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Gold futures had declined for the last nine consecutive days taking prices dramatically lower from just under $1980 per ounce to yesterday’s low of $1914. Today gold futures basis the most active December contract is trading fractionally higher up $3.40 and currently fixed at $1918.60. However, if you look under the hood so to speak it was dollar weakness that provided the tailwinds which moved gold higher breaking the consecutive losing streak.
The dollar is trading down 0.16% and gold futures are up by 0.17% indicating that today’s gains were almost totally the net result of dollar weakness. The dollar index is currently down 0.155 points and fixed at 103.315. Silver which had also been deep in a corrective mode is now in its second day of higher pricing. The most active September futures contract is currently fixed at $22.81 after factoring in today’s net gain of $0.095.
On a technical basis, there are market technicians that believe that nine consecutive lower lows will typically be followed by a price reversal.
There is a Japanese candlestick pattern that is based upon a series of nine consecutive days of price declines. This price pattern is based upon the identification of 8 to 10 new price highs, or new price lows. The theory behind this Japanese candlestick pattern group is that after 8 to 10 new price lows the market has moved into an oversold condition. This pattern is an exhaustion pattern and identifies potential markets being oversold.
There is also a world-renowned technical market analyst who has created multiple mathematical formulas which are used for market timing and analytics, Tom DeMark. His proprietary studies and formulas designed to identify areas of potential price inflection have identified a pattern based on the numbers 9 and 13.
Simply called 9*, which according to Demark says that after nine consecutive price declines with lower lows is often followed by a price reversal.
According to Tom Demark indicators, “A 9 indication marks a completion of the Setup phase in the Sequential and Combo family of indicators. The 9 output looks for a series of consecutive price comparisons to define the underlying environment. Generally speaking, these 9 results are often followed by a price reversal, with the impact and duration defined by other elements of the indicator.”
Although gold trading higher by three dollars today does not indicate a full-blown reversal in the precious yellow metal, a price reversal must begin in exactly this way. We will have to wait till next week to see if there is follow-through bullish market sentiment moving gold off its recent lows.
Gary S. Wagner
