By: Jeff Cooper
Hit and Run Morning Stock Report: November 7th, 2022
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Gold: Is It Time To Get Excited?
Tuesday’s Hit and Run Report, Precious Metals Putting In the Last Leg of A Two Year Consolidation, stated that when gold comes out, following this tedious two year torture, few market participants will buckle in.
The net of it is that the ascent should be quite an event.
Friday gold ripped $50.
No one, but I mean no one wants to go out on a limb and declare the bottom is in on the metals because every time they have done so, the limb gets sawed off.
It’s been hard to keep an open mind with every turn up since the March spike high failing to gain traction and diving lower.
The March 2022 high tested the August 2020 all-time high leaving a large range reversal week and double top.
Subsequently, every 1 to 3 week turn up has marked a high-- the very definition of an authoritative downtrend.
However, GLD left a large range outside up Key Reversal Week last week.
This mirrors the large range downside reversal week in early March 2022.
As WD Gann stated: “As above, so below.”
No other outside up reversal week has occurred since the March high.
A funny thing happened to GLD on the way to a new leg down following Powell’s hawkishness on Wednesday.
GLD gapped up on Friday offsetting Wednesday large range outside down day.
In so doing GLD left a bullish Keyser Soze buy signal.
This is because we have a Reversal of a Reversal in GLD: Friday’s action reversed Wednesday’s knife down.
At the same time GLD closed over its 50 day line on the Friday weekly closing basis.
After 7 months of torture do I have to say that Follow Thru Is Key?
That said Friday’s move looks like there is something to get excited about in gold.
First, GLD closed above a declining trend line from the March high. (Again follow through will be key).
Follow thru will validate an Angular Rule of 4 Breakout.
Second, GLD left a Gilligan buy signal on Thursday.
This is a gap down to a new 60 day low with a close at/near session highs.
Not only did Thursday see GLD strike a new low 60 day low but it was a new low for 2022.
In that context Friday’s explosive move gets my attention…in addition to being a Keyser Soze buy signal, but
It did so in a spectacular way off triple bottoms.
As well, last week’s low was an important 7 months from the March high, an important time frame cyclically as 7 is the number of panic and the metals certainly panicked after Powell’s press conference last week.
Metals bulls who added to positions in front of the “leaked” Powell Pivot on Tuesday has buyers remorse on Wednesday sending GLD to a new swing low from this year’s March high.
Who can blame them: we’ve got the highest inflation in 40 years and the metals complex haven’t rallied on this backdrop.
Did I ever say that inflation was bullish for the metals?
To the contrary, I’ve held that the metals rally off a lack of trust in the system-- economic and otherwise--
A failure of confidence in government.
I think that is what is coming in spades in 2023.
Let’s pull the lens back and take a look at gold itself from 2008.
Gold bottomed in the fall of 2008 and again 7 years later in the fall of 2015.
Here we are 7 years later in the fall of 2022.
The magenta vertical lines represent a 7 year cycle.
This is within the context of a potential 7 month high to low cycle from March 2022.
7 X 7.
Gold is also working on what looks like a double Cup & Handle:
The large green Cup and Handle and a smaller red Cup and handle.
The red formation may be said to be a larger handle of an 11 year Cup.
The Handle shows two drives into a large support region defined by the tops region following the 2011 high.
This is the green horizontal band.
My take is clearing the upper band at the 1900 region should see acceleration.
Below is another view of gold’s monthlies with a trend channel.
I connected the December 2015 low with the December 2016 low.
The break below the channel in 2018 looks like Trap Door given the ramp once the channel was reclaimed.
Notice how gold has pulled back to the channel.
Based on this 3rd test of the channel combined with the aforesaid 7 year cycle, gold looks exciting.
If it follows through my expectation is a drive to the 1900 level.
This is where the top rail of the blue channel intersects with the rising green trend line.
The convergence comes in at the 1900 region.
Keep in mind that the mega-top in September 2011 was 1921.
Notice the horizontal green trend line marking this trifecta of trend lines.
While the 1900 ish region marks beaucoup resistance, clearing 1900 + with authority should perpetuate fireworks.
Gold saw a spectacular end to the first week of November after putting in the longest streak of monthly losses in more than five decades.
Every time gold has rallied since March, selling came into the market.
However, on Friday the market surged nearly 80 points in the early going before fading completely before getting a second wind where the SPX closed up 50 points.
Noticeably during the market fade, the precious metal complex held on to its gains and pressed higher once the market regained its footing.
This looks like a conspicuous change in character.
Clearing the high end of gold’s recent range at around 1685 opens the door to