Gold Update - Likely Major Top Nearly Confirmed Complete

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Gold prices have been contracting into a symmetrical triangle over the last 1.5 months.  These can be continuation or reversal patterns.  Waiting for a breakout of the contracting trendlines will provide the best confirmation of the next price move.  If it breaks to the downside, the red line shows the minimum projection down based on the widest leg of the triangle which is the standard measurement.  The green line shows the same for an upside breakout.

If prices break to the downside, based on the chart support I think we will likely see downside follow through as I have projected in the past.

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This chart is gold daily prices with a parabolic SAR study which are the dots.  Also the bollinger bands are overlaid and are channeling sideways in a relatively low volatility squeeze.  This is coupled with the ADX study below the price chart.  The ADX shows readings below 20 continuously for the last month.  I have talked about these set-ups several times before.  But the low ADX for a long period can be thought of as a low volatility basing period before a major directional price move.  Which ever way the Parabolic SAR triggers could lead to a sharp price move as shown with green arrows in a couple prior instances.

Currently the Parabolic SAR has triggered a sell signal.  So unless it triggers a new buy, expect a downside breakout of this pattern.  But strength next week that triggers a buy on the SAR, would be indication of a likely rally for gold.  Seasonally gold tends to make lows in the early summer and rally into the late summer or fall.  So that would argue the bullish case, but the market would need to show strength soon to give some weight to that view.

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To put gold into longer term context this chart should be very helpful.  First the current top formation has taken the form of a large descending triangle.  The standard chart interpretation and measurement would suggest a likely downside breakout through the support at 1530.  And the measurement would suggest a move down to 1200ish as a minimum move.

The pink boxes show the 2008 bear market in gold and place that same box off the 2011 highs.  Here is what is significant.  The move from the 2011 highs has taken more time than the 2008 bear market.  So if prices break to new lows for the move, it would make this move more time consuming than that bear market.  This would imply a likely larger scale correction than any in the last decade long bull trend in
gold.  So I can't understate the importance of the 1520-1530 support line holding for the bullish gold case.  If it fails, it looks like a major bear market in gold will be confirmed.