Comex Gold Futures (GC) Technical Analysis – October 21, 2016 Forecast

December Comex Gold futures are trading lower shortly before the cash market opening after posting a potentially bearish closing price reversal top on Thursday. The chart pattern was confirmed early Friday when sellers took out $1265.50.

The selling pressure was fueled by a surge in the U.S. Dollar, which was supported by a steep sell-offs in the Euro, Australian Dollar and New Zealand Dollar. Traders also relaxed a bit after the last presidential debate.

The dollar was under pressure early in the week due to falling Treasury yields and concerns over Fed policy. This helped reduce the odds of a December Fed rate hike. Better economic numbers and hawkish commentary from the Fed has helped solidify the chances of a Fed rate hike with the Fed Funds Indicator showing a 70%+ probability of an increase before the end of the year.

Technical Analysis

The main trend is down according to the daily swing chart. Momentum appeared to show signs of strengthening, but those came to an end with Thursday’s closing price reversal top chart pattern. This was not the traditional reversal top chart pattern, however. The time was right, but the price action wasn’t as strong. Nonetheless, the pattern is there.

Typically, this chart pattern leads to a 2 to 3 day correction equal to 50% of the last rally. The last rally was $1243.20 to $1275.90. Its retracement zone is $1259.50. We’re going to watch this price closely today because buyers may try to form a secondary higher bottom. Sellers are going to try to take it out in an effort to make $1275.90 a new main top.

A trade through $1275.90 will negate the chart pattern and turn the minor trend to up. This could trigger a possible acceleration to the upside with $1295.70 the best target.

Forecast

Based on the current price at $1267.00, the direction of the December Comex Gold futures contract today will be determined by trader reaction to the downtrending angle at $1263.80.

A sustained move over $1263.80 will indicate the presence of buyers. This could generate enough upside momentum to challenge the Fibonacci level at $1274.80 and the closing price reversal top at $1275.90. This is the trigger point for an acceleration to the upside.

A sustained move under $1263.80 will signal the presence of sellers. This could trigger a break into a cluster of numbers at $1259.50, $1259.10 and $1257.50.

The daily chart opens up under $1257.50 with the next major target $1243.20.

Watch the price action and read the order flow at $1263.80 today. Trader reaction to this angle will tell us if the bulls or the bears are in control today. For longer-term traders, the bigger moves will take place on a breakout over $1275.90 and on a breakdown under $1257.50. Otherwise, we could just sit inside this $18.00 range.