Premium Market Wrap 09.17.13

On September 17 I wrote, “Short term, watch 1324 as the day’s pivot, as this level has been a great spot for sellers lately. Gold needs to get above 1324 in order to see meaningful strength.”

Another day, another great reaction to our key program levels in Gold! The 1324 pivot was THE line in the sand, and the algos hit it hard twice this morning, with the second test leading to a great sell-off to 1305.80 — a move of 18.20 points! At $100 per point, that move is worth $1820 per contract traded. Not bad for a day’s work.

The chart below shows how Gold has reacted to our key program levels over the last two days. Great movement off clear levels. Gold and Crude Oil have definitely earned their keep lately with regards to how they’ve played of our key levels.

Gold Breakout Ahead

The daily chart shows we’re likely on the verge of another big breakout opportunity in Gold. On September 11 I wrote a post detailing how I was using Average Daily Range (ADR) in order to identify when price was likely to see a breakout, or expansion. For that post, I used a single day and the average daily range to forecast the breakout.

However, today I’ll be using a multiple-day range (MDR) to forecast the next multi-day move. That is, I’m using a 3-day range and a 3-day range average, seen in the chart below. Basically, the total price range of the last three days in Gold has been just 33.30 points, but it has been averaging 50 points over a 3-day span. In essence, the small point range over the last 3 days forecasts a likely breakout and expansion ahead for Gold.

If Gold breaks 1300, we’re likely to see a swift sell-off back to the 1272 to 1275 range, which would be a move worth over $2000 for each contract traded. Take a look at the 100% monthly ADR target for Gold in the table below (Hint: 1275). That’s right, our full range monthly ADR target for Gold is 1275, which coincides nicely with the 61.8% Fib level of 1274.90 and the August monthly low of 1271.80.

If 1300 continues to hold, watch 1324 as a level the bulls need to convert. Above 1324 has 1335 and 1355.