Wednesday October 13, 2010 - 01:57:25 GMT
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Forex Hound - www.forexhound.com
Gold Chart Pattern Indicates Impending Volatility; Possible Top
December Gold traded in a tight and narrow range for the
second day in a row indicating impending volatility.
Fundamentally, the slow down in the break in the U.S. Dollar
has had a lot to do with trader indecision. Bullish traders have backed away
from adding to their existing positions since Thursday when this market made a
closing price reversal top.
At that time it was thought that this pattern was triggered
by position evening ahead of last Fridayâ€™s U.S. jobs data. Now that it has
been three days since that volatile session, something bigger may be brewing.
On Tuesday, the Fed released its minutes from the September
21 Federal Open Market Committee meeting. The minutes showed that the Fed may
be moving up the date of its new quantitative easing program, having changed
the previously used â€śsoonâ€ť to â€śbefore longâ€ť in describing when it was likely to
act. This change put a sense of urgency
on the situation triggering sharp swings immediately after its release before
settling into a range.
Technically the recent closing price reversal top is holding
the market in check. Following the top at $1366.00, the market broke to
$1325.60. This created a retracement zone at $1345.80 to $1350.60. This zone
has been the stopper lately.
The main trend is still up and the market has found itself
trading between three uptrending Gann angles. Looking at these angles one can
see an upside target at $1375.30 and a downside target at $1329.90. The market
has been trading on both side of the middle angle at $1351.10 the past few
days. I believe that this angle is controlling the short-term direction of the
market. Sustained closes under this angle could trigger a break while crossing
back to the bullish side is likely to support a rally.
Another thing to watch is time as in the duration of the
recent breaks. The $1207.50 to $1159.30 break in late July lasted 3 days. The
$1239.50 to $1211.70 decline in late August was 3 days. Finally, the
mid-September break from $1264.70 to $1237.90 produced a decline that lasted 2
The current swing down from the $1366.00 top is 2 days. The
two days of sideways action indicates that time may be overbalancing. This may
be the first sign of a developing top.
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