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Is Gold's Heavy Selling Into Fresh Lows a Trap?

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Daily commodity spot: A breakdown of the day's highest-profile commodity futures.

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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 Gold gapped down big, under prior lows, spending all of Thursday in negative territory. The pattern also formed a potential "Island Reversal." It's much too soon to form a durable bottom, but not extending down immediately Friday could launch a sizable corrective bounce.

Dollar Basket
Jun Contract DX; (UUP), (UDN)
Wednesday's open ranged narrowly around 80.10, whose recovery would trigger a bigger rally leg underway. The reaction down already filled the gap back down to Wednesday's 79.87 close, without closing lower. Closing above 80.10 would still trigger a bigger rally leg underway.

Eurodollar
Jun Contract EC; (FXE)
Thursday's gap down quickly tested 1.3145 whose break would have signaled momentum reversing down. An intraday bounce nearly filled the gap back to Wednesday's 1.3210 close, which held as resistance. Now a close under 1.3160 would trigger a new downleg underway.

Gold
Apr Contract GC; (GLD)
After days of holding 1661.00 resistance, the bearish pattern proved itself out Thursday by gapping down to new lows that tested 1627.50. But look out for the potential to become an Island Reversal. Thursday's open gapped down under 1640.00 prior lows, and the entire session developed in negative territory. Also, no close under 1650.00 ever actually triggered until now. A second consecutive lower close Friday would confirm the breakout's 1591.00 objective is in-play. Gapping up above 1650.00 Friday instead would trigger a sizable corrective bounce to 1691.00.

Silver
Apr Contract SI; (SLV)
Gapping down Thursday to 31.80-31.90 prior lows and extending down throughout the day to new lows at 31.09 further confirms the bearish pattern.Closing under 30.95 would confirm a target in-play at 37.90.

30-year Treasury
Jun Contract US; (TLT)
Thursday's Jobless Claims did not derail the bounce from Tuesday's 135-08 low. Neither did it help the bounce extend. Much of the session developed above Wednesday's 136-28 high, briefly exceeding it up to 137-13. But narrow ranging throughout the day only tested week-old highs at 137-00. A pullback has room down to 136-06 before signaling the 134-10 target is in-play.

Crude Oil
May Contract CL; (USO)
Wednesday's bounce did not extend Tuesday's rejection of Monday's gap up. Neither did it reject the gap up's rejection. The pattern was free to extend lower Thursday, which it did. Last week's 104.29 low was attacked to within a nickel, this time without any SPR rumor. Now a second consecutive lower close would confirm a bigger downleg in-play, next targeting 103.00 and 100.15.

Natural Gas
Apr Contract NG; (UNG)
Thursday's EIA report did not help to launch a new rally leg. In fact, 2.32 support was probed yet again, this time by its deepest, failing to recover by the close. This action puts a clock on the resolution - a rally should be obvious by noon Friday if a deeper pullback is to be avoided.

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.
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No positions in stocks mentioned.
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