Wednesday, May 17, 2006


Here is an hourly chart showing pit and electronic trading in June gold futures. (Ignore the two big vertical lines in the middle of the chart - they are just data transmission errors.) I last commented on gold here.

I think the market has entered the third phase of a three phase decline. If so the downside target will be 665 which is just above 661, the 2 and 5/8 multiple of the 1999 low at 252.

At this juncture I think a three phase corrective move downward is more likely than the start of a bear market. The reason is simple.

The market bounced of resistance near 725 which was the 2 and 7/8 multiple of the 252 low. In my experience the 3/8 and 7/8 mulitples generally do not end bull markets, so I am looking for another leg up to the 3 and 1/8 multiple of 252 which stands near 788. The only thing that would make me reconsider this view would be a substantial and accelerating drop below the 660 level

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