Did Precious Metals, Bonds Just Capitulate? Don't Buy Them Just Yet

By Rod David  DEC 18, 2012 3:47 PM

The dollar, bonds, gold, and silver extended their declines, but still need to close lower Wednesday to confirm that this is not the beginning of a bottoming effort.


The following are the latest daily summaries of my ongoing intraday coverage, providing context to interpret price action. Any prices listed are for a contract's current "front month." Their direction tends to correlate with any ETFs listed for each.

Today’s Highlight: Tuesday played “catch-up” as several patterns broke sharply. The dollar, bonds, gold and silver extended their declines, but still need to close lower Wednesday to confirm this is not the beginning of a bottoming effort.

Dollar Basket
Monday’s “ineffectual pessimism” required the drop to extend lower without further delay to prevent buyers from gaining traction. Without a second consecutive lower close Wednesday, a corrective bounce targeting 79.75-79.90 would be underway.

Mar Contract EC; (NYSEARCA:FXE)
Monday’s “ineffectual optimism” required the rally to extend higher without further delay to prevent sellers from gaining traction. The 1.3222 target put into play Friday was probed u to 1.3252. A second consecutive higher close Wednesday would put into play 1.3640.

Feb Contract GC; (NYSEARCA:GLD)
Having never recovered above 1703.60, the downleg’s momentum remained intact. Nevertheless, extending down sharply Tuesday to 1662.00 without first testing 1703.60 resistance does suggest the probe of new lows is capitulation. A second consecutive lower close Wednesday would instead confirm the new downleg, next targeting 1647.50.

Mar Contract SI; (NYSEARCA:SLV)
The trend remained down without recovering 32.25-32.60, which was exploited by Tuesday’s plunge to 31.40. Now the drop’s momentum remains intact and is next targeting 30.90 unless 32.15 were recovered.

30-Year Treasury
Mar Contract US; (NYSEARCA:TLT)
The trend’s 147-00 target being tested at Monday’s close gave way easily Tuesday to 145-19. The drop from Friday’s 148-19 corrective bounce now measures 61.8% of the prior downleg from 150-02. So long as this low were to hold, a corrective bounce up to 147-00/147-14 is likely.

Crude Oil
Jan Contract CL; (NYSEARCA:USO)
The recovery back up to prior highs has held up long enough to expect at least an obligatory fresh high, even if only to fill the gap outstanding just above. Closing above 87.30 would suggest that more than a corrective bounce is underway. Otherwise, a close under 86.50 would again be credible for triggering the next downleg targeting the 82.00 area.

Natural Gas
Tuesday’s gap up ranged above Friday's and Monday’s highs, but never really extended up as would be expected of a breakout.

Editor's note: Rod's analytical techniques are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He applies his techniques live intraday, primarily to S&P futures, at RodDavid .com.
No positions in stocks mentioned.

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