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Gold Chart Setup Signals Important Top Below $1900 Figure

By , Currency Strategist
16 September 2011 11:20 GMT

THE TAKEAWAYGold technical positioning suggests prices have formed a major top below the $1900/oz figure, implying a drop of over 9 percent decline over the coming days and weeks.

S&P 500 – Prices continue to consolidate in a Flag chart pattern, broadly pointing to downward continuation. The resumption of overtly bearish momentum requires a break below the Flag formation bottom, now at 1132.49. Near-term, resistance stands at 1227.40, while the minor topside barrier at 1204.40 overcome yesterday has been recast as support.

Gold_Chart_Setup_Signals_Important_Top_Below_1900_Figure_body_Picture_5.png, Gold Chart Setup Signals Important Top Below $1900 Figure

CRUDE OIL Positioning closely mirrors that of the S&P 500, with prices testing the top of a Flag chart formation reinforced by the upper boundary of a rising channel set from early May. Here too, the setup is hinting at bearish continuation. The formation of a Bearish Engulfing candlestick pattern as well as the appearance of negative RSI divergence reinforces the case for a downside scenario. Initial support lines up at $83.12, the 23.6% Fibonacci extension level.

Gold_Chart_Setup_Signals_Important_Top_Below_1900_Figure_body_Picture_6.png, Gold Chart Setup Signals Important Top Below $1900 Figure

GOLD The double top setup we have been monitoring over recent days appears to have been validated with prices issuing a daily close below the chart formation’s neckline support. A move toward a measured downside target at $1627.25 over the coming days is implied from here.

Gold_Chart_Setup_Signals_Important_Top_Below_1900_Figure_body_Picture_7.png, Gold Chart Setup Signals Important Top Below $1900 Figure

US DOLLAR As we suspected yesterday, the formation of an Inverted Hammer candlestick preceded a pullback, with prices now testing support at 9699. A break below this juncture exposes 9646. Resistance remains at 9756, a range top in place since mid-April.

Gold_Chart_Setup_Signals_Important_Top_Below_1900_Figure_body_Picture_8.png, Gold Chart Setup Signals Important Top Below $1900 Figure

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16 September 2011 11:20 GMT