- July 1, 2022
- Posted by: Tradingshot Articles
- Category: Commodities
This is a chart that no-one in the Gold (XAUUSD) market (or as a matter of fact in the metals market) wants to see fulfilled as the 1M (monthly) time-frame presents a devastating scenario for the next 1 year at least.
As you see this is based on a fractal taken from Gold’s previous Cycle Top (September 2011). The 1M RSI particularly has been on a bearish trend since the July 2020 peak and is following almost precisely the peak pattern of Aug 2011. Right now it appears that the market could be after the September 2012 final High which started a violent 1 year correction below the 1M MA50 (blue trend-line).
See that both the candle action and the MA periods involved, align almost perfectly with the price right now trading below the 1D MA200 (yellow trend-line), having broken below the 1W MA100 (red trend-line) which on February 2013 was the trigger signal for the collapse. Being close to the 0.382 Fibonacci retracement level, we may have the first Support involved but watch for a 1D MA200/ 1W MA100 Bearish Cross. That should be enough technically to hit at least the 1M MA50 in the coming months. That level has been holding since the start of Gold’s mega rally in December 2018. Closing below that on a monthly basis would be devastating as the market can lose confidence completely and go on to test the 1M MA200 (orange trend-line), which surprisingly or not has been untouched for almost 20 years since August 2003!
We have to note that the macro-environment is different now as 1) we are not getting out of a crisis/ recession as severe as the 2008/09 Subprime Mortgage crisis and 2) the Fed Interest Rate is not flat as in 2013 but is rising aggressively instead. As a result this technical fractal may not repeated because such fundamentals are strong enough to invalidate it. As a result a proper investor should keep an eye on the macro-economic developments (Fed, war, inflation) and be ready to close a technical position if it gets invalidated as quickly as possible.