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Gold and Dollar to Bounce From Key Support

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Midweek take on gold futures, US Dollar, crude oil futures, and the S&P.

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It has been an interesting week in the market as stocks and commodities push to extreme support levels. Below I've posted some charts showing where the market is currently trading at and what I think is likely to unfold.

Gold Futures -- Four-Hour Candlestick Chart


The price of gold is testing a key support level. I figure we'll see gold try to stabilize over the next week or so as it digests the recent drop in value then starts to head back up.

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US Dollar Index -- 60-Minute Candlestick Chart


The US Dollar and gold have been moving together the past few weeks as more countries pop up on the radar for serious financial issues. This is helping to boost both the US Dollar and gold as investors around the world start buying what seems to be safety. The dollar has had a sizable pullback and is now testing a key support level.

This could be the start of a possible head-and-shoulders pattern, which means the dollar rally could be nearing maturity in the next couple weeks.



Crude Oil Futures -- Daily Trading Chart


Oil has been under serious selling pressure because of the rising USD. It has now dropped to a key support level and is starting to look very interesting. If the US Dollar bounces in the next week or two it will keep downward pressure on oil. I think this bottom is going to be a process, not a one-day event.



S&P 500 -- Daily Trading Chart


Stocks have been under, dropping like flies the past few weeks and shorting the S&P 500 last week at 1170 has played out very nicely for members. The broad market is giving me mixed signals and when I'm unsure of a trade I stand on the sidelines. It's always better to sit in cash and watch things stabilize than it is to watch your hard-earned money evaporate. We could see a wave of panic selling in the stock indexes, testing the previous lows, so be cautious.



Midweek Stock and Commodity Trading Report Conclusion:


In short, I feel gold and the dollar will bounce in the coming days from their support levels. This will keep pressure on oil and the S&P, holding them down near support. Once the US Dollar forms a possible right shoulder we'll most likely see them pop and rally.

We are still seven trading days away from a cycle low on the broad market, making this scenario very likely to play out. At the moment I'm getting a lot of mixed signals and during times like this I prefer to stay in cash because volatility will rise and it's easy to get shaken out of trades.


Check out more from Chris Vermeulen at TheGoldAndOilGuy.com.

For more on ETFs in Minyanville check out the Grail ETF & Equity Investor newsletter.
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No positions in stocks mentioned.

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