Hello everyone! I hope you are having a fabulous holiday season! As you know, I will be posting a 2024 outlook for the markets we cover in this stack over the coming week. With lower volume this week, there will likely not be any daily updates unless I see something of note.
Let’s kick things off with Gold to start the week. Gold has had quite a run lately, and it has everyone expecting a huge run in the coming year. Is this warranted? What kind of support and resistance are the markets showing us? What are the major inflection points? Let’s take a look.
48 Year Chart
With all the reports this week, we will start with higher timeframes and work our way down. This first chart does not contain a volume profile, but does show us historical data going back to 1975.
There are a couple of points I want to make here from a technical perspective:
Notice the blowoff top in 1978, the pull-back and then the market came back in September 1980 to about 705 (arrow on left) and then pulled back into a 25 year channel. There was another blowoff top in August 2011, the pull-back and then the market came back in September 2012 without reaching this top and then pulled back sharply (Arrow on right).
Markets like to repeat themselves. Because we recently had a blowoff top up to 2150, we need to be on the lookout for a similar test of these highs without reaching it, and then pulling back sharply.
I do think this top is quite different than the previous ones in 1978 and 2011 as it is not a huge ramp-up, but rather we have been probing up here starting in August 2020. Nevertheless, it is important to keep in mind.
Notice how the market tested the 705 area in 1980 (left arrow), then tested it in 2006, pulled back sharply, then came up a third time in September 2007 and broke through. Once it broke thru it rallied in March of 2008, then came back down and tested this 705 area (middle arrow) before taking off into a 3 year massive up-trend.
This is a classic technical move that is important to remember for all time-frames. I could be showing you a 2 minute chart, or a 50 year chart. The market will often test highs (or lows) several times before the area “weakens” and breaks thru. Once the breakthrough happens, the market will back test this area from which is broke out.
This is important to remember as a trader. The market likes to trap people and take our money. That may be a rather nefarious in theory, but people love to jump on trends (greed) and then the market will pull back and stop these people out. But back tests of previous places of a breakout happen every day (again, on every timeframe). Waiting to buy (or sell) on these back tests will make you a better (read: more profitable) trader and will have you taking trades with lower risk.
10 Year Chart
Here we see the market breaking out of a sideways market in the Summer of 2019 and making new highs the following summer, which was our first probe of the 2100 area. I want to make one point about this chart:
Notice where the cross-hairs are located on the chart. The horizontal is located right at a low-volume area around 1620. The market came down and tested this area but instantly rejected this price and went higher. This is another important technical point to keep in mind. When market back test into an area with low volume (the reason for the low volume is that price quickly went thru this area and didn’t spend any time at this price), how the market reacts here will give us some idea of what price will do. If it goes into this low volume area and accepts this price, it is likely to stay around here and auction around this price for awhile. If a market back tests and rejects this area, it means the auction does not find this price acceptable and is likely to reverse and resume the trend.
Note also that the top of the volume profile is around 1740. This will be important as we look at our next couple of charts
5 Year Chart
We see that the market over the past 5 years has clearly moved higher. Our VPOC (volume point of control), which is where the market has found the most price acceptance over this timeframe has moved to just above the 1740 upper end of the 10 year chart. Clearly the market is moving higher.
Because the first 18 months of this chart include the rally up to the July 2020 highs, I have also included a chart from April 2020 to today in order to look at what the market has done since it moved into the value area of the 5 year chart. See below:
This is the April 2020 to present volume profile. You see that the market has established 1800-1820 as a strong support zone. In fact this year when we tested this area in October, it was immediately rejected.
1 Year Chart
Over the past year, the market has established value from around 1900 up to 2000. If the market is to remain bullish, it will need to continue to hold the 1940-1970 area. A few weeks back we came down and tested 1987 and immediately rejected to move into the highs where we are today.
6 Month Chart
Here we see that the market is establishing value above the 1940 VPOC. Again, this area will need to hold to maintain the bullish uptrend. What do I mean by hold this area? TWO (2) weekly closes below 1940, will be our first indication that the market will be shifting momentum. Please keep in mind, this is a very generalized statement, as the close of these candles after moving below 1940 will make a huge difference. And I intentionally used the word “indication” here. It doesn’t confirm the uptrend is over, but it is an indication of a shift in momentum. When it occurs, we will be using price and volume to determine the market’s next move(s).
1 Month Chart
Over the past month we have seen all-time highs in Gold. Will it continue to move higher?
We see that over the past month, the Volume Area Low (VAL) has been established as 1997, which the market tested on December 11th and 12th. This will be a key support if the market moves back below 2050. If you’ve been reading the newsletter, we have been talking non-stop about the 2050 area for good reason. The market is attempting to establish this as value.
2050 should hold if the market is going to take out the 2080 high made this past week on Friday. Any dips into the 2057-2050 area should be looked at as buying opportunities if the market plans to move higher in the first part of the new year.
Conclusion
The market has clearly been establishing value higher and higher of the past decade. We are now sitting close to all-time highs.
While the market is showing that it wants to go higher, we always need to be careful when we approach all-time highs (or all-time lows). As shown on the first chart, look for low-risk opportunities to buy on back tests into support. Do not just jump on board as it takes off. You might get lucky, but odds are that you will see your account shrink.
It appears the market wants to test the 2150 area again soon. Above there, 2200 will be the next level of resistance. If the market chooses to again go level to level all in one day (or in the case of the move to 2150, in one HOUR…LOL) be very cautious and take profits. The quicker the rally between levels, the odds are that the market will fall back almost as quickly.
Many are calling for 2400 or above on Gold. I’m not quite there yet. I don’t think people understand what 2400 or 2700 Gold means for the American economy. I do think we will see all-time highs in 2024. I also believe we are highly likely to stay above 1940 for the remainder of the year. Beyond that, we will see what the market establishes for value on a day-to-day and week-to-week basis.
Supports come in at 2050, 2000, and 1940-1970. Below there, and the bears will have gained momentum and this highs will be in for the foreseeable future.
Gold is always extremely volatile. It is even more-so as we reach into these areas. Again, buy into support and don’t chase. Trade smart, risk smart (i.e.: trade the micros), and think smart.
Very clear and very helpful. Thank you. Merry Christmas.