Bull And Bear Tug Of War Continues

1. Bull And Bear Tug Of War
Continues
Gold: How Exciting Are Recent Moves

2. Points To Be Covered Today:
•Bull and Bear Tug of War Continues
•Gold: How Exciting Are Recent Moves
•USDX: The Cleanest Shirt Among The Dirty Laundry
•Head & Shoulders Patterns Ahead

3. Bull and Bear Tug of War Continues
• Yesterday’s movements in gold may have given both
bulls and bears reason to think that they are the ones
who are right.
• So, what’s really going on?
• Gold finally made its critical move. It broke below its
short-term support line and closed the day below it.
• And that’s clearly bearish.

4. Jump Right Into Gold’s Chart

5. Jump Right Into Gold’s Chart - I
• The chart in the last slide is likely either perplexing,
confusing or appearing random for those who haven’t
stumbled upon the technical analysis toolkit.
• But to those who have learned about its principles and
have used it themselves, the above chart is very
exciting.
• And to those who took the expertise to the next level
and see an even bigger picture, the chart is relatively
calm, and normal.

6. Gold: How Exciting Are Recent Moves?
• Why would the chart be so exciting?
• Because gold just broke below its rising dashed support line and closed the day
below it. This is the first time that it managed to do that, despite coming close to it
a few times before.
• The excitement is even bigger because of what happened on an intraday basis –
gold moved back to its declining support line based on the 2020 and 2021 highs
and then it moved back up.
• Consequently, based on the same session, both bulls and bears have an
indication that “they were right all along”. Was yesterday’s session a major
breakdown, or a confirmation of the May breakout?
• But how excited can you get if it’s clear that gold is simply repeating its price
patterns from the past that were preceded by relatively similar events
(invalidation of breakout to new all-time highs – just like in 2008; similarity with
regard to price moves, volume, and key indicators – just like in 2011-2012).
• Watching a football match is not as exciting when you already know the outcome,
is it?

7. What’s Likely To Happen Now
• Gold is likely to move back and forth, but will ultimately break
below the declining support line, which will be a major “uh-oh”
moment for those who think that gold will move higher from
here based on the very positive fundamental situation.
• Yes, it is very positive, but it doesn’t mean that gold would rally
right away. It could decline despite the fundamentals, just like it
did in 2008 and in 2013.
• And it seems that it’s about to slide.
• My previous comments on the analogies to 2008 and 2012
remain up-to-date:

8. Back In 2008, Gold
• Back in 2008, gold corrected to 61.8%
Fibonacci retracement, but it stopped
rallying approximately when the USD
Index started to rally, and the general
stock market accelerated its decline.
• Taking into consideration that the
general stock market has probably
just topped, and the USD Index is
about to rally, then gold is likely to
slide for the final time in the following
weeks/months.
• Both above-mentioned markets
support this bearish scenario and so
do the self-similar patterns in terms of
gold price itself.

9. Pace Of Gold’s Decline
• The pace of gold’s
decline in 2012 started
off slow, the momentum
picked up later on as the
drawdown became even
more vicious.
• As a result, the tepid
pace of gold’s current
slide remains deceptive
and isn’t a cause for
concern.
• Please see behind the
chart:

10. Relatively Broad Bottom With Higher Lows
• The relatively broad bottom with higher lows is what preceded both final short-term rallies –
the current one, and the 2012 one. Their shape as well as the shape of the decline that
preceded these broad bottoms is very similar. In both cases, the preceding decline had some
back-and-forth trading in its middle, and the final rally picked up pace after breaking above the
initial short-term high.
• Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May
19 this year.
• Consequently, forecasting much higher silver or gold prices here doesn’t seem to be justified
based on the historical analogies.
• The thing I would like to emphasize here is that gold didn’t form the final top at the huge-
volume reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above
that high-volume top, and only then the final top took place (in early October 2012).
• The same happened in September and in October 2008. Gold reversed on huge volume in
mid-September, and it was approximately the end of the rally.
• The final top, however, formed after some back-and-forth trading and a move slightly above
the previous high.
• Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19,
2021) is not an invalidation of the analogy, but rather its continuation.

11. Gold Corrected To Approximately The
61.8% Fibonacci Retracement Level
• There’s one more thing I would like to add, and it’s that back in 2012, gold corrected to
approximately the 61.8% Fibonacci retracement level – furthermore, the same happened in 2008 as
you can see in the below chart.
• Consequently, the fact that gold moved above its 50% Fibonacci retracement doesn’t break the
analogy either. And even if gold moves to $1,940 or so, it will not break it. It’s not likely that it is
going to move that high, as in both cases –in 2008 and 2012 – gold moved only somewhat above
its high-volume reversal before forming the final top.
• So, as this year’s huge-volume reversal took place close to the 50% retracement and not the 61.8%
retracement, it seems that we’ll likely see a temporary move above it, which will create the final top.
And that’s exactly what we see happening so far this week.
• The lower part of the above chart shows how the USD Index and the general stock market
performed when gold ended its late-2012 rally and was starting its epic decline.
• In short, that was when the USD Index bottomed, and when the general stock market topped.
• Also, please note that while it might seem bullish that gold managed to rally above its declining
black resistance line recently (the one based on the 2020 top and the 2021 top), please note that
the same happened in 2012 – I marked the analogous line with red.
• The breakout didn’t prevent gold from sliding. When the price reached the line, we saw a short-term
bounce, but nothing more than that – the gold price fell through it in the following weeks.

