Gold is correcting and a potential double top is now in play. The projection for a completed double top pattern is the height of the tops that form an "m" projected to the downside, in this case approximately 1085. This actually would represent a run of the mill 10% correction and would not change the fundamental picture one iota. Chart support is coming in just shy of 1200 where the previous low was made. If that level is taken out, a short term down trend will be in place. The 45 day MA is quickly approaching that level and also is providing support. Stronger support exists at the breakout level of 1165 and 1173 for the Fibonacci 38.2% retracement. The magenta lines represent an Andrew's Pitchfork. It is a trend tool that shows areas of support and resistance within a trend. It is formed by picking out a significant move and the reaction to it, then drawing a line from the starting point of the move bisecting the reaction. Two parallel lines are then drawn originating from the top of the original move and the bottom of the reaction move. Prices will generally follow the pitchfork, in either the top or bottom channel. The lines represent support and resistance. If this uptrend is to continue, support will come from the bottom line of the pitchfork. If we fall below the line and later rally back, the line will represent resistance. The pitchfork is best when used with significant moves in price and over longer time frames.
I am in 100% in cash and will be buying real soon.
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Silver is definitely the weaker chart. We have established the 2nd lower high, cementing a down trend in place since the top at 19.80. A textbook head and shoulders reversal pattern is forming. It will be unclear for awhile whether this pattern is validated. For the time being, the setup is perfect. Ideally, the right shoulder should have weaker momentum than the left shoulder and is indicated by the magenta boxes. While volume is not indicated on this chart, volume for the right shoulder should be less than the left. Volume on the SLV chart confirms this. The projection is the height of the head from the neckline (magenta line connecting both shoulders) turned 180 degrees to the down side. this produces a target of 15.0. Currently price is hanging around the 45 day MA and is gaining support and resistance there. Strong chart support made from previous highs and lows exists at 17.45, where the 100 day MA also resides. Fibonacci support exists just under that level around 17.30. 16.65 is an important number in that a breach there suggests a 100% retracement that would achieve the price target associated with a completed head and shoulders pattern.
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