The price of Gold marked its all-time High of $1228 per ounce on December 3, 2009. Since that time, Gold fell sharply, beginning on December 4, as depicted by a tall black candlestick bar for that day. From a “Wave 1 Down” Low on December 22, Gold retraced just over 50% of its initial decline, and closed right on that 50% retracement line, leaving behind a bearish “Spinning Top” Reversal bar which could almost be characterized as a “Shooting Star,” which is also a recognized Reversal pattern. The top of that initial retracement made possible the establishment of a down-sloping trendline, drawn from the top on December 3 to the top of the retracement on January 11.
The aforesaid “Spinning Top” Reversal pattern accurately forecast the strong decline which followed, and then another upmove which hit the down-sloping trendline on February 3 – which was sharply rejected downward by the trendline. After the ensuing decline, prices were propelled upward again by a strong bullish “Hammer” Candlestick pattern on February 5, leading to a short advance to the point at which prices stand as of today: $1094.0, which is just below the down-sloping trendline and only about 5 dollars short of it.
Tomorrow, and the ensuing few days, will be “make or break” time for Gold. If it can break upward through that trendline and then Close meaningfully above it, then the chances would be good that Gold will be off and running on a new advance. On the other hand, if Gold tests the trendline and is rebuffed downward, then the chances would become truly excellent that Gold prices will be on their way down to $800 and below.
So long as prices remain below that trendline, they will continue to be “crowded” thereby, if only because the trendline is on a down-slope. Every day that passes means that prices would be forced to attack it from lower and lower levels.
If there is to be a rejection of prices by the trendline, whether now or in later days, the characteristics of the Candlestick bar at the point of rejection will tell a good bit of the story which we anticipate will follow along.
William Kurtz
February 15, 2010
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