Overheated gold market retracts; stocks watch Fed

I decided to go to the Jersey shore a couple of months ago. I picked the Northeast as I always go away the last week of August since its usually the 2nd slowest trading week of the year. The last week of August is hurricane season and it was a reasonable bet if there was a hurricane it would go elsewhere. So what are the odds I’d end up in the middle of 50 year storm? Since all of my trips include some business, I wasn’t about to cancel but I did change my reservation on Wednesday to a very safe hotel in the middle of New Jersey. Not at the beach, but probably the safest hotel in area. After the storm started, a transformer blew out and the other hotels across the street went dark. Our hotel had a generator. So I came through it okay.

But I do have to check in with these markets.

Where do we start? Let’s talk about Gold, it hit the peak last week as it averaged very close to a perfect Fibonacci price and time balance ratio over 12 years and peaked out with a day or 2 of the 12th anniversary of the bull market if we count the August 99 low as the bottom. It needed to top because it’s overheated again and the last time I checked it still isn’t the reserve currency of the world. But as I told my clients on Wednesday night before I left it was getting set to bounce, I thought the most logical place was about 1725 but it did it from slightly lower levels and hit another good Gann level. That’s why it has recovered so well. We could see a retest of the high but no guarantees it will break through. We may end up with a larger sideways correction again. One would think Gold has topped for a while but the bounce appears strong.

The next issue was the steep retest of the bottom last week which gave us a successful hold for the equity market. That was called into question again on Friday where the Dow was done 200 and almost within a blink was up 160 but ended up higher on the day. We are not out of the woods by any means but we do have banking participation this time which gives this market a fighter’s chance. So we are holding a handful of really good range and time square relationships, most notably the NASDAQ with its 1265 bear market bottom and 126.2 week low earlier this month.

Then we had the Fed chairman make his annual trek to Jackson Hole. What did anyone really expect? He already played his hand earlier in the month telling us interest rates would stay low for 2 years. But GDP came in at 1% and I heard someone say thank goodness it was in the 1 handle. I suppose they are right. Finally, we had the Japanese Prime Minister resigning as none of their interventions ever seem to work. I thought this one had a good chance given the calculations and maybe it does. Anyway, I thought Noda would be the one to go but the big man took the fall and Noda probably goes when they find a successor.

The bottom line to the week is the Dollar can still bottom against the Yen as we discussed last week but it will be challenged to hold on. With banking on board and the successful retest I’m looking at the trading leg to the upside to finally materialize. This should be a slow week given the slow open on Monday due to Irene and last week of the summer for many in the Northeast. The kids may be going back to school but next week I’ll be fully back in the saddle.

Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.

Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.

About the Author
Jeff Greenblatt

Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.

Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.

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