Gold Forecast: Gold & U.S. Stocks Setting up for Decline

Since my last article from mid-July, Gold has seen a very nice rally, with the metal running up to a test of the low-end 4500's, which is up some 500 points off the late-June trough. Near-term, the metal looks to be setting up for a sharp decline, with U.S. stocks looking for a bigger percentage correction.

Gold's 34-Day Cycle

For the very short-term, the most dominant cycle that we track is the 34-day wave in Gold, which is shown on the chart below:

As mentioned back in May - June, the last 34-day cycle trough was projected for the mid- June timeframe or later, with the actual bottom for this wave coming in on June 30th, doing so at the 4015.30 figure (note: December, 2026 contract). With the strength seen over the past 6 weeks, this 34-day cycle in Gold is now back in topping range - and thus is looking for a sharp correction in the coming days/weeks.

Timing With the Gold 'Reversal Points'

In terms of price, it was the July 6th reversal above the 4211.90 figure (at the time, the August, 2026 contract) which confirmed the upward phase of this 34-day wave to be back in force. Since then, Gold has seen nearly 300 points of additional strength through that reversal figure.

Prior to the above, it was the May 16 reversal below the 4510.10 figure (at the time, the June, 2026 contract) which triggered the prior correction phase for this 34-day cycle. Once that level was taken out, another 500 points of additional weakness was seen, eventually culminating in our late-June low.

In other words, timing Gold with only the upside/downside reversals would have seen a very nice gain in past months, while the metal itself is still where it sat back in mid-May. This is the power of using and knowing these price reversal levels in advance. I have traders who play off these numbers - and nothing more - and who do very well.

With the above said and noted, no new downside 'reversal point' has yet to form with our 34-day cycle, though one should show up soon, and will be posted in our thrice-weekly Gold Wave Trader report.

As mentioned above, once our 34-day cycle does top, a sharp decline would be expected in the coming weeks, with the downside 'risk' back to the 34-day moving average, and/or the lower 72-day cycle channel - each of which are well below current price levels.

The 72 and 154-day Cycles in Gold

As mentioned in past articles, a correction low with the bigger 72 and 154-day cycles was set to bottom in the mid-June to mid-July window.

Shown below is the 72-day cycle in Gold:

As mentioned in my prior articles, the detrend tracking our 72-day component had been projecting a 72-day trough into early-July, plus or minus, which was in the window for the smaller 34-day bottom to form.

With the above, the amount of strength on the recent upward phase of our 34-day cycle was enough to confirm the rally phase of the larger 72 and 154-day cycles to also be in force. With that, the combination of these larger 72/154-day waves is seen as pushing higher overall, ideally into the mid-September to early-October timeframe.

Having said the above, we know that the smaller 34-day cycle is looking for a decline in the coming weeks. With the position of the bigger 72 and 154-day cycles, we should be looking for a countertrend correction with the smaller 34-day component, though it could be a sharp - and scary - affair.

Stepping back, there should be another trough with our 72-day cycle into mid-to-late October. From there, another sharp rally of some 14-15% or more would be expected to play out into February of next year. On or after that point, a bigger 154-day cycle top would be expected, before giving way to another correction low with this particular wave into (tentatively) next Spring.

U.S. Stocks (Update)

As mentioned in my past articles, the last key low for the SPX (i.e., the S&P 500 index) was made back in late-March, which ended up as our last 180-day cycle bottom.

Here again is that 180-day cycle in U.S. stocks:

In terms of time, my past articles noted that the upward phase of this 180-day cycle would likely remain intact into the late-July to mid-August window. In terms of price, I noted the potential for a spike up to the 8000 SPX CASH figure before peaking this wave, though there was no guarantee we would get that high.

With the above said and noted, we are now into the expected topping window for this 180-day cycle in U.S. stocks. With that, we are on the lookout for a fairly sharp correction in the next 6-8 weeks, with the next 180-day trough projected for the late-September to mid-October window.

In terms of price, the overall path is looking for a potential drop back to test the rising 200-day moving average into late-September to mid-October, which could also act as support to the coming correction with our 180-day cycle.

In terms of patterns, the correction into the next 180-day trough is expected to end up as a larger countertrend affair, before turning sharply (20-25%) higher into next Spring. On or after that point, yet another 180-day top would be due in U.S. stocks, to be followed by what looks to be a corrective low into next Summer.

The Bottom Line

The overall bottom line with the above is that Gold is due for a sharp correction, coming from our 34-day cycle. Due to the position of the larger 72 and 154-day waves, that decline would be expected to end up as countertrend, before turning back to higher highs into the late-September or later. As for U.S. stocks, a larger swing top is also now due, coming from our 180-day time cycle, which is looking for a sharp decline into early- Autumn, before turning higher again into next Spring. Stay tuned.

Jim Curry
The Gold Wave Trader

Market Turns Advisory
http://goldwavetrader.com/
http://cyclewave.homestead.com/

*********