Originally published on September 22, 2019 by TraderStef at CrushTheStreet.
If you missed my recent analyses on the price advance of gold, I suggest you review “Savvies Were Aware of the Near-Term Risk for a Pullback in Gold and Silver,” published on Sep. 7, and “A Silver Note and the Screaming Gold Rally Pauses After the Dog Days of Summer,” published on Aug. 31. There is no major change in the CFTC’s Commitments of Traders (CoT) report data this week. There is somewhat of a standoff over the last few weeks without a major shift in positioning vs. the price trend, so I will not cover the CoT today. The 20-year seasonality pattern for gold has been spot-on this year, and here we are as of the Sep. 20 close.
There is not much to say regarding the DOJ charging numerous traders and trading desks for racketeering (RICO) and spoofing the precious metals. I have been consistent in my assertion that what we have on our hands are spoofing gamblers across all asset classes. With the advent of automated trading platforms that have grown to dominate the mindless high-frequency trading (HFT) and algorithm bucket shop mentality, a grand government conspiracy to manipulate a market is not necessary, as gamblers infested technology while a government collusion ghost has remained legal Teflon since 1934. The troll farm is so far up their darkest corners that some have slandered and claimed that I must be a deep state member due to my fusion analysis track record and middle of the road view on manipulation. Some folks might want to consider having their heads shrunk.
The FOREX currency futures and spot market (which includes gold and silver), along with the S&P 500 e-mini contract, crude oil, and bonds garner the largest liquidity levels on planet finance. Liquidity makes a big difference if you run a $100k account vs. a $5bln account. Of course, the plebs and their managers always find a way to pad their wallets with large numbers for senior management accolades, not to mention a lack of trade surveillance by internal regulators was rampant at JPMorgan. Spoofing was the expedient option within the current automated trading environment in high-liquidity markets, at least until the SEC finally got up to speed (pun intended). With that said, I am still collecting data for an article on this very topic.
I recommend that you do not get your panties in a bunch and debate the manipulation meme with anyone. It is more productive to focus on fundamentals, charts, and support sound money legislation at the state and federal level.
Current and Former Precious Metals Traders Charged with Spoofing & Multi-Year Market Manipulation Racketeering Conspiracy – DOJ, Sep. 16
Federal prosecutors, commodity regulators broaden market manipulation probe beyond precious metals trades… “Federal prosecutors and regulators are expanding their already aggressive investigations of allegedly fraudulent precious metals trades at J.P. Morgan Chase to other U.S. markets and financial firms, CNBC has learned. The broader inquiry into market manipulation of all kinds comes amid a spike in criminal prosecutions and civil actions in the past year involving so-called “spoofing” in the precious metals markets.” – CNBC, Sep. 18
Nomi Prins nicely summed up the situation in one sentence on Twitter:
Let us move onto the technical analysis on gold. To view a larger version of any chart, right-click on it and choose your “view image” option.
Gold daily chart as of Sep. 20, 2019 close…
Excerpts from the Aug. 31 monthly and weekly chart analysis:
“The monthly chart remains bullish long-term but is in the process of taking a breather and a consolidation as noted in the previous monthly analysis. The $38 pullback at the end of the week confirmed that analysis.”
“The pattern that has taken hold is an Up Channel with a bearish Plunger candlestick (aka Shooting Star) print for the last week of August. Whether the $38 breather is the beginning of a larger pullback before consolidation takes place will be determined by the September news cycle. I posted an hourly gold chart on Twitter on Aug. 29 that pointed out a fractal on the chart that implied a correction was in the making. The price action made a stellar attempt at reaching the $1,586.65 Fibonacci, but no cigar. With the weekly close at $1,519, the $1,526 Fibonacci resistance is back in play. The DMI-ADX at 65 is approaching overbought territory, the StochRSI is threatening a break to the downside after bouncing along overbought territory since June, the Money Flow is rolling over, and the Volume printed lower than the peak in June for a second time… Caution is warranted in the near-term until a price consolidation takes hold and a price pivot to the upside with conviction takes place.”
Excerpt from the Sep. 7 daily chart analysis:
“…chart patterns since the Aug. 2018 low and powerful rally that began in Jun. 2019, added a respectful $396.79 (+35%) to the price of gold… The volume has risen over the last two trading days with a falling price, which is indicative of further downside potential. The next support level is at a confluence of the $1,483 Fibonacci, the lower trendline of the Up Channel, and the 50 Exponential Moving Average (EMA)… Overall, the chart remains bullish with an intact uptrend despite the $54.46 price retreat. Even if the price falls an additional $20, no serious technical damage will have taken place. However, if the 50 EMA is breached to the downside with conviction, the 100 EMA would be the next support level that extends back into the price chop of the previous Flag Tilt. I remain bullish long-term, but caution is warranted in the near-term. This pullback in price can be an opportunity to add physical and/or paper trading positions after a decisive upside pivot occurs.”
The price action got interesting during the second half of the trading day on Friday after the Fed announced continued REPO operations until Oct.10 and China’s negotiators for the trade war departed the U.S. early. The candlestick setup dominating the chart is a Three Outside Up, which is indicative of a bullish reversal 75% of the time. As noted in the Sep. 7 analysis and subsequent charts posted on my Twitter feed, the Falling Wedge has based out and began to pivot up and away from a confluence of the $1,483 Fibonacci, 50 EMA, and lower trendline of the Up Channel. As of Sep. 20, the price action cleared the 10 and 21 EMA resistance with a $1,515.34 print at the close. The $1,526 Fibonacci must be breached again on volume in order for the price to retest the $1,557.06 high at the peak of the Falling Wedge, which will clear the way for a challenge of the $1,586 Fibonacci level. Volume continues to falter and must pick up the pace in order to challenge the price levels noted. The DMI-ADX remains positive but indecisive, the StochRSI has risen up and out into a positive trend, and the Momentum and Money Flow are back on the rise. I remain bullish long-term, but caution is warranted until the $1,557 level is taken out with conviction.
Here are a few articles and noteworthy interviews to peruse before closing up shop tonight:
The Truth About the Fort Knox Gold – Jim Rickards, Aug. 2017
Gold trading volumes continue to rise – Goldhub, Sep. 9, 2019
China & Russia Buying Gold and Don’t Care How Much It Costs – Barron’s, Sep. 13
Citi says gold prices may top $2,000 an ounce – MarketWatch, Sep. 14
Deutsche Bank May Face ECB Probe Over Dealings in Bonds – Bloomberg, Sep. 18
Webinar: Oil after Aramco attack and what’s next for gold – Saxo Bank, Sep. 18
NY Fed to pump $75bln into money markets daily through Oct 10 – AFP, Sep. 20
Chinese trade negotiators cancel US farm visit, cut trip short – CNBC, Sep. 20
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