Fundamentally, gold could be shifting into a holding pattern as traders await the results of the Federal Reserve's mid-December meeting. This week, however, light volume trading conditions leave the market vulnerable to a potential "bear trap" as short-term traders may look to pick off "stop" orders around the contract low at $1,062.00.
What is a bear trap? A bear trap occurs when a market breaks a support point, but finds a lack of follow-through selling below that zone and a quick snap-back move higher occurs. The "bears" are trapped with short positions while the market moves higher. This sometimes occurs around major support levels and can be exacerbated by thin trading conditions.
As Semi says below:
So what we have here on the RUT is a gap at 1202.98 from the August Gap down in RUT, that never was filled. Now the SPX and Nasdaq have filled those gaps as well as many others. Back in September we peaked coming off the gap down at 1193.99 on 9/17. We recently tested that level, closed over it once on 11/7 near the 1199.96 high of the day, broke down the next day and we saw a retracement to 1140.76 and bounced sharply off that low and closed that day - 11/15 near the high, 1156.22 and this has trended higher on acceptably strong enough volume to this point we are on Friday at 1175.15 on the close after a high of 1178.74, on stronger volume on both the day to day current measurement with a higher high, but also on the benchmark comparison from 11/12. So basically this is still set up for more rally going into Monday - we think the market this next week can be volatile as we are expecting holiday levels of light volume, so volatility cannot be ignored, and we still have one signal for a pullback in proximity. Looking ahead now ... the obvious targets are 1178, 1194, 1203 which would test those high volume reference candle highs. We also have another area just overhead (old highs) from 1208-1213 that can be tested -- and we don't rule that out. OK, that sets the upside landscape and from the downside, we have the lower lows at 1140 that can be retested, and a trading range that extends to 1127, but that all failed the last attempt - so there's a lot to prove here until those levels are retested and broken.
Edited by Rogerdodger, 23 November 2015 - 09:44 AM.
