Yellow & Black Gold Shine vs. SP500
Source: Chris Vermeulen, TheGoldAndOilGuy (8/5/10)
"Commodities have been shining recently. . ."
GLD—Gold ETF Trading
In my last report I pointed out how gold needed to break through its down trendline—the MACD had to crossover and then we needed to wait for a pullback which ends with a reversal candle to the upside. It seems gold is working its way through that process now.
Today's pop and drop is not bullish price action, and I expect we see a couple more down or sideways days before higher prices are reached. There are two bullish ways gold could pull back. First would be a drop to $115 area with below-average volume, which could form the right shoulder of a reverse head-and-shoulders pattern; or we could see prices just fade sideways on light volume for two to four days before another up move starts.
USO—Oil Trading Fund
Oil just had a three-day pop and with today's doji candle, the chart is saying it needs a breather. That also falls in line with the price of the USD, which should continue higher today (Thursday Aug 5th) putting downward pressure on crude oil.
SPY—SP500 ETF Trading Signals
SP500 had a nice pop on Monday, taking it up to the first key resistance level. The best play would have been buying last Thursday or Friday when it dropped down to support. Unfortunately, the intraday charts at that time were not that healthy looking.
I am not a fan of trading breakouts because so many of them fail, you end up paying a premium for your position and they can end up going against you very quickly. Rather, I focus on trying to pick things up at support or sell them at resistance.
If we see the price pause for another one to four days on light volume and hold above the support trendline, we could have a great low-risk entry point with a stop set just below support. Or we could see a pop, then a pullback to test the breakout level at which point we can take a long position. This play needs to mature a little more.
Midweek Gold, Oil and Index Trading Conclusion:
In short, gold, oil and the SP500 look ready for a small pullback or some sideways price action. It will be interesting to see how strong the pullback will be on the SP500. The chart pattern and volume favor higher prices at the moment; but, if the support trendline is breached, then selling volume will most likely spike and a sharp decline will occur causing the SP500 to drop approximately 3%. . .all the way down to the $109 area.
Well, that's it for now. If you would like to test out my trading service, which has a 30-day money back guarantee, visit my site at: www.TheGoldAndOilGuy.com.