Weekly Hot Take - Cycle failure / Shakeout
21/08-25/08
Welcome friends!
Hello everyone, and welcome to another weekly hot take on the precious metals market! After a very heavy downfall of silver and gold, it is time to re-analyze what the current state of the precious metals market is and where it will be going.
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Precious Metals
XAUUSD
(Monthly)
The monthly candle for gold shows us that we have violated one of the most important lines in the sand for the bulls. Which is holding the monthly EMAs to keep the longer-term uptrend intact. We have about 10 days to go in this month, so bulls have to ‘hope’ here that we get a monthly close above the EMAs with a wick. Otherwise, we will have to start looking lower, obviously. It would, however, surprise me that we have a failure this early because, in our current theory, we have already made the 8-year cycle low. Therefore, I’m going to be assuming that we will recover strongly this week to save the long-term picture here.
(Weekly)
On the weekly chart, we can see that we broke the higher low and higher high pattern since the big defense at our strong $1974 resistance level. In cycle terms, we either have just witnessed a big failure and a warning signal that the long-term trend is breaking or that our previous ICL count was incorrect. To know the answer here, we will have to wait for the reaction of metals out of the current low.
(Daily)
The daily candles show us that we are completely oversold again on the RSI, so a very solid bounce is definitely overdue. However, we shouldn’t be catching the knife just yet, as we can always make a lower low in price while making a high low on the RSI. This would be a typical bottoming setup, then, and provide us with a ‘positive’ divergent low. $1860 is the downside target for that final flush/retest. Otherwise, reclaiming $1923 is a first step.
XAGUSD
(Monthly)
Silver is yet again showing a big monthly wick candle off of the downward-sloping trendline, which is showing that bulls are trying to buy the dip before we go higher. Let’s dive straight into the weekly chart as silver is showing more strength then gold for once.
(Weekly)
Silver weekly candles are struggling to regain the EMAs, with gold under pressure. This is the first time that we have seen silver this resilient, and it hasn’t broken the higher low structure. The next step for the bulls would be an aggressive push through the weekly EMAs, followed by a higher high. In general, it is important to set the expectation that gold will pull silver where gold is going. So while silver is showing strength, we should be very mindful of gold’s price action.
(Daily)
The massive volume increase to push metals down can be clearly seen on the volume bars on this chart. This translates to certain institutions that have scaled in their short positions. If they don’t succeed in keeping silver down, then we know what will come next, ofcourse ;-)
A higher high is the first target, and then the big 26-dollar resistance zone.
Summary
A bottoming setup in gold is starting to form; a final retouch at $1860 is likely to form a positive divergent low.
Silver is resilient, even though we had a massive increase in shorts. This might cause an upward squeeze.
The smartest decision is to wait until gold is done with the bottoming process.