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Gold Price Bounce Over? Technical Outlook for Crude Oil, DAX, and S&P 500

Gold Price Bounce Over? Technical Outlook for Crude Oil, DAX, and S&P 500

2018-09-04 11:30:00
Paul Robinson, Strategist
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For the most part, gold recently recovered in line with expectations, but is starting to edge lower while silver makes fresh cycle lows; the former is still in OK shape to possibly trade higher. WTI crude oil is breaking resistance, a couple of scenarios could develop here. The DAX remains quite weak relative to the S&P 500; what to make of this and how to approach it from a tactical standpoint.

Technical Highlights:

  • Gold price is edging lower, silver fresh cycle lows
  • Crude oil breaking resistance; a couple of scenarios
  • S&P 500 and DAX divergence is of interest

See how the majority of traders are positioned in various markets/currencies and what it says about future price fluctuations – IG Client Sentiment

Gold price is edging lower, silver fresh cycle lows

Gold price is working its way lower thus far in a fairly benign fashion in that we aren’t seeing a strong resurgence of sellers. Price action could lead to a bullish falling wedge and another higher low, however; we still need to be patient as the edging lower is still in danger of picking up momentum. Silver remains very weak, relatively speaking, and for those looking for more weakness in precious metals this should remain the go-to short of the two.

Gold Price 4-hr Chart

gold 4-hr chart

See what is driving Gold in the Quarterly Report

Crude oil breaking resistance; a couple of scenarios

Crude oil is breaking resistance from July, but is a bit extended at the moment to get excited about fresh longs. A pullback and hold of the July ’17 slope could offer a nice spot if we see strong bullish price action. However, if oil rolls lower soon and doesn’t hold the slope, then a ‘head-and-shoulders’ could be in the works (left shoulder in May). For now, though, risk isn’t viewed as favorable for either side of the tape.

Crude Oil Daily Chart

Crude oil daily chart

What is driving Crude Oil this quarter? See the Quarterly Report for details.

S&P 500 and DAX divergence is of interest

The S&P 500 sits perched in record territory with short-term risk/reward lacking. With seasonality unfavorable and market participation set to pick up as summer unofficially ends, we could see weakness set in. We’ll need a little more time to tell, but it shouldn’t be long before we’ll know if the market is setting up for a material decline.

The DAX trading so weak compared to the S&P is of interest as risk appetite for global stocks is diverging (same for the Nikkei & FTSE). If fracturing in index performance is any indication, then the new highs seen in the U.S. may not be a lasting theme.

The German benchmark is continuing to carve out a descending wedge since June, with 12104 viewed as a critical level of support to keep an eye on. A break below could quickly have the DAX rolling downhill towards the 11700/600-area. A drive lower would bring into play the neckline of a 15-month ‘head-and-shoulders’ formation. Its implications could be huge.

For now, U.S. indices on one hand are still receiving the benefit of the doubt to the top-side, while bears will likely be best served focusing on the weaker DAX (other Euro-zone indices, FTSE, and Nikkei) …

S&P 500 Daily Chart

S&P 500 daily chart

DAX Daily Chart

DAX daily chart

Check out what is driving global equities in our Quarterly Report

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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