Daily Spotlight: Metals

A weekly summary of one complex, including daily updates of other developments elsewhere.

[pay]Gold Dec (GCZ) Gold’s chart is offering a chance to learn something interesting about Head & Shoulders patterns. Their breakouts from don’t always reverse the trend. Sometimes they extend the trend – at least, initially. The reversal eventually comes, after many chartists have stopped considering the pattern.

When a Head & Shoulders breaks higher, first, its minimum target is a 100% swing. I calculate this from the pattern’s left shoulder and its right neckline (annotated on the accompanying chart). It has potential to a 200% swing.

Since meeting its 100% swing target at 1273-1274, Gold’s December futures ranged flat to higher, until Tuesday’s steep surge to 1289.40 in reaction to the FOMC news. A dip back down to 1273-1274 was needed to launch the surge. The steep surge extended to 1292.40 and nearly fulfilled the pattern’s 200% swing target around 1295.

Regardless, the multi-session consolidation around 1273-1274 didn’t create a solid base to launch a durable upleg. Despite probing the prior session’s high intraday, each close is back within the prior session’s range (also annotated on the accompanying chart). Pushing price higher grudgingly tends to be an accident waiting to happen.

30-year Treasury Dec (USZ) Knee-jerk reaction down on FOMC news avoided breaking under last Wednesday’s 130’15 low, which would have resumed the decline. A bounce to higher highs nearly filled a two-week old outstanding gap back to 132’08, while testing higher prior lows. The bounce has room to 132’16 before signaling a bigger bounce targeting 132’28 and 133’20.

Crude Oil Nov (CLX) Closed down decisively to signal the corrective bounce has ended.

Natural Gas Oct (NGV) Already bouncing, too soon to be credible. Extending higher Wednesday to fill the gap back to Friday’s 4.19 close would be very vulnerable to another downleg.

Dollar Basket Dec (DXZ) The “Complex Triangle” pattern broke lower through its 80.92 target and aiming for 80.28, where the pattern has potential to react up sharply.

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Weekly Spotlight coverage’s schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).