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Gold continues to move lower in a 3 step down, 2 step up fashion, but the sequence of lower-lows and lower-highs remains firm for the moment. Not far below with a little more weakness gold will come to an interesting cross-road made up of the December trend-line, 200-day MA, and monthly low. This confluence of support is in the vicinity of 1260/62. Silver is obviously moving in similar fashion, but doesn’t have the ‘neat’ confluence which its yellow sibling has. The US Dollar Index (DXY) breaking out of a bottoming formation could see to it that precious metals break support and extend the slide at an increasing rate. At the least a dollar advance looks likely to make higher prices difficult to come by.
Crude oil - A month ago two opposing scenarios were outlined with regards to the big-picture, both of which have the same pattern type ('head-and-shoulders') but on different time-frames and with a different directional bias. The big-picture bottom could very-well be on the verge of leading to much higher prices. On a weekly basis the 'neckline' of the broad pattern was broken, and barring a steep drop today that will be the case on the monthly chart as well. It may need to trade up a few more dollars to get above the year high over 55 and recapture a trend-line extending higher since 1998 before real upside momentum can kick in. But we’re getting close. If this takes shape then trading in oil from the long-side may smooth out with less overlap in short to intermediate-term price action.
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Copper continues to pull off a top-side trend-line we looked at the past couple of weeks, now targeting the 3.03/.05 area, which is trend-line support extending higher from June.
The DAX is above all visible long-term resistance and may turn to a couple of long-term top-side trend-lines in the 13100/50 area for support. The CAC is beyond the post-election May high and looks likely to remain firm. The euro breaking down out of a 'head-and-shoulders' pattern should be a boon for European stocks with selling pressure expected in the single-currency for the foreseeable future. The S&P 500 has been a bit rocky the past few sessions but appears to be consolidating for another leg higher at some point. The Nikkei is straight up, trading at its best levels since 1996. It’s a tough buy here, but like most indices they are even tougher shorts. The FTSE is bouncing around between ~7550 and 7430, ‘Super Thursday’ may help resolve one side of the market should we see a strong reaction in sterling.
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---Written by Paul Robinson, Market Analyst
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