The question now is not whether risk is on the brink of a drop but rather how much of a drop?

The question now is not whether risk is on the brink of a drop but rather how much of a drop? My answer is simple and straightforward: 1661.22 for the Gold and 1369.33 for S&P500.

The end of the last week finished for the Gold (symbol: XAUUSD) with massive liquidation of longs and we have  a top confirmed by a Head and Shoulders pattern. If you look at my previous post "Is risk on the brink of a drop?" the picture is not much different now only that we are much lower now and the risk/reward is pretty much 1:1 if you wanna trade it on the daily chart. The RSI and Twiggs money flow continue to drift lower into negative territory, the 50day SMA provided no substantial support and it seems like the Gold futures market is headed for a meeting with one of the most common used indicators the traders use - the 200day SMA which in our case coincides with the 50% Fibonacci retracement taken from the lows at 1526.70 to the highs at 1795.75.

The S&P500's setup wasn't as easy to play last week as it was for the Gold. It seems that somebody was quite desperate to hold this market from falling all week - lots of large algos were bidding it in a desperate attempt to hold it until the elections. Will they succeed? I don't think so, the markets are bigger even than Bernanke and Obama, and no matter how much they're trying to manipulate it from the background once the king market decides to correct lower, nobody, and I mean nobody, can stop it from falling.
So what do we see on the technical picture here? Plenty of bearish signs - triple top, lower lows and lower highs, broken ascending channel, negative RSI divergence with last top topped at 60 (which is my upper bearish boundary), decreasing Twiggs Money Flow (below 0).
I'm sure I can find many other bearish signs in this market if I add more technical indicators but you got the point. Risk is going lower and it will be rather sooner than later. Think about it - crashes occur when nobody expects them and now everybody expects the stock market SPX, and risk trends in general, to remain strong until the elections, nobody is expecting them to crash now, so if a flash crash is about to occur now is the time, not after the elections when everybody expects it.

Is risk on the brink of a drop?

Leave the fundamentals, QE3 (which was a total failure), elections and all other distractions aside and concentrate on the technicals, they usually don't lie. What do you see? Technical weakness all around the block. The markets are starving for correction, all these short-term european and US election rallies have exhausted the markets totally, nobody is willing to take any more risk at these high levels.

Let's look at the GOLD futures' daily chart first.
I can instantly mark several bearish signs and not even one bullish.
- The first and most important is the Head and Shoulders pattern that usually marks a top after a strong bull move and is considered a strong reversal signal. Look how beautifully it played - the price broke the neckline first, then came back to retest it for resistance, rejected it and finally plunged down to 1754 where it close the friday session.
- 1790 has been proven as a strong resistance this year many times and it holded this time too despite the massive easing from most central banks, which leads to the conclusion that the GOLD futures market is not as strong as most people think.
- Bearish RSI divergence with price closing friday's session below 50 which is another bearish confirmation.
- Twiggs money flow divergence with price action and actively decreasing since 22nd of august, meaning that the GOLD futures market is a massive speculative bubble pumped on speculative bets and not real money inflow.
- Stochastic oscillator gave a strong sell signal with MA's crossover below 80.
- Golden cross - the Golden cross pattern (crossing of the 50day and 200day SMA) is one of the most bullish patterns observed by traders and usually comes with a correction right after it which we didn't see yet but should occur anytime soon.

It gets even more interesting when we look at E-mini S&P500 futures (symbol: ES_F December 12 contract). What do we see here? Not much different than GOLD - fully matured bull trend, divergences, exhaustion, weakness.

- The first and most important bearish sign I would like to bring to your attention is the break of the ascending channel's and price action's support around 1430, then price returned to test for resistance and rejected beautifully to finish on a daily and weekly low at 1421.00.
- Bearish RSI divergence with price closed below 50 barrier of the oscillator.
- Stochastics bearish crossover in the lower area of the oscillator.
- Twiggs money flow big decrease and close below 0.

With all technicals pointing to a drop/correction in the said markets I am strongly bearish and I am looking to short them. Friday was a great opportunity to do it but unfortunately I missed it because I wasn't on my desk and besides that I am forbidden to open positions at friday. However, there are infinite opportunities out there and I am looking to jump on the next one and ride it with the wind.

I wish you a profitable trading in the week ahead and stay out of trouble, folks. Ciao.

Could the S&P500 tumble while Gold hold it's ground?

Could the S&P500 tumble while Gold hold it's ground? Sure, why not? Even though the Gold lost it's safe-haven status months ago and is acting more like a risk-on - risk-off asset, together with equities, it can still diverge and have it's own pace. In times of centralized easing from the most major central banks printing money like crazy, the only alternative to the fiat (paper money) is the precious yellow metal.
Despite the yesterday's sharp 1% sell-off in the equities market S&P500, the Gold futures remained stable and above the upper kumo boundary which acts as support around 1760 forced by the 50day SMA. In the short-to-medium term my view about the Gold is to remain locked in a range between 1790 and 1750 patiently waiting for the S&P500's correction to finish so that it can continue it's way north. Only a drop below 1750 will change my view. I still remain bullish the Gold Futures market so my strategy will be to go long at 1750 with tight stop loss about 5-10 points (1745-1740) targeting 1790 with one eye and the other looking above 1800.
However, as we can see from the chart below, the bull trend is quite matured and there are bearish signs I have marked on the chart with circles: RSI divergence, broken trendline support turned resistance and the 50day SMA is starting to flatten, so I don't rule out the possibility for a drop towards 1700 to test the 200day SMA for support.
Now take a look at the 2nd chart - I have marked with numbers 1 2 3 4 the spots where the price touches the trendline and bounces up - they are almost at the exact same distance from each other with the final 4th one marking a break of the ascending trendline and entering into consolidation/range. Take note that all the rallies from points 1, 2 and 3 are the exact same length - around 50 points. I have marked them with vertical yellow lines and the final 4th line failed to materialize into rally.
Now you understand why the Gold Futures market was my favorite instrument the last 1 month to trade - perfectly clear and precise to the pip setups. However, easy part is over and until this consolidation is over and the 1750-1790 levels are broken I will stay aside awaiting for opportunity to emerge.

