What about gold?

XAUUSD with Simple Moving Averages 200 and 50

As we know gold as the safe haven for investors, we may have some potential to buy in the near future .

Last week major stock indexes declined and as soon as they start to trend down we know there is a lot "air" for gold. On the other hand, blue chip companies have had a great year and therefore ivestors are holding on the stocks to receive generous dividends. Moreover there is  a rumor about gold that the Indian government would loosen their tight regulation regarding importing gold.

From the technical perspective, we had almost a breakout of the downtrend last week at 1.268, but it turned out to be a testing of the resistance or false breakout. As soon as we have some 1,2,3 formations and a breakout over the 2, I would buy. A turbo-long certificate would be the suitable. A drop below 1.180 would mean, that it is still a bearish climate.

Observing A Trend From A Market Technicians Viewpoint

There are many books about technical analysis out there, that are full of chart setups and candle stick analyses, but what they usually don´t have, is the explanation of traders behavior in a specific market situation. A successful daytrader, knows where the majority of traders have placed their stop orders and limit orders. That information is enough to make a successful trade, since where the orders are placed there will usually emerge a larger movement.

Lets have a look at the SP500 daily chart.

The blue dotline indicates the way of the trend. In general, trendfollowers usually set their stops above or below the last high or low, depending on the position of course. So if we look at the first 1,2,3 formation, we can see that when the price hits the significant high 2 the price breaks out. So the price reached above the last high and triggered stop orders from those who were positioned short. So short sellers have to buy the security and sometimes they even turn their position, which means they have to buy twice as much. And also many traders have their buy orders placed above the line.That is why often, but definitely not always, there comes movement into the market when crossing a significant high or low.  

That explains also why a breakout of a triangle formation has so much volume. The price oscillates up and down, but not making higher highs or lower lows. As the range of the movement gets smaller and smaller, eventually the price breaks out of the formation skyrocketing or falling. The traders move their sell and buy orders outside of the triangle and when the price breaks the formation, it triggers the bundle of orders.