Gold Price Channel Update

Gold has Continued Sliding Down its New Red Price Channel and is Now at the Moment of Truth

Gold has Continued Sliding Down its New Red Price Channel and is Now at the Moment of Truth

Gold has continued sliding down the new price channel (red) that confirmed yesterday and is now near the channel bottom where it either breaks out into a melt-down set-up or starts a bottom.

You know that gold is starting a bottom if it reaches the channel top again from here.

Gold Megaphone on Weekly Chart

Gold Megaphone on Weekly Chart

The channel has taken gold back to the VWAP of the megaphone (blue) it began forming in fall of 2014.  That VWAP is at roughly 1200.

That means a breakout from the price channel into a melt-down set-up would be a breakdown through that long-term VWAP with a target of the blue megaphone bottom.

If instead gold starts a bottom here, it is settling in to form a triangle across 1200 (purple scenario) that could break out in either direction.

An upwards breakout would mean a breakout from an inverse head and shoulders bottom with a triangle right shoulder with a target of a new all-time high.

A downwards breakout would target the blue megaphone bottom.

Gold is in New Price Channel’s Critical Decision Wave

Gold has Confirmed the Red Price Channel and is In Its Critical Decision Wave for Starting a Bottom vs Breaking Out Into a Meltdown

Gold has Confirmed the Red Price Channel and is In Its Critical Decision Wave for Starting a Bottom vs Breaking Out Into a Meltdown

Gold has confirmed a price channel (red) for its breakout from the navy blue rising wedge.  The price channel is in its critical decision wave for starting a bottom (green scenario) vs breaking out into a meltdown (purple scenario).

A meltdown would likely stop around 1150-1175, but it could go all the way into the 700s so it’s the kind of set-up you want to play if it occurs.

Price channel melt-down set-ups can also morph into falling megaphones or falling wedges twining along the channel bottom, but these tend to form clear bottoms so it’s easy to get out with at least a small profit when they occur.

The green scenario would likely set up a long period of gold moving sideways to form a triangle across roughly 1200.

 

Gold has Confirmed a Rising Wedge to 1250 Target

Gold has Confirmed a Rising Wedge (Blue) to its 1250 Retrace Target

Gold has Confirmed a Rising Wedge (Blue) to its 1250 Retrace Target

Gold needed a retrace to its purple megaphone VWAP at 1250, and it has just confirmed a rising wedge (blue on chart) as it reaches 1250.

Gold Rising Wedge to the Purple Megaphone VWAP Raises the Odds of the Purple Scenario

Gold’s Rising Wedge to the Purple Megaphone VWAP Raises the Odds of the Purple Scenario

While gold could break out upwards from the rising wedge (pink scenario), it’s most likely to break out downwards to either start a series of megaphones-inside-megaphones across 1200 (green scenario) or start a plunge to the bottom of the big red megaphone on the chart (purple scenario).

The green scenario would ultimately form a triangle that could break out in either direction–up for a breakout from an inverse head and shoulders with a triangle right shoulder, or down for a trip to the red megaphone bottom.

Gold could also use the green scenario to stay near 1200 for years.  In that case, it would break out upwards from the green triangle but only to the top of the red megaphone, where it would reverse to complete a large megaphone right shoulder on gold’s potential inverse H&S.

GDXJ Inverse H&S

GDXJ Inverse H&S (Red Neckline)

GDXJ Inverse H&S (Red Neckline)

GDXJ has an inverse H&S bottom on its long-term charts (red neckline).  It’s also formed a megaphone off the bottom (blue) and just put in the retrace to VWAP that makes the megaphone legal for an upwards breakout.

That means GDXJ could head straight up from here for a breakout from the inverse H&S, with a target of roughly 100 (green scenario).

The purple scenario represents a triangle right shoulder on GDXJ’s inverse H&S, with follow-through on a larger inverse H&S set-up.

The orange scenario represents a breakdown through the blue megaphone VWAP for a new low near zero.  The odds of this are extremely small.

The pink scenario represents a false breakout through the red inverse H&S neckline to put a megaphone right shoulder on the formation.  If you see GDXJ reenter the inverse H&S after a small breakout, get ready to buy the dip just below 25.

The longer GDXJ spends down here forming a right shoulder, the more likely it is to break out quickly through 100 when it finally heads up.

Yen Critical Decision Point

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen futures have completed an inverse head and shoulders bottom with a megaphone right shoulder (silver) on the drop out of last August’s high.

The yen has just retraced to VWAP (the volume-weighted average price) of that megaphone right shoulder and is now legal for a breakout upwards from the inverse H&S (purple scenario).

But if the yen can break down through VWAP for a trip to the megaphone bottom, if will put in a new low for the move out of the August high and confirm the blue falling megaphone.  That would be nice to see because it would usually provide a strong set-up for a melt-up to the formation top (green scenario).

The yen could also bog down forming megaphones inside megaphones across the silver megaphone VWAP (pink scenario).  This would usually mean a continuation triangle before a move to a new low to complete a wider falling megaphone.

Moment of Truth for the Ten-Year T-Note

ZN has been Working on a Bottom Since December 1 - Here's Where We Find Out Whether It's an Inverse H&S or Megaphone Bottom

ZN has been Working on a Bottom Since December 1 – Here’s Where We Find Out Whether It’s an Inverse H&S or Megaphone Bottom

The 10-year t-note has been working on a megaphone right shoulder for a potential inverse head and shoulders that began forming December 1. Now it is back at the inverse H&S neckline.

A quick pullback here to the right shoulder VWAP (volume-weighted average price) at roughly 124-23 would set up a breakout from the inverse H&S with a target of roughly 129 (green scenario).

A break through the neckline without a pullback first (purple scenario) would usually stall out quickly and the 10-year would form a topping formation at the neckline.  That would typically lead to a plunge to the right shoulder megaphone bottom for a retest of the low and possibly a new low.

That would be a plunge to buy, because the t-note would just have reached the low point of a larger megaphone bottom en route to a higher target.

Gold is Approaching its 1250 Critical Decision Point

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is approaching its purple megaphone VWAP (volume-weighted average price) and critical decision point at 1250.

Gold had a mandatory retrace requirement to 1250 before it could legally break out downwards from the purple megaphone and through the orange megaphone VWAP at roughly 1140 for a trip to the orange megaphone bottom in the 700s.  So gold could reverse at 1250 for that plunge.

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is approaching 1250 within the red rising megaphone on the 60-minute chart. This rising megaphone would typically complete with a head and shoulders top inside the formation that breaks out at the same time as the formation for a plunge to its bottom at 1200.

From 1200, gold could go blasting off past the July 2016 high for a breakout from a big inverse head and shoulders on the weekly charts.  That’s unlikely with a chart like this.

More likely, gold will either enter into the green megaphone-in-megaphone scenario on the top chart to complete a triangle (red on top chart) that could break out in either direction, or gold will complete the navy blue megaphone top on the 60-minute chart and break out downwards into the 700s.

The green triangle scenario is the strong favorite, but remember that Neely has a big correction set-up on his SPX charts for February or March that could mean an atypical move for gold too.