Weekly Hot Take - Cycle failure or Shakeout?
15/05-19/05
Welcome friends!
Hello everyone, In this week’s weekly update, we will talk about the events of last week and how to interpret them for the upcoming week. We saw a severe decline right after the early warning on private Twitter.
This warning at $25.27 was followed by a -6% move! Right now we have also hit the major pullback target at the 0,382 Fibonacci level, which might provide some support, but let’s talk in more detail about what factors are driving the price here.
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Let’s dive right into the weekly update now:
Precious Metals
XAUUSD
(Monthly)
On the monthly chart, we can see that we are still progressing nicely; hence, there is no reason to start being bearish on gold. We can also see that the monthly EMAs are curling up aggressively, so our momentum signals are pointing up.
(Weekly)
For the weekly candles, we can see that the EMAs are also supporting the trend up. For the weekly cycle analysis, we are on week 10, so there should still be about 2–3 more weeks of upside before we start a decline into the next weekly cycle low. This will be important later when we are looking at silver because there are some conflicting signals that we can spot.
(Daily)
The daily candles show an insane amount of sideways chop, with prices between two extremely important levels of $1974 and $2077. There is really no way to tell which way this will break first. Silver is doing a nasty pullback here, while gold remains sideways. Given the timing of the daily cycle, which is on day 17, there should already be a bit more upside here before we start the second part of the daily cycle, which is why I’m starting to get cautious here. It is extremely hard for gold here to tell if we are going to break up or down. Let’s have a look at silver next!
XAGUSD
(Monthly)
Monthly candles for silver look like a big rejection at the long-standing resistance zone of $25.77 to $26.11! It seems like it is backing off the downward-sloping trendline. Using our system of combining cycle analysis, elliot waves, and general momentum indicators, we can see that we are still above the monthly EMAs, so we are going to give silver the benefit of the doubt on the monthly chart. But we have to be extremely cautious to not be biased here, as the weekly and definitely the daily candles might be telling us something else.
(Weekly)
I’m going to be honest here and say that a rejection this hard shouldn’t occur if we were already in wave 3 of 3. This seems like a severe rejection, which was called out in private on Twitter right before the big downmove happened. I’m seeing a lot of similarities with the May period back in 2022, where we got absolutely hammered back to ridiculously low prices. The contradicting factor here is that gold isn’t dropping together with silver as it did in May 2022.
For the weekly candles, we are looking for $23,75, or the 0,382 fibonacci that we have hit this week, to hold. If we go below that level, we can see it going to $23, where the next Fibonacci retracement is. But trying to be as unbiased as possible for the current state of the weekly and daily cycles in both metals, $23,75 should hold. If this doesn’t happen, we have to take a bearish stance again.
(Daily)
On the one hand, to bring some positive news on the daily chart, we see that we have had a severe rejection. It might be that we were still in the previous daily cycle on day 44 and thus might have found our DCL here at $23.75! Given how severely the RSI has reset as well, this might definitely be a viable option and would imply that we rocket back up from these prices. But on the other hand, this might only be day 13, which means that we have just had a big daily cycle failure that is then warning us that the weekly silver cycle might already have topped. This would be extremely early, so it’s hard to believe that we have already topped in silver. However, we have to try to analyze both bullish and bearish signals to be able to perform at the highest level.
Summary
Gold still looking good for bullish continuation after the consolidation
Silver has two options here: either we had an early daily cycle failure, indicating topping signals, or we were still in the previous daily cycle on day 44, in which case $23.75 must be held at all times.
Gold isn’t dropping together with silver, so this gives more weight to the day's 44 DCL on silver. If gold starts to drop too, then we are going to have two failed cycles and need to build cash again for lower prices.
If you liked the update please like, share and comment as you please! I hope to see you all back next week with more clarity regarding the precious metals charts. Have a great Sunday everyone!