The pros and cons of the possible gold and silver breakout

Maybe next one is going to be the most important week for the gold bugs in the whole year. The entire trading community is waiting for the gold breakout, and right down the line they're expecting several new all time highs this year already. There are some good reasons why: The seasonality, the sentiment and, of course, the strong up trend since the late July lows beginning after a several month consolidation that is typical for gold. But in my assessment the chance for a new short term all time high will be determined by the duration and depth of the just initiated consolidation or correction respectively, and it's quite possible that for this year we saw the highs already!

To re-enact that “unthinkable” thought we'll have to consider the recent past. GUNNER24 nailed the 1264 gold top with last issue. There was a 20% of probability for gold to turn there. Strike! Further, GUNNER24 forecast as early as 07/04 the July high to reach 1168 (the low resulted in 1159 then), and in the same issue GUNNER24 forecast a double top at 1260 as the minimum target in gold. Here's again the forecast of 07/04/2010:

How are those precise forecasts possible which “almost” hit the spot? The trick is A) always combine the GUNNER24 Setup signals of two different time frames and B) to recognize which of the time frames is setting the tone. Since two years gold has been joining that weekly GUNNER24 Up Setup to a tittle:

And here's where things become critical. According to all the GUNNER24 Rules the rise ends by reaching the main target that is to say by reaching the 5th double arc!

The driving force of the original initial impulse should end by reaching the 1264, and up there at the main target we always have to reckon on a “big change in trend”. First con. Zooming in we further recognize that last week turned away from the 1264 “pretty violently” closing below the red broken resistance diagonal while the week candle is lying on a time line moreover. All in all a bearish “candle” expressing which monster resistances are present in the market. In an extreme case gold may follow that main target downwards for months. Second con.

A very, very important finding is the market performance at the double arcs, and thus we've come to the first pro of a new all time high. In the big picture we recognize that in the weekly 8 Candle Elliptical GUNNER24 Up Setup the great and violent corrections on weekly basis took place at the green double arcs. The converse conclusion is: The red double arcs didn't offer much resistance. Besides, that makes us assume that now again we should reckon on a little correction. The 1225 at the Gann Angle is an ideal place to go. That's where the support area begins. If the price reaches the 1225 or dives into the support area respectively it would be the forth test of that Gann Angle. A rebound would mean that the long term upwards trend is going on. A break would mean a change in trend.

The second pro of some new all time highs:

Within the 2nd double arc we've had closing prices which confirmed the 1298. Now gold follows the 2nd double arc downwards. It's conspicuous that the Friday low might be significant because it happened exactly at a setup-anchored cross support. By the way: the setup-anchored horizontal support is corresponding exactly with the horizontal support anchored in the weekly setup! So it's important. That's why it might have been the correction low already. However the area of the 1*1 Gann Angle at 1232-1225 is ideal for a low in this correction. That's where we'll look for a long entry according to the rules of the Gann Angle Retracement (Rules 18.4 and 18.5). Please pay attention to them UNCONDITIONALLY in case of a long entry!

As the actual 8 hour GUNNER24 Up Setup illustrates the market is really on the verge of a very important decision. The third con.

With the Wednesday high here, too, we reached the 5th double arc. It's the 8th consecutive high that indicates a negative interpretation which again points to a change in trend. There hasn't been any closing price within the 5th double arc i.e. no hint it would be broken upwards. Here again the setup-anchored horizontal support at 1238 is important. Please pay also attention to the following monthly setup in this context. In the last issue we shew that - pointing to the September candle being stuck. There hasn't been much change in it, that is why here again you see the zoom out of last issue:

So the 1238 are a quadruple magnet and a quadruple support. It is present in the monthly, weekly, daily and 8 hour GUNNER24 Setups. Very, very seldom!! Very important!! So a rebound from it in the 8 hour GUNNER24 Up is likely, and until Tuesday and Wednesday it could lead to the formation of the second shoulder. Another rebound at the 5th double arc is possible, and it would be very negative! But if the 5th double arc is broken upwards the SHS scenario will be dead. A closing price above 1260 in the 8 hour time frame MUST be used for a long entry. That would lead to a total of 13 higher highs in the 8 hour time frame! In all, the primary Gann Angle is maintaining the upwards trend. Here again the 1233 is recognizable as a down target. Another dip on Monday is possible. It would be the first test of the primary Gann Angle. So it should resist.

The last and most important pro:

The actual situation in the stock markets:

Friday was a very important day. For a long time the S&P 500 fought this week with the 1105, but it shot over that mark. The 1*1 Gann Angle which divides the weekly 2 Candle GUNNER24 Down into its bullish and its bearish half is taken away for the time being. In plain English that means we should test the 1124 (blue arc) in the course of next week. We'll see, also regarding the option expiration week, whether it is taken or how violent the rebound from it will be.

As forecast in the last issue already the market now is nearing the open gap at 1122. Maximum target for next week will be the 1*1 Gann Angle at about 1129-1134. We'll have to adjust the SL daily to take along some profits, so in case of a positive Monday we would set the SL on 1100 immediately. In case of a furthermore positive Tuesday – in a tie, etc.

After reaching the target area we'll have to judge the market reaction. For beside the blue arc in the weekly setup above also the monthly resistance will join in! (see GUNNER24 Forecasts, Issue 08/29/2010)

Also the weekly 6 Candle GUNNER24 Up Setup of the FDAX # that we hadn't presented for a while indicates what a plunge is going to be taken by the stock market in September: