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As you may recall, I said some time ago that if Obama was re-elected the equity markets would sell off.
That was almost a no brainer, if one looks at the historical market action after a win by an incumbent. But more importantly, the implications for tax selling this year with the reasonable expectations of higher taxes next year.
So what next? We may see a choppy, sideways market, as some things are uncertain, but again, the fundamentals of the markets are foul. The economic recovery is weak, because demand and the median wage are weak.
There will be no sustained recovery until there is genuine reform.
A "Cup and Handle" is a bullish continuation pattern in an uptrend.
The greatest factor working against this current gold chart as a cup and handle is that it appears during a consolidation pattern in a broader uptrend.
The 'cup' is best shaped as a "U" and the broader the bottom the better.
The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.
The retracement usually does not exceed 30% of the advance of the cup to its second high, but can go as deep as 50% in a volatile market.
The cup and handle formation will not be activated until the price of gold rallies about the 'rim' of the cup which is at 1790.
If this correction exceeds 50% then we must consider that gold is in a broad trading range.
As I have limited access to the news of the day I will not comment on the specific market action.
The 'cup and handle' in gold still has the potential to activate.
I will hope that my access to communications will improve later this week.
Have a pleasant evening.
