Booth - Weekly Gold Report (August 20th through August 24th)
Brian Booth of Long Leaf Trading in Chicago writes: "After completing what seemed like a fairly strong week in global markets, I now look back at the daily charts for most futures and realize that overall, things were not really all that exciting. While the Treasuries quietly slipped lower day after day, and the Crude Oil and Stock Indexes maintained their upward bias, the US Dollar, the Euro Currency, and the Precious Metals were overall fairly boring.
There were no real breaks above or below the ranges that we continue to be stuck in. I suppose the reason there may have been some excitement in the overall trade last week is that despite the low volume (which hit record low in some markets) there were opportunities to hold positions without fear of the intraday or overnight “stop-hunt” that we all have become so accustomed to.
If traders sold Treasury or Yen Futures, or bought Crude Oil, Grains or Stock Index Futures to start the week, they had the first chance in a long time to hold out for the directional move. If traders were involved in the Dollar, Euro, Gold or Silver Futures, the same rules applied but there was much less direction to speak of.
So what are the markets paying attention to overall? I believe the Precious Metals and the two powerhouse currencies (Dollar and Euro) have removed themselves from the global rumor mills and patiently wait for real economic policy to be voted on. In the United States, we have had several consecutive weeks of low volume trading that while normal this time of year, has put a strain on the confidence of those involved. In all fairness, there hasn’t really been any big reason for the sidelined money to get involved in the markets. Even when an important report hits the market in the U.S., traders have to decide whether a decent number is a reason to buy, or whether it is a reason to sell. In normal markets, a good number should invite buying. These days, a good number might give the FED less reason to “accommodate” the markets after their next meeting. But these markets are far from normal.
In Europe over the last several weeks, their markets have been equally as schizophrenic. Each overnight brings another rumor or promise that is later squashed in the United States day session.
There are however a few standouts to keep an eye on. Mario Monti made a bold statement suggesting he would do anything and everything in his power to keep the Euro from a total disaster. Last week, his statement was surprisingly backed by Germany’s Angela Merkel. The only issue with these statements is they have since failed to suggest a plan of action. There is a rumor of a “Quantitative Easing” like program being tossed around by the ECB. There is also a rumor that there may be a plan put in place that will not allow any one country’s debt yield rates to rise above a premium over German Bonds. Lastly, it is also rumored that Spain may finally request assistance and receive the bailout funds that are ready to ease their financial pain. The only problem with all of these rumors, is that none of them have been backed with action. When you mix rumors, promises and light volume into the trading equation, you can expect a boring market.
There is a FED announcement mid-week, and since the US Stock Indexes and Treasuries have hit their respective resistance and support, I believe that we will experience a bit of profit taking in quite a few markets that were directional last week. If the FED reports nothing this week, the profit taking may continue for more than just a few days. I still believe that the global markets will set their sights on the Jackson Hole Symposium in September before delivering a long term, directional trade. As far as Gold is concerned, I still believe the long term trend will continue to be up based on the underlying fundamentals and technicals.
This week, look for another choppy trade with support levels at the 100 day moving (red line on chart) average at $1609, then the 50 day moving average (green line) at the ever important price of $1600 even. If these levels are violated, the market may target the cross of trendlines closer to a price of $1580. As far as resistance levels are concerned, the chart shows today’s high as the first resistance, based on the two week trendline above. If this level is broken, look for $1630 next, then the 200 day moving average (blue line) in the low $1650’s. Until Gold trades out these levels, traders should continue to take what the market gives them, which are fairly reliable technicals on the daily chart.
Good luck this week. And as always, feel free to contact my office by phone (888) 272-6926 or by email at email@example.com with comments or questions. If you are interested in opening a futures trading account with Long Leaf Trading, please call or email me and I will be happy to discuss all of the trading tools and services that are available at Long Leaf Trading.
Senior Market Strategist
P: (888) 272-6926
L: (312) 274-1470
F: (773) 751-2103