In our regular gold trading alerts, we focus on the short- and medium-term outlook and we rarely discuss the very long-term issues or price targets. The reason is simple – the long-term issues and price targets don’t change often, so usually, there’s little new to say about them. Consequently, it’s been a long time since we last discussed our view on gold’s explosive upside potential. In fact, it’s been so long that those who do not take the time to read our analyses thoroughly and those who have been reading them for only a short while may think that we are bearish on gold in the long run. Or that we’re perma-bears.
Yesterday’s weakness opened the door to a buying opportunity for those who were patiently cautious. Our narrative all week long has been cautiously optimistic; get out of the forest to see the trees, this market is in a strong uptrend. However, we emphasized yesterday the high probability of a washout. Today the S&P and NQ are up, let's call it, 0.5%.
U.S benchmarks are lower this morning with the S&P 500 and Nasdaq both down more than 0.5% on emerging market fears and the escalation of the conflict with Turkey. China is leading the way lower on a delayed reaction to Monday night’s trio of dismal reads; Industrial Production, Fixed Asset Investment and Retail Sales.
After a rough start to the week, Asian stocks seem to have found some support as the Turkish Lira steadied below 7 per dollar. Japan’s Nikkei 225 rose 1.8% with all sectors in green territory as the Yen gave up some of yesterday’s gains. Australia’s ASX 200 and the Korean KOSPI also edged higher but gains were limited.
This morning brings a reprieve from turmoil; the Turkish Lira has bounced back as much as 8% before settling in. The story will continue to develop and an agreement to release the American pastor will certainly be favorable for the global risk appetite. While the damage to the world’s currency market has been done, we maintain that it is important to not get stuck in the forest so that you can see the trees; there can be a lot of noise in the headlines, especially during slower summer months.
The coming week of Aug. 13, 2018, sets up trending pivot math concurrent with narrow ranges (means breakouts) in the S&P 500 (countertrend bounce & maybe down), Japanese yen, Crude oil, and gold (extreme narrow range block/rectangle on daily chart). The Eurodollar has already made 5 easily-countable down-waves (Monthly chart) since the swing top I identified in advance months ago, and it has sideways pivots for this week but extreme trending monthly pivots into Sept.
The global risk appetite is again shrinking but it’s easy to get caught in the forest and miss the trees; despite the headlines, the U.S stock market remains in a strong bull market. Listen, we are certainly not ignoring the Turkey-related risks as the Lira plunged once again and hit a record low against the U.S Dollar before paring losses.