Did I say gold is on the launchpad? It’s not now!
In my week-ago post I had gold on the launchpad, getting fueled for the ride to the $1300 area – and possibly beyond. Today, we had lift-off.
This is the latest hourly chart:
The $1170 area held and with waves 1 and 2 in place, the scene was set for a magnificent wave 3 up. Remember, third waves are long and strong – and today, this one is setting off in style.
Market bust through the Fibonacci 50% resistance this morning and is on its way to the 62% level. I expect a more solid resistance at this point.
Of course, one of the giveaways that a sharp rally was in the offing was the large positive momentum divergence at the low. My rule of thumb is this: the larger the divergence, the sharper the move off the turn.
And the other huge clue is the state of sentiment. Bullish sentiment has been close to historic lows for some time – an ideal scenario for a ‘surprise’ rally. Hedge funds are hugely net short and this little swing will wipe the smiles off their faces (a prospect I find especially pleasing).
This is the bigger picture on the daily:
My next major target is the Fibonacci 62% level at the $1240 area. That is where I may decide to take partial profits, but as always, I will not pre-judge and let the market tell me.
VIP CLUB NEWS
We had little activity this week as I have taken profits on currencies ahead of the Fed meeting yesterday and the ECB/Greece bout result due soon. But here are the trades closed:
Short DAX – 540 pips profit
Long USD/JPY – 415 pips profit
Long USD/CAD – 190 pips profit
Long Gold – 60 pips loss to our stop