Originally published by Chamber of Merchants
Good morning,
I’d like to share a brief charting perspective based on the 1 hour candlestick chart for dollar, oil, gold, silver and the S&P 500.
Let’s start with the main game, the US Dollar.
US Dollar
The US Dollar rallied in U.S trading, sending gold as low as $1271, however as of my writing this, the US Dollar have given back most of its rebound. The Dollar started sputtering on some mixed economic data, however, it may be the deepening uncertainty regarding the election outcome that could be pulling the rug out from under the greenback. Either way, from the chart, it appears that failing to achieve a new high as set in motion a decline to what will probably 98 on the index. However, failing to hold the supports of 98.28, then 98.17 then 98 on the index would signal to me that the bear is awake – and hungry for some green paper.
Gold
Gold has shown resilient support at $1271-$1273. However, it has also been confined to trading around the $1275 mark. We cannot expect a breakout until the Dollar confirms its decline. Gold is really only waiting for Dollar weakness. The Dollar of course depends on many factors as discussed in previous posts. Currently, the $1275 level seems to be good support as Gold attempts a permanent break into the $1280 zone.
Silver
Silver has received strong support in the $17 range.
Silver is trading in a consolidating bullish channel. Some would argue that it is a bear flag, however, I would argue it will be a failed bear flag. There is just no way, in my mind, that silver will fail to achieve a rally if the Dollar declines. Silver is the converse proxy trade for a decline in the U.S. Dollar. Once the Dollar decline is confirmed, Silver will break out of the linear growth channel and enter a parabolic appreciation in price, overshooting the move in Gold is demonstrated historically.
Crude Oil
Read my previous post on Crude’s Resistance levels.
Crude is just a dud in my opinion. Yes, as I discussed previously, traders can have short term profit trades, but greed usually convinces them that the rally has to continue forever and then they get caught in the decline.
Again, I’ll reiterate, Crude Oil is not economically or fundamentally stable for long term gains.
Rumour driven trades are just not the Merchant‘s way.
How can one sleep at night, knowing that price rise is only due to a rumour or speculation?
Granted, a small punt of a few thousand dollars may be worth the risk, but only if you enter at the correct levels. Clearly someone bought close to $53 believing it would head to $55. Ouch.
Remember, for a Merchant, to seriously start considering crude transactions, there must a certainty of crude supply disruption (not OPEC agreements which can be broken) or a demand surge due to whatever economic reason.
And finally, the US. Stock market darling, the S&P 500
S&P 500
The stock market has been supported by the powers that be for quite some time now.
However, a gradual decline has set in , where the lows are becoming lower and the highs are failing to hold. If the uncertainty in the market increases, then control of the market may become too difficult to maintain by banks (Goldman Sachs (NYSE:GS) etc).
Remember, they’re literally buying up index futures every time a correction wants to commence.
Additionally, at some stage, they’ll want to unload all the purchases they’ve made.
Therefore, as a Merchant, I am not comfortable with the low probability trade in any stock market at present.
If Hillary Clinton wins the Presidential race then we will most likely see a good rally after the election, but that would be a coin toss and short-lived.
Either way, I would only feel confident in the stock markets, globally, once a retracement and correction has occurred to flush out the stale money.
That’s it.