Gold's Attempt to Double Bottom

With the recent market volatility (vix over 20) and selling pressure in the major indices, gold is subject to a decent move to the upside if the SP500 selling pressure persists as a flight to safety asset. A move above the small blue trend line beginning with the August 137.55 high, could be just the catalyst needed to move up and test the dark blue multimonth trend line going back to October 4 of 2012 with a 174.07 high. This trend line is major resistance so expecting a immediate reaction and few day consolidation after its initial test is possible. A move above this major trend line is the 1st confirmation that the dragon reversal bottoming pattern is underway. This will be were the 2nd round of stops will be as this ETF could trade up to the all-important 137.55 high. A close above 137.55 confirms that the double bottom is intact and creates a measured move target up to 160.00. One hurdle in the way to the 160.00 objective will be the 148.27 price which is the double bottom valley low that was confirmed on April 4 of 2013. This level should see a reaction on the initial test because it’s been naked ever since the 2 year double top was confirmed. All in all the flight to safety in this precious metal looks to be underway.

S&P 500 Outlook

Since Point #4 was reached in the S&P500 with a 1850.48 high Double Top that was confirmed on a close < 1812 and ultimately the 50 day moving average, this index has been in overall sell mode. Every bounce or green day has been aggressively sold, allowing fresh shorts to reload or any existing longs to exit at slightly better prices than the previous session. Ounce this index reached 1775 it proved to be a decent support level that the market desperately needed to hold but ultimately failed. Any rallies into this failure can be sold for a test of the 1730 level, which in my opinion is the next pit stop for this leg lower. Here I anticipate there to be responsive buyers present defending this area. This level is an old naked weekly high that was established last year and was never tested. < 1730 is when I get more concerned as there is no support till the last years naked October Island Reversal. This level is where I believe the market is headed in the short term and if we lost 1730 it could get there in a hurry. Important to note that the island is coincide ding with key market levels like 1665 is the 10% correction from the 1850.48 highs, along with point #5. A pullback in my opinion to this area seems logical and this area of confluence gives more confidence to begin initiating new longs in this market. All in all the markets have a few reasons to sell. #1 being the index was at the upper extreme of its range testing and building point #4. #2 was when the double top confirmed moving < 1812 and closing under the 50 day. And #3 was all the emerging markets (Turkey) nonsense along with a market that was up +30% last year. Keep open minded, be ready for anything and watch the 10% correction zone that will build point #5.

S&P 500 Update 1812 level of interest for bears