I recently wrote about Gold in the DecisionPoint blog. We saw the 20-EMA pull out of its decline to keep its ITTM BUY signal. However, the gravitational pull of price after it couldn't hold support at 1300 was too much and the 20-EMA finished just below the 50-EMA today. An ITTM Neutral signal is generated when the 20-EMA crosses below the 50-EMA while the 50-EMA is above the 200-EMA. Recall that if the 50-EMA is above the 200-EMA, it implies that bull market rules should be applied. With that in mind, a negative crossover is a neutral rather than a SELL if the 50-EMA is above the 200-EMA.
With Gold unable to hold 1300 as support, I think this signal is timely. It appears the correction started in early September will continue. The next important test will be this month's low. Given the PMO has topped below its signal line in addition to this new Neutral signal, I would vote "No, it won't hold". Many might point out that based on sentiment using the premium and discount information from the close-end funds $PHYS and CEF, we should consider a reversal to a rally. I disagree. I think the CEF discounts prove the point best. We have seen far more bearish conditions with much higher discounts. Prices need to move lower.
The weekly chart isn't that encouraging. The PMO is headed for a crossover SELL signal and support along the long-term declining tops trendline is below 1250. The only thing I "like" about this chart is the bullish confirmation given by the PMO as it rises along with the intermediate-term price trend.
Conclusion: This new ITTM Neutral signal on Gold will likely take hold. The PMO on both the daily and weekly charts are declining. The daily chart has a PMO that topped below the signal line, very bearish. Yet, sentiment is simply not bearish enough to set up a rally. I would look for price to dip to 1250, or even further to 1200.
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