Some Big Swings Setting Up in Gold

Gold is Likely Forming a Triangle (Orange), which Means Some Big Swings are Setting Up to Retest its Top and Bottom

Gold is Likely Forming a Triangle (Orange), which Means Some Big Swings are Setting Up to Retest its Top and Bottom

Gold is now megaphoning across 1200, which is VWAP of the big megaphone that’s been forming since late September 2014. That makes gold a favorite to complete a triangle (orange) across 1200. The triangle could break out in either direction.

If gold is forming that triangle, it will soon be putting in some big swings to set up the formation’s top and bottom.  Those will be swings to the blue and red megaphone tops and bottoms.

If gold can break out upwards through both 1230 and 1250, it will be going for a retest of the July 2016 high.  If instead gold is turned back at 1250, it will likely be going for a retest of the December 2016 low before the retest of the July 2016 high and subsequent retest of the November 2015 low.

Be aware that triangles tend to be comprised of a series of megaphones inside megaphones, and they can get very messy in the middle.  The moves coming up may not be as clean as drawn.

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.

US Dollar Update

DX is at the VWAP of its Long-Term Megaphone (Red)

DX is at the VWAP of its Long-Term Megaphone (Red)

The dollar is hung up at the VWAP (volume-weighted average price) of a very long-term megaphone that began forming in the late 1980s (red on chart).  It’s also paused just above the breakout point from a falling wedge top connecting the 1985 and 2002 dollar highs.

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX got to its recent high within the red rising megaphone on the second chart.  That high pierced the formation top before reentering and would usually make a new high within the formation before breaking out of it.

Then DX must return to at least the base of the rising megaphone at roughly 93.

It could get there by returning to the blue megaphone VWAP at roughly 95 and starting a new megaphone there (green scenario).  The green scenario could produce a series of new megaphones inside megaphones across 95 to form a big continuation triangle before the dollar continues up to the top of its long-term red megaphone.

But it’s more likely that the dollar will continue through 95 to the bottom of its blue megaphone to form the larger orange megaphone.