Best Financial Markets Analysis Article The rally out of the February intermediate and yearly cycle low has now traveled far enough and long enough that it is due to take a breather. That breather would be in the form of a short term pullback into the mid cycle low.

The initial move out of the July intermediate cycle low lasted 22 days before forming a short term top.

The current rally is now on day 21 and very short term overbought (see chart above). Traders should now start looking for a brief pause in this market. A move back down to the 1120 support zone is probably in the cards some time soon.
I’m also starting to see divergences in breadth and signs that institutional traders are stepping aside for the moment. More on that for subscribers in Tuesday’s market update to subscribers.

If we are on the Brink of an Asset Explosion, as I think we are, then traders should be prepared to position long in virtually any asset class as we make our way down into this temporary correction.

I expect the stock market will also exert some influence on the precious metals market when it sinks into the low. As a matter of fact, at 21 days it now appears gold has already begun the trip down into its next daily cycle low.

As this short term gold cycle is right translated (topped later than 12 or more days) the expectation is for this move to hold above the last cycle low at $1044. It would be a big plus if gold can hold above the last short term dip at $1087 and keep the pattern of higher short term highs and higher short term lows intact.

If it can, then I would be looking for gold to move above the critical $1161 level during the next short term cycle.

If gold can take out $1161 then the pattern of lower intermediate lows and lower intermediate highs will be broken. That will also force a rephrasing of the last intermediate cycle low from December to February. Again, more on that in the subscriber newsletter.

Suffice it to say that it is critical this rephrasing take place if gold is going to continue higher and not go through another multi month consolidation phase like it did from March 08 to Sept. 09.

So, short term expect some weakness in the stock market which will probably continue to rub off on the gold market, but be prepared to buy the dip as this bull rally in the stock and gold markets is not over yet.

Toby Connor
Gold Scents

A financial blog with emphasis on the gold bull market.

© 2010 Copyright Toby Connor - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.