Gold markets have broken down rather significantly during the trading session on Wednesday, as we have formed a horrifically bearish candlestick. However, there are a lot of buyers underneath near the psychologically and structurally important $1500 level. That’s an area that extends down to the $1490 level as a support “zone.” With that being the case it’s likely that we will see a bit of a fight in that area based upon market memory.
The 50 day EMA sits just below there as well, so it’s very likely that will also offer a bit of support just because it’s there. Any type of daily supportive candle in that region gives the gold market an opportunity to bounce and continue the overall uptrend but if we were to continue to go lower then I start to look at the $1450 level as support based upon the fact that it was the top of a previous ascending triangle. That was what kicked this market off to the upside, so it makes quite a bit of sense that area would of course be of interest again as the market has been launched from that region.
Looking at the chart, the $1560 level is resistance, and it should continue to be an area where some sellers should be found, but if we were to break above there, then it allows the market to fulfill the “measured move” from the rectangle that I have marked, opening up the door to the $1620 level. Longer-term, I think we go higher than that anyway, so this is a market that I am looking to buy on dips but recognize we may need to see a bit of stability first before jumping in right away. After all, part of what has been driving gold higher has been political theater in the United States, which looks to be ending with the dud yet again.
Pay attention to the next couple of days, they should give us a bit of a “heads up” as to where we will probably go longer term. I will base my next trade off of a daily candle stick, so in the meantime I simply sit on the sidelines and wait to see what happens over the next 24 hours and perhaps even 48 so it can give me a longer-term outlook for the market yet again. Nasty candlesticks like this typically mean something, so we have to be cautious.
