Many Traders Taken By Surprise By The Huge Drop in Commodities and Gold

The gold market came under massive liquidation and profit taking today and flashed a sell signal at $1762.49. This was the first signal we have had on our weekly Trade Triangle since July 13th when we had a buy signal at $1557.86. This trade resulted in a profit in excess of $200 an ounce. Only our long term Trade Triangle is positive on this market at the moment. Should the gold market close at current levels around 1733, it will confirm a double top indicating a move potentially down to lower levels.

The 50% Fibonacci retracement comes in at $1697 and the 61.8% retracement comes in at $1645. We are measuring from the lows that were seen in early July, to the highs that were seen in early September. This market looks to be on the defensive for the balance of the week into next week. Only long term traders should maintain long positions with the appropriate money management stops in place.

December gold closed lower on Thursday as it extended this month's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If December extends this month's decline, the reaction low crossing at 1705.40 is the next downside target.

Closes above the 20 day moving average crossing at 1816.20 would signal that a short-term low has been posted. If December renews this year's rally into uncharted territory, upside target are hard to project. First resistance is the 20 day moving average crossing at 1816.20. Second resistance is this month's high crossing at 1920.70. First support is today's low crossing at 1723.20. Second support is the reaction low crossing at 1705.40.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 70

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