Date — September 30, 2016
Gold and silver are once again putting traders to sleep following Tuesday's October options expiration and ahead of quarter's end on Friday. While the markets are not all that interesting at the moment, gold and silver are approaching crucial technical levels.
Major support in gold comes in at 1315. This level represents a long term trend line on a continuous chart dating back to the beginning of the year. A convincing close below 1315 sets up the possibility of a near term washout to the 1250 area.
Ideally, the bears may prefer to see a close below the psychological 1300 in order to confirm a true trend reversal, but we anticipate this will be no problem with a sharp close below 1315, or 1307 (38.2% Fibonacci from 5/2 lows -7/5 highs).
Line-in-the sand resistance continues to be the long term bear line at 1340-1345. We have been noting the importance of this trend line for months and it cannot be understated. The bullish thesis can be supported by all of the fundamentals in the world, but they're completely worthless until a breakout above 1345 is triggered on a closing basis.
The sample size and price action of how gold has traded against this level over the last few months is large enough for us to assume that the big players are monitoring this level closely, as well.
GOLD FUTURES - DAILY
Silver is in a similar pattern as gold with a more clearly defined wedge pattern. The 1895 level represents the bottom end of the channel and a price area that has held beautifully over the last few months. A convincing close below 1895 opens the potential for a major washout to the 1740 area in the coming weeks.
On the top end, 1970 is first resistance, but only a close above 2000 puts the market on alert for the next wave higher. A price of 2000 is essentially the equivalent of gold's 1345 level. Silver traders should certainly be taking a cue, or at least watching gold's price action against 1345 for possible "tells."
SILVER FUTURES - Daily
Ultimately gold and silver remain in long term bull trends and have not faced any threat of a reversal for most of 2016. Technically this could sneakily change in the near future with a one sharp down day. The recent pullback and choppy price action is basically the identical price action we've seen all year on price retracements.
But like LeBron James going 1-40 from the field in the Finals with his team down two, a 3-pointer at the buzzer erases an otherwise terrible game.
This feels similar to the scenario gold and silver bears are currently experiencing with every selloff being a mostly pathetic one sharp down day below key technical levels.
As always, managing risk is priority number one. Priority number two is getting risk/reward stacked in your favor.
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