The gold channel is the channel I drew on yesterdays daily chart, only here it is illustrated on the hourly chart. Note how if we did not touch bottom near 042 this would be more of a wedge. The reaction off the bottom was strong indeed, and predictable from the divergene in the RSI that started to develop late yesterday.
I have labeled some important levels. First, we will have some resitance to on monday morning in the 068 area. This may or may not prove to be significant. I suspect it may not hold a lid on the reaction wave that started today. If it does not hold, we can expect a run to the 082 area - which now the 38% retrace level back towards the high. It is also a major resistance level going forward and I do not think it will be so easy to get by. Depending on the timing of the price action, it may align perfectly with the upper trend line of the down channel. There is recent supply and historic supply at this level which will likely take time to exhaust (see yesterays daily graph for a view of the historic supply).
Beyond the 38% level and the upper trend line of the down channel, we have the 50% at 094ish and 62% at 1106ish retrace levels. Both are in zones of recent resistance. I just don't see a break out happening just yet. We are in a "no mans" land right now and true support is down around 1020.
We shall see. I hope everyone made some $change$ today.
Have a great weekend.
9 comments:
Here is a very interesting theory regarding the recent market sell-off. The author speaks of the unwinding carry trade - where those who have shorted the dollar and used the proceeds to buy equities and commodities are being squeezed so hard that there is a massive flight to liquidity. Meaning if you shorted the dollar to buy equities and the dollar has turned against you - you sell your equities to cover your suddenly losing dollar trade. The cycle is actually quite viscious. It drives the dollar higher and higher and the equities/commodities lower and lower. I am not sure when this will end...
Barrons Article
Cheers!
David,
Do your think we are in the type of market where it is going to be very hard for EVERYONE to make money? You currently are still holding some shorts, and your butterfly spread? Are you long on any? I like chinese solar companies, miners, and physical gold and silver. Also looking for the moment to play TBT.
David , thanks for the Ta as always
IHS on todays u turn ? 1087 target ?
Could be on the unwind of the carry trade ,
I am lost on My EWT count , too many possibles
Sold out my oil short and some of my gold short as I look for some upside on Monday , that up leg , that could be any number of things does not look finished .
The daily still bothers me EWT wise , it works , for an iregular top really well , but that is the only way .
On oil this week , there is a descending Triangle at the top finishing in a sell off ,
Ever seen that ? a descending triangle at the top of a reverse ?
My best for everyone .
Hi Guys.
Thanks for TA Dave
Shorts all closed on trailing stops.
Was out all day so needed security.
The way things have gone lately I accept the result but I am not truly happy.
Therefore it is good to carry very light positions over the weekend to recover mentally and forget internet troubles. And start afresh monday.
Most signals are pointing to further downleg in a few months to target my guess 50% retrace to around 920 of march lows. We are now not even at 30% retrace.
Carry trade is already mostly priced in as it was a sliding drop from december high's 1.50 to todays 1.36. Also a lot of data (jobloss etc) and `eurotrouble is priced in till next fresh escalation, as the politicians will go to work. Like Dubai scenario.
As you say there is still bullish commitment and distribution to be made. So big boys go for a push higher.
Please consider chart "JPM's ETF desk singlehandedly manages to push market higher' friday
http://www.zerohedge.com/article/thank-you-jpmorgan-must-see-jpms-etf-desk-ramps-market-higher-close
So I will be patient for any strenght to reshort, add to gold on weakness and be patient.
Oil looks like a long from here, but needs attention.
Let me know what you think.
Have a good weekend all.
Hey CBS,
About the market, I am yet unsure about what exactly is happening. We have to see if this move down is part intermediate trend reversal - meaning a directional change since reacting off of the March 9th low. Or, is it simply a correction/throwback in a new bull market.
Regardless, everyone can make money while we trade inside a channel. So, we bounced Friday off the bottom trend line. Massive covering and buying. One strategy is to ride to the top in long positions - another is to wait for resistance to short - yet another is to do both.
For now, I bought back the middle positions in my butterfly spread at about a 70% profit. That leaves the 108 and 114 calls. I will sell the 114 call when we approach the top trend line of the down channel. Depending on price action, I will likely do the same with the 108.
I have started to accumulate SLV. I think the very bottom for SLV is in the $12-$13 range, but I am an aggressive buyer in the $14 range.
I am a bit spooked right now otherwise. China is a bad story in my mind and the soveighn debt scenarios are only starting to show themselves.
I'm cautios.
Hey Payline,
Let's see how Monday plays out. This "late rally" basically closed the market flush with the open - which was down 30pts the day before. Bull celebrations at this point are really premature. We are at resistance right now and 082-085 (cash market) is going to be tough to get through.
I am betting that we remain in the down channel till at least 1020. I expect a drift higher then sidways along resistance before another wave of selling.
I'll have to look at the Daily SPX chart to see what the EWT count looks like. I think this is a long extended wave.
Hey Paulus,
Glad you have reconnected.
You know I try to be a pure technical guy - but I also try to have an idea of general market conditions.
Price action has signaled a shift in market conditions. The 10% down move in recent sessions can not be ignored. (The pop at the bottom of the channel yesterday afternoon is only a minor signal in comparison).
So what is changing in the general market condition? I think we are seeing the beginning of a major currency crisis tied to debt levels and defaults. This Euro zone credit issue is a definate concern, as is the US deficit.
Nobody really knows what is going to happen. This uncertainty was the trigger for this first wave of panic. The question remains - are the problems "managable" or will they spiral out of control. That is where we are today. All the great corporate earnings mean nothing in the face of this issue. Nor will jobs or real estate stabilization.
The fundamentals of world currency and economic interdependence is being tested. Big issue which can easily turn the markets upside down with absolutely no where to run...
We'll see.
David,
What are you basing your entry price for silver on? Are you buying it to hold or for swing trade?
Hey CBS,
Good question regarding SLV. I decided to put a post up on the subject.
Thanks.
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