Looks like Gold is going lower.
First, let’s start with the CBOE Gold Index (GOX). GOX has now given several Bearish signs. It has broken down below its uptrend line and out of its upward channel, fallen through the neckline of a Head & Shoulders Top, and dropped below the 200 period exponential moving average (ema) as well as closing below it on Friday.
CBOE Gold Index – Bearish Signals
In the short term, the index has been dropping for a week and had a Doji candle on Friday, so a short term bounce towards resistance of the neckline (approx. 201.70) could be imminent.
Fibonacci retracement measurements have been taken on two uptrends as seen on the GOX chart. The 50 per cent and 38.2 per cent levels are almost on top of each other around 175 to 176 creating a high probability support level. This is also near where resistance was found in late June 2009 (175.07).
The target for the H&S Top is 147.72. This matches the support area of July 16′09, therefore strengthening the significance of the level and increasing the odds that the index could reach that level before this drop is over. We’ll see.
SPDR Gold Trust ETF (GLD) found support minor support intraday at the 100ema, its uptrend line, and the 38.2 per cent Fib retracement level of the smaller uptrend.
Near term support is at $105.31, a swing low. If GLD breaks that level then it will also be below the 100ema, its uptrend line, and have a lower swing low, thereby increasing the odds that it will decline to a more significant support level.
That support level is determined to be around $100.44, as it was support or resistance several times before, and it is the 38.2 per cent Fib retracement level based on the larger uptrend started from the low in November 2008. The Fib retracement of 38.2 per cent is considered to be the minimum potential retracement of a trend.
There is also a near term support zone, based on the consolidation rectangle in October 2009, starting at $104.70 that should be watched closely. Given the momentum in the downtrend over the past eight weeks the chances are good that GLD will drop through the area of the rectangle.