To See a Bear Market, Look to Gold Not Stocks

Gold prices slid to new lows today in an ongoing downtrend and bearish money flow.

While a lot of traders are expecting the stock market to peak and reverse, many traders may be missing the ongoing downtrend in Gold that is confirmed and in motion.

Let’s chart Gold from three perspectives and see what’s going on (and what levels to watch):

Our simple Daily Chart perspective reveals an ongoing downtrend of lower lows and lower highs along with bearishly sloping moving averages.

However, a key support level developed near $ 1,140 where buyers intervened and bounced prices higher in November 2014 and March 2015.

Traders perhaps were hoping for a repeat performance of the bounce rally – which is absolutely logical – but today shows the bounce did not yet occur.

At this point, we’re likely to see a “Bear Trap” outcome (see the stock market in October 2014 and recently in July 2015) which would trigger IF price pushes back above $ 1,140 instantly… or a breakdown and continuation of the ongoing downtrend and bearish money flow.

See yesterday’s multi-market update post for a broader perspective.

Before we take a look at the Weekly Chart structure, let’s update our Color Structure Chart of Gold:

This is an update from yesterday’s Color Structure Multi-Market Grid.

The main idea is that Gold is downtrending and is on a “Red Sell” swing in the Color Structure Chart.

At the moment, price is into the lower Keltner Channel (band) but piercing under the support floor near $ 1,140.

This is a bearish price development taking place on a clear positive momentum divergence so we’ll be more alert than usual (and perhaps less directly bearish as we would be without a positive divergence).

Now, let’s pull the perspective back to the Weekly Chart for additional clues to what’s happening:

Buyers supported gold at the $ 1,200 level through 2013 but sellers overpowered buyers with another breakdown and new low in late 2014.

Through 2014 and early 2015, buyers once again supported gold at the $ 1,140 level as noted above, but so far buyers are losing the battle to the bears with today’s breakdown.

The focal point will again be $ 1,140 for the “Bear Trap” (false breakdown) possible outcome and if we don’t see an instant movement back above $ 1,140, then the $ 1,100 target is fully in play.

For one more perspective on Gold (and related markets), see the prior update

“Multi-Timeframe Color Ribbon (Trend) Update for Gold, SP500, and Oil”

Watch the $ 1,140 level and under it $ 1,100 as the ongoing downtrend in gold continues (distribution).

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Corey Rosenbloom, CMT
Afraid to Trade.com

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