Gold elected the Monthly Bearish at 1155 and we did so well below that level, holding the 1084 number both weekly and monthly. Our energy models are turning positive, so it does not appear that we will have major follow-through at this time. When you elect a Bearish Reversal that far from the number, you typically bounce back to retest it before proceeding further.
We have a Directional Change back to back for August, September, and July. So, we may see a reaction to the upside to flush out the shorts since we have excessive bearishness building in the press, as the WSJ commented that gold is the “pet rock”.
A reaction rally at this point BEFORE new lows will relieve the short positions, but this is not likely to last beyond September. Therefore, we are more likely than not going to see the final decline stage into the Benchmarks. Gold is within the channel so the resistance is forming at the 1155 level followed by 1225-1300. Support will remain at 1084 on a closing basis with key support at 900.
