The first tender glimmers of hope

For the gold and silver bugs as well as for the stock bears the blissful month of May has turned out as to be pretty unpleasant so far. Agonizingly and constantly increasing the stock-market trend has been expanding from one day to another with new highs nearly every day. On the other hand both precious metals have hitherto shown hardly any serious indication for a sustainable rebound. Whereas silver last Monday yet marked a new downtrend low in the 20$ region keeping on being in the absolute sell-off mode, though by last week’s higher low gold might have handed in the first sign of the expected several month rebound.

None of both metals may – hereby I repeat it again – schedule a lasting rebound before the stocks are "ready" having swung into their next correction. The investment behavior of the hedge funds etc. will have to change! With the course of the week there are "newly" clues that the stocks might have reached some important highs being in their correction already. Both assumptions – the stocks are in their correction wave since the swing highs of last Wednesday and gold as well as silver are in the expected rebound swing since last Monday – require the respective confirmations however.

Why though, where and when are the stocks due for correction? About that here’s a little review. By the middle of December of 2012 for me this was understood: The US Stock Markets cannot start their corrections before the DAX will have worked off its next important main target.  

On 12/16/2012, reaching the main target of the FDAX, the 4th resistance double arc in the determining monthly 13 Candle GUNNER24, was forecast for May 2013 at either 8060 or 8450:

Mission accomplished! The 4th double arc is reached. In terms of time it’s been perfect. In terms of price the FDAX is extending the current up-move a little bit just like its American friends do. Here’s the actual monthly chart:

The 4th double arcs use to have an enormous signification in the monthly time frame. Very often they end up in radical changes in trend. I.e. with them frequently several month corrections begin or with them pretty often all-time highs are produced that force the markets into a downtrend for years. But mostly the stock markets turn either at the 3rd or at the 5th double arc, as happened with the FDAX in 2007 – at the 3rd. See the left red oval. In that case the top formation lasted 7-8 months before the strong resistance of the 3rd finally prevailed forcing the DAX into a hefty downtrend.

I think the worst threat for the market is now another several month delay at the 4th double arc - a sideways move by and large in whose course the 4th is broken upwards on closing price base sometime thus being supposed to release the next buy signal on monthly base. How low may this sideways move go? - About 7500. If May closes near the actual all-time high (8561) the 4th won’t be nearly taken on monthly closing base. That wouldn’t happen beneath a May close of about 8700 index points.

A first confirmation of the coming "sideways move or consolidation at the highs" will be a closing price within both lines of the 4th double arc. A May close below the lower line of the 4th will be a very strong confirmation that the swing is taking a break in deed. In any case May is expected to close above the resistance Gann Angle – a clear Gann Angle buy signal in the medium term! The market will keep on going up! But technically it won’t before a several month correction/sideways move.

Let’s record for the moment: The FDAX/DAX is technically done now. There isn’t so much possible any more, the monthly target is reached.

That’s why the S&P 500 is not much use any more, either. According to the GUNNER24 Trading Rules since reaching the lower line of the 4th we are short, at 1627. As the FDAX is, the market is extending its swing. It briefly quoted above the upper line of the 4th as well. Technically the correction/sideways move should be under way or start soon.

Owing to the exhaustion of the actual wave III, differing from the last analysis, the sell-targets for the expected wave IV are reducing to 1595 or, in case things turn more severe, to 1504, respectively.

A May 2013 close within both lines of the 4th will be – a monthly close above the 4th is anyway – a first weighty and unambiguous indication that also the 5th double arc in the setup above will be reached during this bull market. Not before the 5th double arc and about 1900 index points a new bear market may start!

Gold lows in? Maybe, but still in sell-off mode!

The extremely low trading volume during the Pentecost sell-off is a very grave indication that gold and silver might be "done in" now.

Technically at opening last Monday entire cascades of stop-loss-orders, in other words high volumes should have been executed. But that was not the case. Normally the market participants hedge against any move at any time. But if there’s no safeguarding and not coming about high trading volumes with new lows, we’d frequently see total surrender. No buyers in case of lows and no safeguarding against possible heavy losses are signs of total exhaustion of the market participants. The shorts don’t press down any more, from their point of view they’ve earned enough. At the low there are no buyers. For them it makes no difference whether it is going up or continuing down.

In addition both metals closed last Monday solid, so compared with previous Friday they revealed price gains. A intraday-reversal. The big correction in the uptrend might just have come to an important intermediate price level. That doesn’t mean we should expect high jumps of prices. Certainly the hot fight for the actual swing lows is going to continue. But beside the exhaustion in volumes even in the Fibonacci count and in the Gann Techniques there are important indications that the market participants are going to adapt themselves now to price increases for several months!

With May 2013 gold is now in its 21st month of correction. 21 is a Fibonacci number, and in case of Fibonacci numbers the markets turn frequently and willingly. So far the May 2013 low is situated above the April 2013 low. Moreover last week was the 89th week of the entire correction. 89 is a Fibonacci number like 21. The actual week is the 90th week of the entire correction. This is very close to 89! In addition, since the last important October 2012 high we count off now 34 correction weeks:

The low of the 90th correction week is lying above the low of the 85th week. Both weekly lows dipped into the support space of the 2nd double arc. If gold succeeds to close above the 1*1 Gann Angle again next week the support of the 2nd double arc would be confirmed so far. Subsequently gold might – merely theoretically – follow the course of the 2nd double arc upwards through a big part of 2014.

A first tender long-signal will arise now when gold trades again in the bullish half of the setup above. I.e. a weekly closing price above the 1*1 Gann Angle next week = about 1400$ will be compellingly necessary to confirm the theory of the higher low on weekly base. But if gold closes within the line of the 2nd double arc next week or the week after next the correction will go on for many more weeks. Conclusively new lows would be the result. In that case some further price losses down to the 1140$-1040$ region would have to be budgeted for.

So the first precondition for a possible recuperation will be a weekly close near 1400$. Moreover the market would not be allowed to show a hefty reaction at 1413 and 1422!

The lower line of the all-dominating 4th double arc in the weekly 13 Candle GUNNER24 Up Setup will be at 1413 next week. If gold doesn’t sell off next week at 1413 because the lower line of the 4th forfeits its dominance, and if a daily double top at 1413 doesn’t happen an important hurdle for the possible rebound will be taken. A look at the lower line of the 4th is enough however to make break out in cold sweat every gold bug. Any touch with the 4th during the past weeks has led to hefty declines.

Above the 1413 there is the next dominant sell-off-trigger mark. Now the 1422 are the monthly horizontal resistance. The 1422 are situated within the lines of the 4th for next week. At any time and at any price, the space between the lines of the 4th are good for releasing a monster sell-off.

The influence of the 4th double arc will last at least through the middle of July. Till then gold keeps being vulnerable for further severe sell-offs. It will take a weekly close above this 4th double arc to ease the situation definitely. Subsequently gold might rise to 1570 until December 2013.

Gold won’t be out of the woods being able to ascend considerably before the 4th resistance double arc in the weekly 13 Candle GUNNER24 Up will be taken upwards!! Gold needs two consecutive weekly closings above the 4th double arc to overcome them finally.

Till then gold (and silver, too, of course) will be situated in the absolute sell-off mode. New lows are naturally allowed any time and reached extremely fast in the sell-off mode. Thus, quick, hefty sell-offs are going to be taken into consideration for a long time. If in gold the actual downtrend low of 1321.50$ is fallen below in June at first the 1280 will have to put a stop. But subsequently 1140-1040 will be much likelier in that case!

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Be prepared!

Eduard Altmann