As legend has it, a heavy sword was hovering over the throne, held just by a horse hair, when Damocles – an unhappy courtier – swapped places with the king. Before, Damocles had praised the king in glowing terms describing him as the happiest and mightiest man in the world. But the wise king wanted to teach Damocles a lesson. For a feast, he placed him directly underneath the sharp sword. Nobody knew when and whether the thin hair would break… nor did Damocles who couldn’t enjoy the presented sumptuousness being too scared to taste food. Thereby the king wanted to make clear to his servant Damocles that everywhere a threat may lurk and that luck is not always persistent.
Silver and gold cannot rise substantially before the affliction with the weekly opening gap in silver is not wiped out. Silver is closing all its gaps. That’s a fact, out and over. The 20.51$ opening gap will have to be closed before the metals can start rising again, merely theoretically…
On Monday, August 12 the new week opened at 20.595$ what constituted the low of the week at the same time. From 08/12 a powerful thrust led up to the current swing high (25.16$) of 8/28. Since then silver has been correcting the rise from the year low refusing sturdily to close the open gap. That’s why the shorts have been predominating for weeks being assumed to remain on the winning side till "finally" the gap will be closed. Silver rallies – intraday and brief upswings on daily base – may be shorted thoughtlessly and with a very high success rate until the gap close.
In addition, silver generated a new important weekly sell-signal with the last red candle. It closed – unambiguously now – beneath the 1*1 Gann Angle after this one could still be defended on closing price base during the last two trading weeks. According to the Gann Angle trading rules, now the next more important Support Gann Angle – the 1*2 – is activated as the next downtarget. For next week, it is going to be at 20.18$ not being an unrealistic downtarget (the 1*2…) even though we should work on the assumption that the probable gap close at 20.51$ is thoroughly supposed to be interpreted negatively by the market, so from there some new sell pressure is likely to come up.
In the valid weekly up setup above we make out a dangerous special feature. The initial impulse from the June lows is not clean. It can’t be before up to a candle the 5, 8 or 13 will be counted off. There is rather arising a connection that is not based on Fibonacci numbers. We may perfectly dock the blue arc to the top of the candle # 9, to the opening of the candles # 10 and # 12 as well as to the close of the week # 11. This price/time relation is pointing to a countertrend initial impulse. And this means – if it is really just a matter of a countertrend since the June highs - that some new downtrend lows are to be expected. But that is not yet the case. It will take a clear weekly close below the 1*2 Support Angle (under 20$ in October) to get the signal that new downtrend lows are to be expected. I assume that silver is in wave B of a complex ABC correction in the downtrend at present. According to Elliott, after B a new C upwave will follow. Not before the C wave tops the next five waves down that will start then will be likely to bring new downtrend lows.
So, silver must still go down, gold should follow. The forecast of last week was pretty well worked-off by gold in the course of the week:
Last Friday – day # 5 – the 1263 were overshot a little bit, and the low was made at 1259.60$. By the weekly close, gold escaped narrowly above the combined weekly and monthly 1272 support, moreover. That is a positive signal, so far. Some important price/time relations were paid attention to, the 1272 was defended but…
As analyzed on silver above, aka the Damocles sword, silver will have to fall reaching at least the 20.51$. How might gold press against it? Gold is anyway performing much weaker than silver in the current B-wave. Ergo gold, too, is likely to fall lower. Two consecutive daily closings below 1272 should be enough for gold to reach the 1*2 Angle. This one will pass at 1222 next week, so newly at a combined weekly and monthly support!
A weekly close below 1270 next week will make the 1232 be sagged till the end of October. The correction wave B should end there followed by the C-upwave. Target is newly the first double arc. A weekly close below 1222 in October will rapidly activate some new downtrend lows.
A possibility: Neither in silver, nor in gold, Friday showed any high volume. This again is a signal for a further fall. To confirm final lows it mostly takes a washout. A capitulation and a high volume indicate us such a circumstance…
My judgment last week was that "next 8 days the 1272-1263 is going to be headed for"... Well, the price target is worked off, but the time allows still more decline potential during the coming three days! Perhaps the 20.51/20.18 or the 1232/1222 respectively will show very soon, the next three trading days. It’s just a possibility…:
...that will open up before me if gold newly wants to perform as it did during the first test of the 5th double arc in the weekly 5 candle GUNNER24 Down Setup starting at the October highs 2012. In its exhaustion gold spiked pretty clearly below the support of the 5th double arc during the year-low in June 2013. On closing base the 5th supported gold even three weeks before the A-wave really unfolded.
A new spike below the 5th double arc next week will be allowed if gold actually wants to perform as it did in June. The check-box sketched beneath the lower line of the 5th in the chart above is showing the 1244-1222 target area. At 1244 will be the lower line of the 5th next week, at 1222 the next lower combined weekly and monthly support. At 1232 there is an important monthly Gann Magnet that together with the weekly time frame indicates a potential low the week after next. A clear statement: A final sell-off next week may end up at 1222. In case the exhaustion takes place the week after next, the sell-off will possibly finish at 1232.
It’s for sure that a weekly close below 1222 in October will have the support of the 5th double arc be broken being thus activated the end of the setup as the next downtarget. This one is at 1169$ and thus very, very close to the next important 1272 monthly support.
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US-Markets – S&P 500:
The second test of the dominating Support Gann Angle could not have turned out more unequivocal. This Support Gann Angle is guiding the gradient of the uptrend in price and time. The correction lows are brought in, a new upleg is on its way. New all-time highs are the effect.
Last Sunday, I expected the correction low to happen at 1658 index points, in fact within 10 trading days. Certainly the 1658 was "pretty clearly" fallen short by reaching the 1646. But the signal produced by the market combined with the Support Gann Angle after diving into the support area was unambiguous. The monster-rebound including 57 points of rise within three days from the weekly support area…
The hefty rebound from the 4th double arc and the Support Gann Angle is the confirmation that now the last upwave up to the 1880 (January 2014) and the 5th double arc = main target of this uptrend are going on. The next uptargets will be 1711/1730 and then 1750. Before reaching the 1750 no considerable correction on weekly base will be likely to happen. A good entry into the new upswing will be at 1665-1670 index points next week.
Be prepared!
Eduard Altmann