Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter


Gold, Stocks and Copper Set to Crash

Commodities / Financial Crash Apr 23, 2013 - 06:34 AM GMT

By: Clive_Maund


Failure of gold's key support at $1500 - $1550 triggered a stunning plunge as masses of stops were triggered. We can see what happened on the 6-month chart below. The plunge was the most severe since 1980 and was accompanied by colossal record volume, which is strongly bearish. It quickly lead to gold becoming critically oversold and it bounced later in the week as cheerleaders advised their readers to buy this "opportunity of a lifetime". Is it? In this update we will consider the implications of this extraordinary breakdown.

In the first case a plunge of this nature has shattered confidence, which in the best of circumstances will need time to recover, so any premature rally attempt can be expected to fail. What was strong support at $1500 - $1550 is now strong resistance, as all those "hung up" in the top area will take any opportunity to sell onto a rally that approaches this price level. The second important point to note is that a dramatic breakdown on heavy volume such as this is normally a very bearish development that kicks off a longer-term decline. Worst case now is that a bear Flag forms for a short time, perhaps a week or two, which allows the short-term deeply oversold condition to unwind, before another brutal plunge ensues - and it looks like this is what is happening. At the time of posting this (Monday morning) gold is continuing to creep higher and is starting to look like a good short.

$GOLD Gold - Spot Price (EOD) CME

In the last update we opined that Big Money, aware of the mass of stops beneath the key support, was conspiring to trip them in order to trigger a collapse which would enable them to replenish their run down gold inventories at a relatively low price, but there is a darker explanation for their earlier big inventory rundown, which is that they had seen "the writing on the wall" and were offloading their inventory at top dollar in the large top area as fast as they possibly could ahead of a collapse. Many are now protesting "How could gold collapse when its fundamentals are so strong?, overlooking the fact that that is precisely when bearmarkets start, because all of the good news is known to the market and priced in.

On its 7-year chart we can see that not only did gold crash key support when it plunged, but it also simultaneously broke down from its long-term uptrend in force from 2008, or longer if you take it from its top channel line. This was another strongly bearish development and while the plunge suddenly stopped at the support approaching its early 2011 low, the decline looks set to resume once the massively oversold condition has eased somewhat. There is no serious support until it gets down to the $1000 area, which is where it looks like it is headed.

$GOLD Gold - Spot Price (EOD) CME

Another reason for gold's plunge to halt where it did was the fact that it had arrived at another long-term uptrend line which originated back in 2005, as we can see on gold's 20-year chart below. While going on price alone it looks like this line could hold and generate a reversal to the upside, the massive down day last Monday and enormous volume on the plunge strongly suggests that this trendline will fail and that gold will drop steeply to the $1000 support level at least.

$GOLD Gold - Spot Price (EOD) CME

We had assumed that the huge drop on Friday - Monday and going into Tuesday would result in a significant improvement in the COT structure, as it seemed highly likely that Commercial short and Large Spec long positions would ease substantially, which would have been a positive development for bulls, but it was not to be. Instead, despite the massive drop in price, the COT structure is little changed. This is viewed as strongly bearish.


Meanwhile the dollar index rallied last week from an oversold position near to its rising 50-day moving average, as we had expected. The dollar COTs remain bearish and thus we have also been looking for a dollar rally to be contained and turned back by the Distribution Dome shown on its 6-month chart. However, the rally last week started with a quite pronounced "bullish engulfing pattern", and this fact combined with the way the gold charts look, suggests that the dollar may be starting another upleg that will break it above the Dome, which would mean that the recent reaction was just a correction to the impulse wave (move in the direction of the primary trend) that occurred in February and March. We should know quite soon as the dollar is now approaching the Dome boundary.

$USD US Dollar Index - Cash Settle (EOD) ICE

If gold did enter a bearmarket now, which is what the action last week appears to be signaling, it would of course have profound implications for just about everything. It may be the harbinger of an impending liquidity crunch and skyrocketing interest rates that would bring the world economy to a dead stop. Given that the debt and derivatives mess is orders of magnitude worse than in 2008, due to that which caused the problem being use to fix it, or more accurately to paper over the cracks and buy time, we could see a commodity and stockmarket meltdown that would make 2008 look like a walk in the park. Given that gold and silver have just started to crater, are there any other major warning signs flashing out there?

There are - the long-term copper chart looks absolutely terrifying. With gold's plunge on Monday last week it largely went unnoticed that copper broke down from a giant 3-year plus Head-and-Shoulders top on massive record volume. We can see this development on the 20-year copper chart below, and how this Head-and-Shoulders top forms the 2nd high of a giant Double Top whose peaks are separated by a deep ravine the deepest recesses of which lie in the 2008 crash lows. Copper is believed to be breaking down, and if it should now plunge back towards its 2008 lows, it will have the direst implications for the world economy.

$COPPER Copper - Spot Price (EOD) CME

It is hard if not impossible to reconcile the latest copper COT charts with the bearish look of the copper price charts, for the latest copper COTs look strongly bullish, implying that copper will pull back from the brink and stage a rally, perhaps to drop later on. However, we should remember that the silver COTs looked bullish too, but that didn't save it from plunging.

$SPX S&P 500 Large Cap Index INDX

If copper follows gold into the abyss there won't be any prizes for guessing what will happen to "the market that thought it could go up forever", regardless of the state of the economy - the US stockmarket. If players gets the slightest whiff of rising interest rates, stocks will crater, as shown on our admittedly rather dramatic 20-year chart for the S&P500 index shown below. This market has been rising for a long, long time, has not got clear of the strong resistance near to the 2000 and 2007 highs, and looks set to roll over and plunge.

By Clive Maund

For billing & subscription questions:

© 2013 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules