Kase Forecasts of the Week – Spot Gold and S&P 500 Index

By Dean Rogers

Spot Gold (XAU)

The long-term outlook for gold is still reasonably promising after prices rallied from a six-year low in December. However, from a technical standpoint, the decline from the 1263.48 swing high is poised to challenge support targets before the move up continues.

KaseX triggered a strong short entry signal called a pierced dart (gray down arrow and yellow triangle) on February 15. On that same day a bearish Harami line and star was completed. The subsequent pullback to 1240.02 held the 1263.48 swing high and was followed by a confirming short signal on Monday, February 22. Monday’s decline also completed another bearish Harami line and star. These factors call for the decline to continue for the near-term.

Gold Daily Candlestick ChartGold Chart

The primary wave that the move down formed, 1263.48 – 1191.02 – 1240.02, projects to 1194.5 as the 0.618 target. Most waves that meet the 0.618 projection extend to at least the 1.00 projection, which in this case is near the 1163.6 confluence point. 1163.6 is the decision point for a larger correction to 1126.2 and possibly lower. A close below 1163.6 would significantly dampen the likelihood of a continued rise, and a close below 1126.2 would shift the long-term outlook to negative.

Gold Table

First resistance is 1232.3. This is currently the 0.618 projection of the small wave up from 1191.02. A close over this would call for 1251.1, the 1.00 projection. As it stands, odds are 25 percent for a close over 1251.1 before at least 1194.5 is met. A close over 1251.1 would indicate that the move up should extend to at least 1277.1 and possibly 1331.0 and higher.

S&P 500 Index (SPX)

The S&P 500’s rally from a double bottom at 1810.1 has been relatively strong and is challenging the completion point of the formation at 1947.2. This is significant because a close over 1947.2 would complete the double bottom and open the way for a potential rally to the formation’s 2084.0 target.

S&P 500 Index Daily ChartSPX Chart

A similar double bottom had formed in late 2015 and was completed when the index closed over 2020.86. The ensuing move fell short of this double bottom’s 2177.0 target, but was still substantial. We could see a similar type of rally upon a close over 1947.2 that falls short of the 2084 target, but challenges key resistance before the decline continues.

Other technical factors, such as wave projections and retracements, call for at least 1971.6. This then connects to 2019.7, 2057.7, and finally 2084.

SPX Table

The move down stalled just below a key support level at 1849. This was the 1.00 projection of the wave 2134.72 – 1867.01 – 211.48. The index only closed for one day below this level, so this is still crucial support.

A normal correction of the move up should hold 1894.0 and must hold 1862. These are the 38 and 62 percent retracements from 1810.1 to 1946.7. Key support is 1848, and a close below this would shift the outlook back to negative and call for 1810 and lower again.

These are brief technical analyses with a 10-day outlook based upon Kase’s technical forecasting models and trading indicators KaseX and Kase StatWare. If you are interested in taking a trial of KaseX or Kase StatWare please contact [email protected]. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to [email protected].

gold

Read on TraderPlaner.com

by Cynthia Kase

With the first increases in interest rates in over nine years looming, and the dollar strong, and gold supplies reportedly healthy, especially in China, gold is looking especially weak. After a strong decline on Monday, it bounced a bit on Tuesday, so, is it time to “go for the gold”. While fundamental pundits are hazy, technicals can polish up the outlook.

The current spot low is $1072.45 as shown on the daily chart below. This price constitutes the “equal to” extension of the wave down from $1307.41, and thus is strong support. The big down day on Monday was followed by a star Tuesday, which is bullish. Daily momentum is oversold, but mitigated somewhat by the lack of divergence, a turn signal.

XAUUSD Daily Chart with Equal Waves, Harami Star, and Oversold Stochastic

Charts created using TradeStation. ©TradeStation Technologies, Inc. 2001-2015. All rights reserved. No investment or trading advice, recommendation or opinions are being given or intended.

 

 

 

 

 

 

 

 

 

The major line of resistance is a confluent $1145, the equal extension for the bounce up from $1072.45, and the trend terminus, 2*1.38, and Phi3 corrective projection for the last reaction wave, $1094.35 – 1109.8 – 1098.26. $1145 is the Kase DevStop3 on the daily chart and warning line on the weekly. Whenever there’s such correspondence, the confluent value increases in importance. $1145’s also the 10 day and four week moving average. So $1145 is unlikely to be overcome without a significant clarification from outside influences. If and when this happens though, the next big target is $1222, then next key extension and also the 62 percent retracement from the $1307.41 swing high.

gold 3

 

 

On the downside, the chances of testing $1000 are highly dependent on whether support at $1045, $100 below resistance, is broken. If so, $1000 will have 2:1 odds.

$1045 is Kase DevStop4.5 on the daily chart, and $1000 on the weekly. $1045 is the lowest extension for the most recent wave down from Monday’s reaction high of $1119.10. Below $1045, targets from larger waves extending to $1000 are engaged. $1000 is the Phi2 corrective projection for the swing 1072.45 – 1119.1, and again for the swing 1142.7-1232.3.

Most importantly, the wave down from $1307.41 that has met its 1.0 projection at the current low, targets $1000 as its next, 1.38, extension.

For the optimists who went long on Monday or Tuesday, we’d suggest extreme caution until there’s a solid close over $1145. I’d use tight stops at previous swings around $1085 and $1075, but if you want to take more risk, $1065 is the critical target above $1045, and the key DevStop1 on the weekly.

If I were short, I’d stay short with stops at $1145 for now. This is about $70 up from the low. Should prices decline cleanly lower, I’d narrow my stop, first to $57, and then to $45, or use all three values for a scale-out exit.

Meantime, I’m expecting that if you keep your eye on the technicals, and are disciplined about exits, you’ll surely be golden.

Send questions for next week to [email protected], and for energy hedging visit www.kaseco.com.