Hedgers Move To Net Long Position

Chief Analyst & Editor @ Goldwavetrader
September 9, 2018

Last week’s action saw gold holding in a consolidation pattern, with the metal bottoming in Tuesday's session with the tag of 1195.10 - before rallying up to a Thursday high of 1212.70, then pulling back off the same to end the week.

gold daily continuous contract chart

Gold's Cyclical Picture

For the short-term, the most recent rally phase was well overdue for the gold market, with the same coming as a result of the smaller-degree 10, 20 and 34-day time cycles. In terms of price, each of the 10, 20 and 34-day moving averages were hit with this rally, thus satisfying my normal assumption - which means that a cycle will revert back to a moving average of the same length better than 85% of the time.

Having said the above, until proven otherwise, the mid-term cycles (chart, above) are still seen as heading south at the present time, and could only turn up with a daily close above the 1263.50 figure (December, 2018 contract). With that, the overall assumption is that the most recent short-term rally will end up as a countertrend affair (Elliott wave 4), and with that will be followed by a test or a break below the 1167 bottom on the next swing to the downside.

Stepping back, should a drop back to or below the recent lows be seen on the next move lower, then it would be viewed as a strong buy signal for gold. That would be due to the completion of a five wave move to the downside, and would also be due to the position of the commercial hedgers - which have now moved to a net long position in the metal:

For the bigger picture, if and when the next mid-term trough is set in place, the probabilities will favor a rally which takes the metal back to or above the 154 and 310-day moving averages, though a move now assumed to end up as countertrend - against the September, 2017 peak of 1392. From there, lower lows should play out on the next downward phase of the 154 and 310-day cycles.

As for our Gold Timing Index, with the close above its upper standard-deviation band on 8/27/18 (i.e., 1216), this indicator is currently on a short-term sell signal - but with the same still looking for a mid-term buy signal at some point going forward. For the latter to materialize, price would need to register a lower low - with the indicator itself forming a 'higher-low'. From there, the actual trigger would be a daily close above the indicator's upper standard-deviation band. We'll see how this plays out in the days/weeks ahead.

Jim Curry

The Gold Wave Trader

Jim Curry is the editor and publisher of The Gold Wave Trader and Market Turns advisories - each of which specializes in the use of cyclic and statistical analysis to time the Gold and U.S. stock markets. He is also the author of several trading-related e-books, and can be reached at the URL's above.

Jim Curry became involved in the markets as an investor in 1988. In the early 1990's he stumbled upon a book/methodology that would change the way he looked at the markets forever. That book was J.M. Hurst's the Profit Magic of Stock Transaction Timing. Hurst's concepts seemed to make perfect sense to Jim, and he has spent the years since coming up with his own cycle/technical analysis methodology.

In 1998 Jim put his cyclic methods to the test by entering the Etrade national options-trading competition, twice (his only two entries ever into the competition). In the first contest he finished in the top 10 out of over 150,000 entrants; in the second entry into the same contest, he just narrowly missed finishing in first place - over quadrupling a $100,000 account in the contest's short time span.

What you are seeing when you view my market reports is a collection of over 30-years of experience in both numeric analysis and spectral methods - and in actually trading the methodology for myself and for the subscribers of my Gold Wave Trader (which covers Gold) and Market Turns (covering U.S. stocks) reports.

You can visit his websites at: http://goldwavetrader.com/ and http://cyclewave.homestead.com/

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