Category Archives: Gold

On Balance Volume (Beyond Volume Basics) | 23rd June, 2017

Volume alone is not always a clear indicator. It is necessary to add another volume indicator, like On Balance Volume, to add depth to volume analysis and improve accuracy.

Gold Daily 2016
Click chart to enlarge.

On Balance Volume can be used in two ways.

1. When On Balance Volume creates a range draw trend lines across its highs and lows. A breakout by On Balance Volume can sometimes precede a breakout from price, so On Balance Volume can be a leading indicator. Other times On Balance Volume may break out with or after price, it can then be a confirming indicator. Used this way On Balance Volume works very well.

2. Divergence between price and On Balance Volume can be used to indicate weakness and an impending trend change. This divergence can persist for some time prior to a trend change, so it is not useful in picking highs or lows.

Trend lines are drawn on On Balance Volume in the chart above. Resistance is in purple, support in yellow. A long term line is added in pink.

Bullish signals are noted in green arrows on price:

1. Halfway through an upwards trend On Balance Volume breaks above resistance which was prior support. This adds some confirmation to the trend. Traders may have more confidence in long positions.

2. A long term trend line which previously provided support, then resistance, is breached. This adds confidence in the upwards trend continuing.

3. A long term trend line is touched after some time. The bounce up and away is bullish.

4. A breach of resistance is a bullish signal. This illustrates that this technique does not always work. Price continued higher for only one more day before a major reversal.

Bearish signals are noted in red arrows on price:

1. A breach of support is a bearish signal, which should confirm the downwards trend. But a low is found the next day. Again, this technique works more often than it fails, but it can fail.

2. A break of a long term support line halfway through a downwards trend offers confidence in short positions.

3. Another break below a support line offers confidence in the downward trend.

In addition to breaches of trend lines, tests of support and resistance also offer signals.

Using On Balance Volume in conjunction with volume bars adds considerable depth to analysis.

This analysis is published @ 03:41 a.m. EST.

Volume Basics | 21st June, 2017

The activity of buyers is required for price to rise sustainably. This is indicated by increasing volume on upwards days.

The opposite isn’t necessarily true for a falling market. Price can fall due to an absence of buyers, just as it can with increasing activity of sellers. Rising volume with falling price is good to see as it supports the trend, but it is not necessary.

Does Gold’s price and volume conform to this basic principal of technical analysis?

Gold Daily 2016
Click chart to enlarge.

1. This first rise in price is close to textbook perfect. The trend is well supported by volume. Volume does not increase in a straight line each day; some days are lighter than the prior day, but overall there is an increase.

2. This next rise is not so clear, but there is still overall an increase in volume as price rises. Volume is lighter than the prior stronger trend though, so the deep pullback that followed should not have been entirely unexpected.

3. As price falls initially volume declines and then shows some steady increase. The fall in price has support from increasing selling activity.

4 & 5. As price rises volume is not clearly rising. Sometimes the market can drift higher on light volume, so this type of rise is suspicious. The following deep decline again should not have been entirely unexpected.

6 & 7. As price falls volume declines. The market is falling of its own weight.

8. At the end of the fall volume begins to increase.

9. The start of the next rise has some support from volume by day 5. This shows an increase. However, the fifth day volume spike may also be a blow off top signalling an end to the rise temporarily. Blow off tops are not usually the very end; they usually signal a period of consolidation before the trend has a final rise.

The area between 9 and 10 is very unclear, with choppy overlapping price action generally trending higher and mostly flat volume.

10 & 11. As price falls volume declines. The market is mostly falling of its own weight.

When volume clearly supports a trend, then more confidence may be had in it. When volume does not support a trend, it is suspicious. Lack of support from volume will not tell when price will change direction, but it can warn that price may likely change direction and not just consolidate.

This analysis is published @ 03:51 a.m. EST.

