Gold & silver are both coming off resistance levels, putting burden of proof on buyers’ backs. Crude oil is hanging strong, has support not far below. The DAX may get in gear if the euro can at least pause, while U.S. indices are in a tough position for traders.
Highlights:
- Gold & silver both pulling back off resistance, shifts focus lower for now
- Crude oil trend very strong, has slope support not far below
- DAX may find help from a stalling euro; S&P 500, NDX, and Dow hold poor risk/reward
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Gold & silver both pulling back off resistance, shifts focus lower for now
As we discussed yesterday, both gold and silver arrived at resistance which may keep a lid on a further advance. Gold is pulling back form the 2013 trend-line, while silver is falling sharply today from a confluence of resistance by way of a key price zone up to 17.46 and the 2016 trend-line.
For now, the outlook is lower, especially for silver which has lagged gold for some time now. As long as precious metals stay below their respective resistance levels this bias will remain intact. If gold makes a big push lower, a long-term triangle could become visible. More on this later should it become relevant...
Chart 1 – Gold: Daily
Crude oil trend very strong, has slope support not far below
Crude oil has been a monster despite speculators already holding a very large position in the futures market (suggesting 'overbullishness'). As we said in the weekly CoT update, this won’t become relevant until price action backs it up.
At the moment, oil is extended but doesn’t mean it’s a short. The first reaction line on the radar is a slope from July it overcame recently. Below there we will look to support around 62, which is the top portion of a consolidation-period formed during 2015.
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Chart 2 – Crude Oil: Daily
DAX may find help from a stalling euro
As noted in this morning’s DAX commentary, the index has been under pressure by a surging euro. The currency’s short-term influence has been felt, but the 1-month correlation just turned positive, an unusual occurrence. With the euro looking extended, even a pause may be all that is needed for the market to trade higher.
As long as 13151 holds, so does a neutral to bullish bias. There is minor trend-line resistance off the record high, but of more importance is the monthly high at 13425. A breakout above will quickly bring the record high at 13525 into view.
Chart 3 – DAX: Daily
We also looked at the CAC, which has held better than its German counterpart. A breakout above 5536 is needed for more upside, but longer-term overhead trend-lines (~5570) may soon stall momentum. The FTSE is nearing the 7850/900 target zone. Tactically, it doesn’t hold good risk/reward right now.
Risk/reward is also lacking in the U.S., where indices are extremely extended at the moment. Too high to buy, too strong to short is the general feeling on this end.
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---Written by Paul Robinson, Market Analyst
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