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VIDEOS&P 500 and Gold at Crucial Pivot Points
If the S&P 500 moves up today, consider the market to be in an uptrend. Gold, meanwhile, has found its way to the previous top, but there's not much demand at these elevated prices.
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Wednesday was a big session with better-than-expected manufacturing surging the market 3%. In this article I'll do a quick technical take on the current situation for the S&P 500 and gold as they're both trading at a key resistance level. Also, it's important to know what type of price action we'll get in the next one to two days so you can have your profit targets or protective stops in place depending on which side of the market you're currently playing.
S&P 500 Exchange-Traded Fund (SPY) -- 60-Minute Chart
The market is currently in a downtrend, which means bounces get sold. But if you take a look at the buying volume ratio at the bottom of the chart you'll notice that in an uptrend, buying surges are the beginning of a rally, and during a downtrend, buying surges are the end of a rally. I also want to mention that a lot of volume traded at this current level, which you can see on the volume-by-price bars on the chart. This means there will be a lot of sellers to overcome before breaking to the upside.
The situation the market is at now makes things difficult to tell if this bounce will get sold, or if it's just the start of a rally. There are several arguments for each side but the one that I think has the most influence is the buying volume. It was very strong on this current bounce. It feels more like a rally but we won't know for sure for a couple days.
That being said, if the S&P 500 moves up today then I'd consider the market to be in an uptrend and exiting any short positions is a smart play. But if this bounce is sold and the market drops, then the 3% rally on Wednesday could all be given back and then some.
Gold Exchange Traded Fund (GLD) -- 60-Minute Chart
Gold has continued to grind its way up to the previous top. Problem is the volume has been very light and that tells me there's not much demand for gold at these elevated prices. While we're still long gold it's crucial to have your protective stop in place so we lock in as much profit as possible for when the sharp selling spike happens.
Mid-Week Technical Take:
In short, the market feels like it's trying to reverse back up, but, at this time, it's still in a downtrend and trading under a key resistance level. This means trading with the trend and selling the bounces is still the play. That being said, yesterday’s strong volume makes this bounce suspect. Keeping positions small and setting a protective stop should be done as a safety precaution. The next couple days will shed some light for sure.
As for gold, I'm still bullish but expecting our protective stops to be triggered any day now, which means we get paid and can mark another successful trade down on the scoreboard.
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