Today the gold futures were on the Sell Short day of the Taylor Trading Technique (TTT) cycle. Gold was approaching last week’s high, the highest of the past three weeks, so this was a market to watch today.
Friday was the Buy day of the TTT cycle and the market had a bullish pattern, opening near the low of the range and then closing near the high. Also, Monday was an inside day, so Monday’s expected TTT Sell day could also see an upside breakout if it could rally above the Friday high. This was borne out yesterday as there was strong upside follow through.
After a two day rally we would anticipate a Taylor Trading Sell Short day for Tuesday. Specifically we would look for a failed rally above the previous day high (our reference price), shorting it when the market fell back below the reference price.
Gold rallied last night, making a session high of 1263.80. If you were trading overnight you could have shorted the move above our 1262.60 reference price (Monday high basis June futures). I generally don’t trade the overnight session (even us brokers need to sleep) however we could continue to look for another trade opportunity for the day session.
Gold saw another rally this morning, reaching a morning high of 1263.30 around the stock market open. This failed rally gave us another opportunity to short; the lower high in the day session gave us confidence in the trade. If you missed the 8:30 AM sale you got another chance at 9 AM when it once again cleared Monday’s high, making a still lower high.
This series of lower highs gave way to a stronger selloff. By 10:45 it reached the first objective of 1255.30, a 50% retracement of the Friday to Monday night rally. We could watch this level as a pivot point for the selloff and this was decisively taken out around 11:30, leading to another leg down.
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