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Wednesday, August 22, 2012
Are gold cycles turning up with easy money?
 

Aug. 21, 2012, 3:39 p.m. EDT

Are gold cycles turning up with easy money?

About Mike Paulenoff
Mike Paulenoff is author of MPTrader.com, a live trading diary of his technical sector analysis and trade alerts on stocks and ETFs best poised to capitalize on sector trends. Mike is a 30-plus year Wall Street veteran, previously at Smith Barney, Harris Upham, Drexel Burnham Lambert, and Republic National Bank. Co-author of The Business-One Irwin Guide to the Futures Markets (with Stanley Kroll), he publishes widely on sites such as MarketWatch, WSJ Online, and Minyanville, where he is a contributing "professor."

By Mike Paulenoff

My cycle work in gold indicates we're due for a few months of strong upside action.

Using cycles based on 5.5 months, gold was due for a low between June 11 and 15 after its December 29 low at $1522.48.

The two lowest-lows in and around the anticipated cycle low window occurred on May 16 at $1526.98, followed by a successful retest on June 28 at $1547.87. Every bout of subsequent weakness has held above the May-June lows, suggesting that, indeed, a 5.5 month cycle low has been established, presumably ahead of two months of bullish price action.

Today, spot gold has broken above key, 10-week resistance at $1625, and has continued higher quickly towards more important resistance at $1640.30, the June 6 high, the first signal that a new up-leg is in progress. The next immediate challenge is a test of the September 2011 to August 2012 down trendline, now at $1672, a break of which should trigger upside continuation to $1680-$1700, thereafter.

At this juncture, only a failure to hurdle $1640.30, followed by a decline that breaks back beneath $1625, will indicate that spot gold has disappointed and trapped the bulls, yet again this summer.

Barring such a bull trap, my intermediate-term pattern and cycle work will be arguing strongly that spot gold has entered a new bull phase that should revisit the September 2011 high at $1921.05.

 
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