The monthly resistances are very strong - Gold implies a continuation of the stock market rally

As we elaborated last week, the indexes are fighting against their mighty resistances. I mean in the NASDAQ-100, we drew up the 1820 in the GUNNER24 Setup. Well, the last trading week showed the mark exactly at 1823.32.

Considering the market simply this way we see the market has produced a higher low.

That means we are still in an upwards trend. At the same time, the 61.8% January retracement is providing a powerful resistance, as well.

Rummaging in the setups sometimes produces an idea...

From this setup we can gather the threat of additional resistances on Monday/Tuesday. On Monday, the lower line of the 2nd double arc will be at 1835 corresponding with the upper line of the 2nd double arc in the actual 3 Candle GUNNER24 Up.

To compare two indexes always makes sense because that increases the security of the analyses. Maybe the things one index withholds from us are shown by the other. 

The situation: Also in the 4 hour chart of the Dow Jones continuous contracts we are precisely at a target. Since we have not closed within the 4th double arc the main target of this up swing is not activated yet. The weekly high is nearly on the important time line. We are in the 7th passed square where we really must not expect a change of the swing. All the same: in this time frame, too, a very important resistance will be effective exactly at the weekly closing. Definitely for certain should be that our distance from the main target is only 90-120 points.

Let us still have a look at the actual 3 Candle Daily GUNNER24 Up:

Here, the Friday candle looks toppy to me. But since the 4 hour time frame makes possible a daily closing price within the 2nd double arc on Monday or Tuesday respectively thus being able to activate the main target of the entire one year upwards move we will execute the following strategy:

1. On Monday, Tuesday or Wednesday, we will mark the top of the up swing. The upper line of the 2nd double arc is the first obvious target. In the case of the NDX, it is at 1835. That is where we will cover the half part of our long positions to take along some profits. We will hold the rest because “the trend is your friend”.

2. Since the resistances in the actual prices are extremely strong we will always have to take into consideration a stronger retracement on daily basis. See YM # 3 Candle GUNNER24 Up.

3. If we recognize that the 2nd double arc is clearly broken upwards on Monday or Tuesday we will increase our longs because thus the 10700 in the YM # or the 1870 – 1880 in the NDX respectively are activated on daily basis as well.

4. If on Monday, Tuesday or Wednesday a reversal candle is produced we will cover all the long positions seeking the re-entry at the back test of the first double arc. The Thursday candle is allowed to produce a reversal candle (normal reaction in the upwards trend!).

5. Within the 4 hour time frame we consider the 1*1 Gann Angle letting go on our longs as long as the 1*1 Gann Angle is broken. At the moment of the obvious break we will turn the position with a very narrow stop in order to trade a possible 3 to 4 day retracement. We will do so because on the one hand the monthly resistances are very strong and we ALWAYS have to take into consideration a change in trend at the 2nd double arc in a GUNNER24 Up Setup whenever the market is in a possible down trend. At least the performance of the Friday candle at the 2nd double arc is pointing that way. In addition, in the 4 hour GUNNER24 Up Setup there are resistances which may mean that the up swing was finished after ten days. That would be another evidence of a fake move produced by the market.

Gold: Consolidation at the high!

As to the turns, gold is the precursor of the stock markets. At the moment, it is running ahead of the stock markets. Just compare the moment on 02/05/2010 when the final low of the last down swing was formed. At first in gold, two hours later in the stock markets.

As well, in the actual Daily GUNNER24 Setup we can realize a much stronger initial impulse than in the stock markets.

The first double arc at 1148 is the first target for long positions when gold closes over 1129 on final price basis. As early as Friday, gold prepared its break out of the first square, rebounding impressively at the 2*1 Gann Angle. For 4 days already, the blue arc has been offering resistance, and the price might follow downwards (1100 – 1080) on Monday through Tuesday, maybe during the whole week without spoiling the general impression. If the 1080 comes, a long entry at one of the Gann Angles (Rules 18.3 – 18.5: Gann Angel Retracements) will be possible.

The situation: Gold closed within the 3rd double arc thus activating the next target and the next main target (5th double arc). But that 3rd double arc is offering considerable resistance, like usually. We also know this: Very often after the 3rd double arc has been reached or broken, respectively, a zigzag move will follow which can frequently test back the 1*1 Gann Angle (near 1100). It is simply silly. And to decode the price performance in its surroundings you normally have to work in the lower time frame, so you can elaborate the final break. At the 4th double arc, the target at 1148 is very close to Tuesday. If the 3rd double arc were able to maintain its influence of resistance through Monday evening the 1148 might not be on the plan before the end of the week.

The 1*1 Gann Angles in the stock markets and in gold in the 4 hour time frame deserve supreme attention. They are the lines in the sand. If they are broken downwards significantly the possible retracement on daily basis should begin.

Finally, we will have a look at the pair EUR/USD in the weekly and in the daily GUNNER24 Setups:

In our GUNNER24 Forecast issue of 02/07/2010, we already had noticed the possible target for the pair. Just two weeks later, the weekly GUNNER24 Setup is corresponding with the daily one.