The $1832 spot level in gold finally proved accurate this week, with the metal touching $1830. This from Monday's piece - "I continue to be wary of more selling in the very short term if looking for a chance to pick as close a low as possible."
I originally anticipated metals would begin to form a bottom around $1832 gold last week. Now that we are here, I don't see the harm in waiting for some sign of an imminent resumption in the upward trend, further to the bottoming signals described below. Short-term sentiment in the metals sector has also corrected from overly bullish conditions, which, as I have written, is a pre-requisite for the sustainability of a longer-term trend. I will be interested to see where sentiment levels are at end of this week. Of course, nimble traders may attempt to enter the long side, perhaps with a stop at or under this week's low.
As for stocks - nothing has changed. The onus is still now on sellers to prove that there is still no new bull underway. Last week I wrote that an inverse head and shoulders pattern may be forming in S&P futures and that I would like to see the next level up as a weekly close over 4295. The below weekly chart shows the IHS formation with the price still flirting with an upward breach of the neckline.
Note that despite my current general bias for a renewed bull, I also think the short-term sentiment in stocks is becoming stretched. Therefore I would not anticipate the price to smash through the yellow zone shown above with any type of ease. In fact - sentiment in stocks may begin to cool off in the near future along with a price correction , as we are now seeing in metals.Follow J_GidaroDasilva jdasilva@kitco.com www.kitco.