Without question today was a really, really bad day for gold. And not just from a trading point of view. Technically, the damage to the shiny metal was intense.
So besides the outside negativity gold is facing (Rate hikes, US dollar moves, good economic news), even the most optimistic chart purest will have a hard time calling a bottom here.
One thing all technical analysis guru’s can agree on are Fibonacci numbers. Among other things, Fib numbers are used by technicians to find levels where a chart should bounce.
They use these numbers to find entry points for trades and although they’re not perfect, they are very close.
Let’s remove the suspense right up front; No, gold has not found a bottom and traders need to be very extremely cautious before taking up any new positions in any stock or index associated with the precious metal.
That’s a 5-year chart of gold. Now, we like to keep it simple so here’s why we don’t think the selling is done;
- The US economy is getting stronger. I know with all the doomsayer media out there its hard to believe. But the fact of the matter is it is true. And many of the Central Banks are realizing it – especially Janet Yellen.
- The last rate hike did nothing to hurt the market. One year ago the S&P 500 was at 1950. Today it closed at 2159. Over 200 points higher or about 10.7%.
- The markets digested that rate hike and there is no reason they won’t do the same if the Fed raises in December.
If you’re like us you see all the “end of the world” articles out there. They come in newsletter ads and show up on even the most legitimate financial websites and blogs.
And gold is always at the forefront of these articles. You better buy gold and you better buy it now!
Look at these predictions sanely: If the world does slip into a global recession, the dollar crashes and we enter financial Armageddon, will anything even matter anymore?
So, we’re not sold on this being a bottom for gold. And remember we mentioned those Fibonacci numbers? Here’s your road map for them…
- $1290: In a normal bull market, this is where the sell off should have stopped. (It did not)
- $1270= the 67% Fibonacci retrace number (Daily) It closed below this one also.
- $1268= the 33% Fibonacci retrace number (Weekly) It took this number out also!
- $1155= the 67% Fibonacci retrace number (Weekly) Next stop?
The charts never lie and the Fibonacci is a very reliable indicator. Until we see solid strength return to gold, we will stay away.
The Financial Reboot Investment Team
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