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Last week we saw stocks move sharply higher as traders started to cover their short position which added fuel to an already oversold market ready to bounce. Overall volume was not that strong on the move up which is a bearish sign. On Friday afternoon we saw the SP500 continue to move into the $1075 resistance level on very light volume. This indicates to me that buyers are not willing to pay these higher prices because the market has moved up so quickly and the fact that it’s trading at a resistance level.
I feel the market will gap higher on Monday just like we say on June 20/21 deep into a resistance level and the big money will short the pop sending it sharply lower. Gold looks to be shifting its momentum from a down trend to an uptrend as it forms a reverse head & shoulders pattern.
Weekend Conclusion:
In short is looks as thought the market is at a critical pivot point. We could see prices stall out here and continue the down trend or see strong buying step in sending prices higher in the equities market. We need to wait and see what type of price action unfolds in the coming days.
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Last week we saw the financial market including commodities move higher which was great to see. But the recent run up has brought both equities and commodities to their key resistance levels. With Gold, Oil and the SP500 trading near key resistance points we will most likely have some sharp movements this week so buckle up tight!
Gold – Daily Chart
Gold Future Prices continue to form the large cup and handle pattern and is trading near resistance. This week I figure we will see gold make a move up or break the dotted support trend line and drop towards the blue support level. I continue to wait for a low risk setup for gold.
Crude Oil – Daily Chart
Crude oil has been trending down for a couple months and recently rebounded to test its resistance level. It looks as though oil is forming a bear flag which generally means we should see lower prices in the near future. But another $1-2 move up could trigger a surge of buyers if this resistance level is broken which is why this week should be volatile… it’s a 50/50 chance for commodities to either rally or sell off.
SP500 – Daily Chart
The SP500 has posted some decent gains the past couple days but it’s still no in the clear just yet… Most technicians are looking for a move above 1100-1110 area with heavy volume before they start to commit serious money to the long side.
It looks and feels as though the market could drop or rally very sharply from here and if you are caught on the wrong side of the move then it’s going to really hurt the trading account. During times like this when the market is at a critical pivot point with increased volatility levels along with mixed market internals I tend to stay on the side lines until some dust settles.
Weekend Gold, Oil and SPX Trading Conclusion
In short, everything is trading near key pivot points giving mixed signals for prices to rally or drop. My analysis is pointing to a small move up Monday morning to break Fridays high followed by some selling late Monday or Tuesday. How much of a move down I don’t know for sure but there is potential for a 3-4% move. On the flip side if buyers step in pushing the price above 1100 then we could see a surge higher of 3-4%…
Very dicey times right now to be trying to pick a direction, which is why it’s best to wait for the risk level to diminish before getting involved or at least trade a small position with a protective stop if you feel confident in a direct.
