Friday, March 20, 2009

Technical Picture - Minor Profit Taking

Commodities and commodity related plays logged in solid gains on the back of a weak $USD. Financials, on the other hand, submitted to profit takers, undercutting the broader market from start to finish. Tomorrow is options expiration, but in this kind of market environment, it may not be as choppy as usual.

I've added the open interest (CPC) as an indicator on the SPX chart to save from posting two separate charts. Extreme bullish reading of 65 retraced but still in bullish zone.

Financials hit with some profit taking after a 60% surge off of the lows. Watching to see if the R-zone of the most recent reaction high/low will hold as support.

Bearish dark cloud cover on the daily.

$USD getting crushed but support from trendline and rising 200 SMA will be coming into play near term.

7 comments:

TraderLars said...

Jaime take a look at GLD,,, downside looks opened up... narrow range inside bar has appeared. would you feel as comfortable as i do taking a short on a break below the bar?

Jamie said...

Lars,

GLD consolidating Wednesday's big move on declining volume. I see support at $93, followed by $92. I suspect narrow range sideways trade before the next leg up. NEM has formed a perfect base at $45.00 and needs to consolidate sideways before BO to the upside. A failed BO to the upside would provide a shorting opp. with a wider target.

john said...

If gold has a failed breakout after the FED's recent commitment to accelerate the debasement of the USD, and the consequent prospect that of other countries' pols will respond in kind, than I wouldn't be surprised if gld was done for a long time. After all, how could the news possibly get any better for gold?

To me, both the chart and the fundamentals for gold are, unfortunately, bullish.

smtrader said...

GLD is riding an uptrend price channel and there was a gapped up breakout from the inverted H&S on 1/23/09. The 50 & 200 SMA is rising with 50 SMA above 200 SMA. The dramatic intraday reversal on Wednesday reinforce the bullish stance for gold. Not saying gold can't reverse and go down, but the odds are against going short on gold right now. I would consider shorting it only after it has broken the price channel support. I have just put up a chart on GLD in my blog showing all the technicals I have mentioned in my comment.
www.lastchipstanding.com

TraderLars said...

great points from both of you... another reason why i love the blog...

to me gold already looks like a failure with it's inability to break 1000 on that second attempt... the big volume day three days ago opened up the DOWNSIDE in my opinion... it is a high volume breakdown of the 90 level (Jaime I'm working off the daily chart)... which is already a false breakout because 90 wasn't penetrated on enough volume relative to last years test of the level. GLD is begging for a trip back down to 700 and the failure and light volume retest of 1000 warrants it.

as far as the fundamentals go, I'm not so sure they really deserve such inflation fears. i see the USD fall as a knee-jerk reaction to something that seems like its going to be inflationary but won't pan out that way due to low low velocity of money preventing that from taking place and the ability of the fed to remove liquidity once velocity increases.

the USD is at the beginning of a new 16 year cycle.. it may have some struggles but any pullback is a buying opportunity in this safe-haven currency, one that is flocked to in tough times... simply due to it's availability and the fact that it is the reserve currency of the world.

so to me ... still... gold is a short... dollar is a buy... and US treasuries are still DIRT cheap. think negative interest rate.... and even then US treasuries will sell like hotcakes because the dollar will be appreciating against the rest of the world's currencies.

Jamie said...

Good discussion guys!

The reaction highs to confirm a new uptrend for the $USD are $92.50 from 2004-05. Looking at the weekly chart you'll see negative divergence of the RSI on the most recent high which fell short of the RH. $USD has formed double top on daily. Once the trendline and 200 SMA are broken, it will be in a position to retest the lows.

GOLD is forming an inverse H&S, and long term uptrend on weekly is thus far intact. Failure to BO of inverse H&S would be a major upset and profit taking opp. Long gold near term.

Gold bugs say that gold going to $2,000, if so does that mean $USD going to $0.50?

john said...

With so much supply under the control of political entities (governments and quasi-gov't entities like the IMF), gold could move down in the short-term as supply is released by these non-market-motivated forces.

But longer-term, the US gov't seems determined to cause inflation in order to keep people spending while also decreasing the real value of our huge private and public debt. On Wednesday, the FED made it clear that they get the decreased velocity of money and that they will create tools to counteract its effects.

Everything that the Obama administration has done is consistent with a move towards spending, indebtedness, inflation and dollar debasement - - photo ops with Volker notwithstanding. And politicians in our trading partners' countries will be motivated to follow our lead.