12. USDX: The Cleanest Shirt Among The
Dirty Laundry
• The precious metals seem to be ready for vacation deep dives, but all signs
indicate that the USDX will stay on the side of the pool, perfectly dry.
• The USD Index (USDX)
• With the USD Index washing away its sins in recent weeks, the greenback has
recorded five daily rallies of more than 0.40% since May 26.
• And with the up days growing stronger and the down days growing weaker, the
change in the trend will be clear to more and more traders, which eventually
would likely cause a shift in the sentiment.
• Case in point: while gold, silver and mining stocks are looking forward to their
summer vacations (deep dives seem to be in the vacation plans, especially
given today’s pre-market ~$20 decline in gold), the USD Index has been hard
at work rehabbing its reputation.
• And with the U.S. dollar easily the cleanest shirt among the currency basket of
dirty laundry, the smell of fresh linen has begun to pique investors’ interest.

13. The USD Index (USDX)
• For one, not only are the USD Index’s fundamentals
trending up, but the technicals are also moving in the same
direction.
• And after the USD Index closed visibly above its previous
weekly close, the greenback’s verified breakout above its
declining resistance line remains a source of optimism.
• Moreover, while the USD Index still remains below its
dashed rising resistance line and its 50-day moving
average, subtle signs signal that the dollar is slowly
cleaning up its act.

14. The USD Index (USDX) - I

15. The USD Index (USDX) - II
• Second, while the USD Index’s rally occurred slowly at first in 2016,
the momentum gathered steam as sentiment shifted.
• And while we’re only in the first stage of the two-stage process, it’s
important to remember that investors are forward-looking.
• Third, the USD Index recently bounced off of a triple (declining)
bottom and prior instances were followed by significant rallies (the
identical patterns formed in mid-and-late 2020 and are marked by
the shaded green boxes above).
• During that time, the USD Index originally declined steadily before
zigzag corrections culminated with new lows. However, with the third
time being a charm, the third distinctive bottom was the final one.

16. The USD Index (USDX) - III
• For context, the USDX sunk like a stone in July 2020, before moving
back and forth while still declining in August.
• Similarly, in November 2020, the USDX fell from grace once again
(there was one exception) before moving back and forth while still
declining in December.
• More importantly, though, ever since the final days of March, we’ve
seen the same thing all over again.
• After the USD Index lost its confidence in April, we saw back-and-
forth movement with lower lows and lower highs in May.
• However, with the third distinctive low likely already achieved, the
USD Index’s best days may lie ahead.

17. Head & Shoulders Patterns Ahead
• And what happened to gold, silver and mining stocks in the time of the two previous analogues?
• Well, in August, gold topped without waiting for USD’s final bottom – which is natural, given how
extremely overbought it was at the time. Likewise, in early January gold topped (which was much
more similar to the current situation given the preceding price action) when the USDX formed its
third and final distinctive bottom.
• In addition, while the development is more of a wildcard at the moment, the USD Index might be in
the early innings of forming an inverted head & shoulders pattern. For context, an inverted H&S
pattern is a bullish development that if formed, could usher the USD Index to about 97-98. However,
completing the right shoulder requires an upward breach of 93 (the blue line on the chart above), so
at this point, it’s more of an indication than a confirmation.
• However, if we turn the pattern upside down, the Euro Index might be in the midst of forming a
bearish H&S pattern. If you analyze the right side of the chart below, you can see that the
symmetrical pattern has the current price action mirroring the summer of 2020.
• And while we’re still in the early innings of forming the right shoulder, three peaks were recorded
during the second half of 2020 before the Euro Index eventually rolled over. Likewise, with a
symmetrical setup that seems to already be in motion, the Euro Index may be heading down a
similar path of historical ruin. In the second half of 2020, the decline was not that big, but it’s no
wonder that this was the case as that was only the left shoulder of the pattern.
• Completion of the right shoulder, however, would imply another move lower, at least equal to the
size of the head – to about the June 2020 lows or lower.

18. Head & Shoulders Patterns Ahead - I

19. Head & Shoulders Patterns Ahead - II
• Moreover, with the USD Index’s triple bottom mirrored by a likely triple top
in the Euro Index, last week’s decline actually ushered the Euro Index
materially below the dashed resistance line of its monthly channel.
• And with the price action mirroring what we witnessed in mid-to-late 2020
– right before the Euro Index plunged – investors’ confidence could soon
turn into fear.
• Furthermore, the completion of the masterpiece could have a profound
impact on gold, silver and mining stocks.
• To explain, gold continues to underperform the euro. If you analyze the
bottom half of the chart above, you can see that material upswings in the
Euro Index have resulted in diminishing marginal returns for the yellow
metal.
• Thus, the relative weakness is an ominous sign, and if the Euro Index
reverses, it could weigh heavily on the precious metals over the medium
term. That’s another point for the bearish price prediction for gold.

20. Bull And Bear Tug Of War
Continues
Gold: How Exciting Are Recent Moves

21. THANKS FOR LISTENING
Bull And Bear Tug Of War Continues