Will a Punch in Gold Rhyme with a Crunch in Chips?

We’ve been tracking December 3 as a likely pivot for GLD and gold as it is 90 days/degrees from the September 4 high for the year.

As we know, 90 days/degrees is a reliable cycle.

A daily GLD below from August shows a breakout on a gap on December 3 above a trendline encompassing resistance throughout the entire last 3 month correction.

Got Gann?

On December 3, GLD gapped up above this trendline and pulled back for a backtest on Dec 6.

The pullback into the Dec 6 low left a micro island. Yesterday, bullishly, GLD closed the gap and is now challenging its overhead 50 day line.

The structure best counts as a little 1 up on Dec 3 and a little 2 down with yesterday’s impulse — consistent with the start of a little 3 up.

If this is correct, GLD will clear its overhead 50 day moving average, putting it in position to attack the key pivot just above 140.

140 ties to a secondary declining trendline from the late October highs.

Notice the convergence with this trendline and a little rising trend channel defining the price action since November.

The bottom line is that clearing 140-141 on a sustained basis indicates continuation to 144 which ties to a Ghost Line (blue).

Notice also that GLD gapped up in late November — above its 50 day moving average breaking above a declining trendline. That action also left a micro island.

However, there is a big distinction between that pattern and the current long setup.

In late October, the ‘island’ remained intact and the gap back below the 50 day m.a. indicated a false breakout.

Fast moves come from false moves and GLD responded accordingly by flushing to the low for the corrective move since the September peak.

The distinction is that yesterday, GLD offset the open gap and is now in a position to clear its 50 day m.a.

If successful, it looks like a case of the 2nd mouse getting the cheese.

In other words, the first breakout above the declining trendline and the 50 dma failed and gold longs got the squeeze.

Upside follow through now above the 50 day line AND the key 140 region indicate the 2nd mouse will get the golden cheese.

My expectation for a bottom in the metals complex looks like it is being validated.

Overall, I maintain the perspective that we should prepare for a major move to the upside.

Powell stated yesterday there would be no rate hikes in 2020.

So much for “data-dependent.”

He also stated recently that he would need to see a “significant” and “persistent” rise in inflation to even consider raising rates.

They say don’t fight the Fed. Well the Fed is saying that they are going to let inflation run hot.

Gold is listening. Gold is not going to fight it.

The Fed is providing beaucoup blue sky for the golden metal.

Are the gold bears going to fight the Fed?

Gold bears may say that the Fed will contain the price of gold as it calls b.s. on them.

However, contrarily, I think they will let gold run hot too, underpinning the perception and reality that they have succeeded in igniting inflation.

Higher gold prices point to a “successful” campaign on their part.

And what is their campaign?

It is to monetize the debt… because there is no way otherwise to resolve the debt.

More on that in Monday’s report, Debt It Be Part 2.

I can’t help but wonder at the synchronicity that the Fed is stoking inflation upon the death of THE American Financial Giant, former Fed Chair, Paul Volcker, who whipped inflation in the early 1980’s, paving the way for the Reagan Era.

A Fed on hold for the next year didn’t exactly send the market into orbit as one might have thought.

Nor did Tuesday’s rumors that the can was being kicked down the road on the Dec 15 China tariff deadline.

Be that as it may, yesterday’s ‘news’ was enough to spark the high beta semiconductors to a new all-time high.

Our CRUS exploded.

However, a daily SMH for 2019 shows it may be at pivotal resistance… a 3rd drive to the top of a trend channel (blue).

Notice that the spring top in SMH occurred on the 3rd drive to the top of a channel as well.

SMH broke out over a trendline connecting the April and July highs in October.

It backtested the breakout point on December 3 which perpetuated the current push to an ATH.

SMH is at an inflection point going into year end:

It is flirting with 3 drives to a high at the 140 region while just below is a 3 point rising trendline at the 130 region which also ties to the 50 day line.

Breakage below 130 could see a swift drop.

In addition to the 50 day and the rising trendline, 130 also ties to recent successful Dec 3 backtest of the breakout point.

Consequently, failure below 130 implies a fast move to the bottom of the channel at 120.

The pattern sets up similarly to the chip crunch in May when SMH snapped 3 point trendline support.

The difference is that this time there is multiple support at 130… so breakage below 130 is magnified.

Conclusion. Interestingly, 140 is a big number for SMH and GLD over the next few hours/days.

As it happens, TODAY vibrates with 140.

As my Square of 9 Wheel shows, December 12 is 180 degrees straight across and opposite 140.

You can’t make this stuff up.

140 squares out with this week on the square of 9 chart.

As the semiconductors are typically the point of the market speak, this 3rd drive up to a trend channel bears watching.

Red arrow is 140
Blue arrow is Dec 12