the inverse yen ETF, YCS.
– Also hold your current open position in DZZ, with a good till cancelled protective sell stop at $6.53.
– USO is still a hold. Oil appears to be bottoming after testing support on Friday. However, it’s touch and go with oil right now, so stay alert.
– Lastly, but as mentioned earlier, this week appears to be a turning point for the stock market. Therefore, continue to hold UVXY, with your stop in place, good till cancelled at $22.24.
Now, let me address the longer-term
picture for gold (all precious metals).
As the forecast chart (repeated here) clearly shows, gold is now poised to indeed move lower – into Wednesday, November 25.
How low can it go? This is the tricky part.
Cycles do not tell you much about price.
They are about timing and turning points.
My other tools come into play to determine price forecasts, and here is the bottom line: To form a MAJOR low that ends gold’s near market …
A. Gold must break the July low at $1,074 heading into November 25. If that happens …
B. Gold’s major support levels will then be found at $1,063 … $1,035 … $1,005 … $984 … and the $890 to $905 area.
Right now, it’s simply too soon to say. But I suspect, based on early indications from my price projection tools, that gold will fall to at least the $1,035 level.
Ideally, I would like to see gold fall below $1,000. That would scare the dickens out of almost every gold investor on the planet, thereby also setting up the market for an even more powerful rally to follow.
IF gold does not break the July low by the cycle turn date of November 25 …
Then gold will still rally per the forecast chart into March of next year, but then crash yet again into April 2016, producing the final low.
Either way, I expect a potentially very strong rally coming out of the November low. That rally could be very strong.
No matter what, naturally, I will keep you fully informed on whether or not gold is making a MAJOR low as we head into the November 25 turn date.
Plus, if it does indeed make a major, final low – I will make sure you get my top recommendations for core investments in the precious metals. While not part of this service, per se, they are longer-term investments everyone should own.
Stay alert now, very alert!
Best wishes, as always …
Larry
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