Gold found support at trendline but don't be complacent that it lasts!

Gold found a good place to look for support the past two days, confirming once again that it likes the newest set of trendlines that I'd added to my gold daily chart (below - click on it to see it larger)). For anyone skeptical of my warnings about gold who's held long as it dropped into this trendline, it's time to keep a keen eye out for whether this support holds or gives way to lower levels. Some of my thoughts are noted on the chart, and see my prior posts here (use "Gold" label in the labels list at right) if you need the info or a refresher on the two major Elliott Wave paths for it. Bottom line is, I think it's at great risk of moving into a large wave (C) down that could point as low as $550. Since the alternative is that it moves into a beautiful large wave 3 up, I can understand why gold bulls would be reluctant to heed my warnings and sell or hedge. So I recommend using this trendline and the lows of the past two days as a stop level.

Another way of thinking about this would be, many are seeing gold as tracing out a bullish, inverse head and shoulders pattern, with the March-April lows being its right shoulder. I disagree with that. But if that's your idea, and if you also disagree with my recommendation of using this trendline and past two days' lows as your stop, then you must at least agree that your stop should be at the bottom of that "right shoulder." Interestingly, that level is also a support/resistance pivot level approximately $850 that I've marked on the chart, which gold has really worked around for months. This gives at least two reasons why, if gold cannot remain above $850, it should gain downside momentum. Let's add another - gold's 200-day moving average is at $868, and falling under that would be bearish and perhaps even start tilting it downward (even more bearish).

Gold at $934.70 on this $GOLD continuous contract chart is also under its 20-day moving average Bollinger Band mid-line (sitting about $954). Its lower Bollinger Band (BB) is at about $922, so it's possible that a quick poke under the trendline might receive BB support. But it's increasingly risky. It's already lost $55 in almost two weeks and the indicators are rolling over and showing negative divergence. It's looking to me like the bearish case on gold has the upper hand.

I've referred to Elliott Wave counts on my gold charts, and my default label for this refers to Tony Caldaro's Objective Elliott Wave. As I've mentioned and shown before, Tony has been showing the more bullish case on his gold chart (unless he changed it since his weekend remark about gold), but also a more bearish case on his precious metals chart. I think that's a fair way to point out that it can be "counted" either way, although my belief is that the Elliott Wave counts currently favor the bearish case. There are cycle reasons to view gold with a very skeptical eye as well; and I've shown the commercial traders with substantial net short positions in the Commitments of Traders (COT) charts for weeks now. As I've mentioned, the indicators have rolled over, and even the DMI-ADX has seen a negative cross-over (bottom indicator on the chart below). So once again, I'm thinking the bears will be in charge of gold for a while. Maybe there's "hope" for a technical oversold bounce from the trendline, but it may be a selling opportunity for many.