Earlier last week, we pointed out that the market was facing a small countermove and wrote:
Even though a small countermove of $15 – $20 is imminent in gold, we maintain the opinion that the bears will eventually drive the market towards $1150 – $1109 before a sustainable bottom is reached. Meanwhile, the bulls are starting to misbehave. With the high at $1230, there should be no more upside to keep our count valid. As you know we do not want to see a breakout above this mark to not cause a breakout above $1246. In this case, prices towards $1284 an ounce would be unlocked, before another correction could be expected.
Our primary expectation remains that the market will continue to expand the downward movement to the $1150 – $1109 an ounce area. We assume a long-term bottom in gold will be reached, for which we will define a corresponding target range. As we wrote in our free daily update: “After the bottom we expect prices to soar towards the $1400 area. In order to accelerate the downward movement again, the bears must drive the market below $1192.
The SPDR Gold Shares ETF (NYSE:GLD) is also expanding in a countermove, but is able to stay below $116, and thus the decisive resistance, in order to maintain the downward pressure. However, it should still be noted that the GLD has not fallen below support at $112.64 in the course of the previous correction movement and thus has not yet confirmed the high in wave (II) in white. Even though our primary expectation in this market is for significantly lower prices in the $107 – $106 range, it remains vulnerable to a detour across the $119.78 area before the correction continues to expand.
With the completion of wave 2 in purple, in the $107 – $106 area, we also expect the GLD to hit a long-term bottom, which will lay the foundations for an overall upward movement.
SPDR Gold Shares
In summary, both markets do not have much room on the upside for the rest of the week. So the GLD should no longer break above $116 and Gold should no longer break above $1231 to maintain the imminent downward pressure. Once the ongoing correction in both markets is completed, we see them building a long-term base in both markets. To this end, we will still define corresponding long target ranges. As already pointed out, we have moved stops on all short entries of the target zone (yellow box) at $1246 – $1231 in gold and $117.65 – $116.00 in GLD. We now trade these positions without any risks.