“The recovery in Gold has run out of steam and after the Labor Day Holiday we have gapped lower today. In fact early trade has seen us print below our last dip at 811.9. This is beginning to make us nervous as the bounce from testing the long term Fibonacci levels should have been more aggressive and prolonged. In fact only a quick recovery through gap resistance at 833.9 would ease the pressure but at the moment we feel the winds have changed in favor of the Bears again”. Our concerns were justified and we now have our old support at 811.9 firmly in the resistance column. The next objective for the Bears is our recent low at 775.1. However, we are currently hovering around the 797.8 Fibonacci level and a second visit below here is a real concern.
Indicators in Play
Fibonacci introduced his sequence of numbers to mathematics back in the 1200’s. These numbers appear in all walks of life but have an eerie influence on trading. We use the 38.2 level as an indication of the strength of the correction or indeed if the longer term trend has changed.
Weekly Chart...
Summary
The last time we dipped below our long term Fib level shown on the weekly chart we were keen to buy dips. 775.1 was a touch further than we expected but overall the strategy worked very well. This time round we are not confident that this should be the play as the picture looks bleaker on this occasion.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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