Gold Prices Explode Higher for the Largest One Day Rally in Eight Months
Now let’s take a look at the technical aspects of some of the major markets. We had some major developments on the technical front this week. The gold market had an explosive run up towards the end of last week. As I had mentioned on my last report, we saw strong support come in at the $1,240-$1,250 area, and out of nowhere the market wakes up, catches some traders snoozing away at their desks, and has a massive almost $50 dollar move up in one day. The gold market hasn’t seen such a big one day move in 8 months. This massive move up in price blasted through some major resistance levels as well as moving averages on its way up — all in one day. The 50, 100 and the 200 day simple moving averages (SMA) were taken out like a hot knife through butter. I especially like the fact that we were able to close and stay above the 50 day SMA, since this particular moving average has given gold a lot of trouble on any meaningful move up recently. Every time gold had a constructive day or two of price movements higher, the 50 day SMA capped its advance and then reversed the market. Also when you look at the chart, you will clearly see that with this huge price advance and the subsequent consolidative price action over this week, the gold market has formed a clean and clear bull flag or pennant. Usually after the formation of a bull pennant you will see another massive wave higher. This time around the bull flag is consolidating at the trend-line resistance around $1,322. If broken to the upside, the market should quickly test $1,334-$1,339, and then try an assault on $1,350-$1,360. So as I said in my last report, watch out for some exciting movements in the next couple weeks.
Now looking at the silver chart, I want our readers to focus on a significant technical development in the market. First, just like gold had a big one day move up, silver had an even bigger one day price movement. Silver was up 5.25% in one day and more than 9% in a week. This price movement is especially important since it was able to make silver break through a stubborn downtrend-line that has been in place since silver printed its record high in 2011. This downtrend-line kept rejecting any meaningful price advance in silver over the last 3.5 yrs like a well-trained, powerful, agile goalkeeper. But last week the market came alive like a silver backed its gatekeeper. The subsequent price action with minor highs is even more constructive, and if silver breaks and closes over $21.50 multiple times, you may be looking at a volcano about to erupt. In 2009, silver did a similar breakout that led to a historic bull run in the market. We still need to see more price action to confirm this breakout, but wise investors and traders should get ready for an assault higher.