Market Correlations – Statements and Assumptions | 20th June, 2017

Occasionally, members and visitors to this website make a statement along the lines of “market X is doing this, so how come you think Gold is going to go up / down?”.

Such statements are based upon unacknowledged assumptions that the markets have a correlation. The problem with assumptions is they can be wrong. So is there a simple mathematical technique to determine if two sets of data are correlated, either positively or negatively?

Gold Daily 2016
Click chart to enlarge.

Yes, there is: by looking at the correlation co-efficient range between two sets of data.

Correlation co-efficient ranges from -1 to +1. A perfect positive correlation will have a correlation co-efficient of +1. A perfect negative correlation will have a correlation co-efficient of -1.

Two sets of data which have a positive correlation will have a correlation co-efficient between +0.5 to +1. Two sets of data which have a negative correlation will have a correlation co-efficient between -0.5 to -1.

Any two sets of data which have a correlation co-efficient between +0.5 and -0.5 are not correlated.

Any two sets of data which have a correlation co-efficient that spends any time between +0.5 and -0.5 does not have a correlation which is reliable. This area of unreliability is shaded in the chart above for several markets which are often assumed to have a correlation to Gold price.

GDX, US Bonds, US Crude Oil, the US dollar index and even Silver do not have a reliable correlation with Gold price. All of these markets have correlation co-efficients which spend time in the shaded areas.

Even if these markets do sometimes exhibit a correlation with Gold, the point is that because this is not always true that when it is so it cannot be assumed to continue. The math shows that it does not.

To base an analysis of Gold on an assumption that another market is moving in a particular direction, and therefore Gold must move in a particular direction, is to base the analysis on assumptions and not data. Such assumptions are unreliable, and why you will not find then in my analyses.

To base an analysis of Gold on actual data and math is more likely to lead to accurate predictions and profitable trading. This does not mean the analysis will always be right, but it does mean the analysis will be based on facts and not assumptions.

This analysis is published @ 04:13 a.m. EST.

Will US Consumer Sentiment Data Release Influence Gold Price?

“The University of Michigan Consumer Sentiment Index rates the relative level of current and future economic conditions. There are two versions of this data released two weeks apart, preliminary and revised. The preliminary data tends to have a greater impact.” [1]

US Consumer Sentiment data release will be at 10 a.m. EST on the 16th of June, 2017. The release will be for preliminary June data.

The sentiment data is very likely to affect equities and indices. It may also affect Gold, but any effect should be short term.

A look at an hourly chart with a simple Elliott wave count and Fibonacci retracement levels may yield clues as to what direction Gold may take after the release:

Gold Daily 2016
Click chart to enlarge.

If US Consumer Sentiment data does have an influence on the Gold price, then Gold may see a short sharp upwards thrust to end about either 1,257 or 1,261 followed by very strong downwards movement to new lows. The target at 1,221 is some days away.

To see how the bigger picture supports this view, see my current Elliott wave count.

This analysis is published @ 09:26 p.m. EST.

What Is Gold’s Next Move After US FED Interest Rate Decision on 14th June, 2017?

Technical analysis chart of Gold with Volume and On Balance Volume indicators, and support and resistance lines, may give guidance as to the direction Gold may take after FED Interest rate decision.

Gold Daily 2016
Click chart to enlarge. Chart courtesy of

The recent fall in price over the last three days does not have support from volume and this suggests a bounce should be expected here or very soon. Additionally, there is strong, bullish support for Gold’s price at about 1,260. These support the idea of upwards movement after the FED Interest rate decision.

However, the latest and now most important signal comes from On Balance Volume breaking below support. This is bearish.

Given that a technical analysis approach would expect Gold to move mostly in the direction of least resistance and away from greatest support, the expectation is for Gold to breakout upwards. But because of On Balance Volume’s bearish signal, any upside movement is expected to be relatively short lived.

Also, On Balance Volume supports my current Elliott wave count.

This analysis is published @ 03:30 a.m. EST.