Pressing and Capping
We discussed in yesterday's podcast that today was likely to be a "Happy Tuesday". And so it is. But that's not important. What happens next is what matters most.
The absence of London Monkeys overnight allowed price to rally all the way into the Comex open this morning. As expected, though, price was immediately capped and thrown back from above $1350.
This is nothing new and we've seen it all before. As discussed yesterday, anyone trading and willing to be out overnight or for a few days should consider taking profits above $1350 as it's quite clear that The Cartel Banks DO NOT want to see gold trade clearly through there and, even more importantly, $1360. WHY? Because both levels are extremely important from a technical standpoint.
If gold can rally through $1350, it will violate the Cartel plans to paint a third recovery top on the chart. Actually, with the downward slope of the trendline being so steep, all gold really needs to do is continue to trade sideways for a while. If, eventually, it pops UP, all the better and the trendline will be officially broken.
IF and/or WHEN that downsloping line finally fails, we will turn our attention to $1360. Why is this level so important technically? This chart makes it pretty clear:
The reason I am optimistic and feel that it is more a matter of WHEN than IF is revealed on the charts below. Notice that with each Cartel capping effort at $1350, gold makes a higher low. This shows that momentum is building, not fading, and it gives the chart the appearance of a compressed spring. Of course, The Forces of Darkness might always coalesce into an overwhelming waterfall of selling. However, absent that level of desperation, eventually the cap fails and price moves higher.
You can see this on the HUI chart, too. The index has been stuck in a range for nearly four weeks yet notice the incrementally higher lows. This, too, is acting as a pressure cooker and it should resolve itself to the UPside. At this point, it needs a close above 248.50 to signal a breakout and an imminent run to 255 or so. We'll keep an eye on it.
And here's just a quick look at silver, which is also bouncing back today and above $21. For me, the key level to watch today is 21.10 to 21.15. A close above there would be a very positive first step in the road back to $22.
On the news front, there's nothing new:
- The Crimean Crisis isn't getting any "better": http://www.zerohedge.com/news/2014-03-11/diplomacy-fails-ukraine-putin-rebuffs-kerry-proposal-kiev-issues-ultimatum-crimea-su
- The U.S. economy remains in the toilet: http://www.zerohedge.com/news/2014-03-11/wholesale-sales-collapse-most-5-years-autos-lead-inventory-surge
- And there's still no sign of Malaysia Air flight 370: http://www.cnn.com/2014/03/10/world/asia/malaysia-airlines-knowns-unknowns/
And if you're wondering, I haven't decided what to do with my April gold call spread today. Part of me wants to take it off and hope to buy just the $1350 call back by Thursday. The other part of me says "screw it, it's not that much money and I really don't want to be out overnight". I'll keep you posted.
Have a fun day.