Gold intraday technical analysis - market remains in consolidation

The Gold futures market remains in consolidation and the trend remains bullish in the short-to-medium term so I'm looking for an opportunity to go long today. Above 1747 is bullish and any drops towards this level should be considered a valid buy opportunity. Only an hourly close below 1747 will neglect the bullish bias and will accelerate towards the next support at 1724. The market is currently testing support at the ascending trendline and 38.2 Fibonacci extension around 1755.

Pivot: 1747
Support: 1724, 1716
Resistance: 1776, 1788, 1800

S&P500 intraday technical analysis - bullish above 1448

Not much has happened in this market since yesterday. The E-mini S&P500 futures (September 12) remains in a strong bull trend and any pullbacks are viewed as corrective and should be bought. I'm looking for an opportunity to buy at 1454 should the trendline and 38.2% Fibonacci support hold. I'm bullish above 1448 and only a drop below it will make me reconsider my strategy.

Pivot: 1448
Support: 1439, 1428
Resistance: 1480, 1492, 1500

EURUSD intraday technical analysis - bullish above 1.30

EURUSD outlook remains unchanged since yesterday - bullish and looking for a correction towards 1.30 before the next bounce up towards 1.3200. Below 1.2974 is bearish.
Pivot: 1.3075
Support: 1.3015 and 1.2974
Resistance: 1.3140, 1.3170, 1.3200

Crude Oil intraday technical analysis - the downside prevails

The Sweet Light Crude Oil futures (Oct.12) intraday chart doesn't seem very bright today. Yesterday was a black day for this market as it lost $3 in just one minute after a sharp sell-off occured. Lots of rumors circulate - fat finger, technical glitch, coordinated manipulation, etc.Whatever it is it made it's mark on this already choppy market and it's getting harder to read the intraday chart and look for direction.
The price currently resides at 96.10 and from here we may continue to see choppiness in both directions in the short term between 98.70 and 94.20. Intraday pivot is 98.70 and as long as price remains below it I will remain bearish. My preference for today will be short positions below 98.70 targeting 94.4. However, such a sudden drop created a cheap supply that may be viewed by many traders as a good opportunity to buy so I wouldn't rule out the possibility for the same sharp bounce to the upside.
Pivot: 98.70
Support: 94.20
Resistance: 98.70

Notice the Head and Shoulders pattern formed on the H1 chart (the red circles on the first chart). It usually marks a top and is considered a reversal signal after a strong bulltrend. Now take a look at the daily chart(the second chart I posted) - I have marked 3 important bearish signs - RSI divergence, bearish candlestick engulfing and ex-support now turned resistance that held at 100.65. The major trend is still bullish but with so much bearish signs I'm looking for a change in the trend in the medium term.
In conclusion: quite mixed picture today as both sides can be played but tight risk management and timing should be applied strictly.

Gold intraday technical analysis - QE3 will continue to be the main source of strength

Gold futures - this instrument has been giving very nice and clear setups recently - that's why it is my favorite to trade these days.
The FOMC meeting last week resulted in open-ended quantitative easing (QE3) measures and this will continue to be the main source of strength for the Gold in the weeks ahead. However, the markets seem to open in a slightly risk-off mode this monday so I'm looking for a pullback towards the 1747 intraday pivot which is a very important level as it is a confluence of 3 different supports - trendline, 50% Fibonacci and ex. resistance now support. Going long at this level should give me a good managed risk/reward with target 1800 in sight.

EURUSD intraday technical analysis - Good traders do trading, bad traders do gambling

The Economic Calendar for today is quite light so I don't expect any big movements in the EURUSD pair today, unless the usual suspects - the eurocrats - come out with some of their ridiculous sometimes comments and give some kick to this market.
From technical point of view the upside prevails and we're still in a strong bull trend but it seems like the pair is looking for a pullback to search for support around 1.30 ahead of further advance. The intraday pivot we should pay close attention is 1.3075.
The wise thing to do today is to wait for a pullback around 1.30 and look for confirmation that the support will hold to go long. However, short-term scalpers may find this great opportunity to steal about a 100 pips here to the downside but I personally do not advise anyone to bet against the major trend which is clearly up. Going against the daily trend (and in our case against the hourly too) is nothing but gambling. Good traders do trading, bad traders do gambling.

S&P500 futures intraday technical analysis - bullish above 1448

The E-mini S&P500 futures (September 12) remains in a strong bull trend and any pullbacks are viewed as corrective and should be bought. The market is very well bid and all buy signals should be considered good opportunity. Intraday pivot is 1448 which coinsides with the 50% Fibonacci extention taken from the 11.09 low at 1421.20 to the 14.09 high at 1474.25.

Crude Oil intraday technical analysis - bullish above 98.70

The Crude Oil (Oct. 12 contract) remains bullish above 98.70 and seems to have found support at the intraday pivot at 98.70 (which is the same as friday's). Notice the nice legs on the H1 candlestick chart that almost reached and bounced of the 50% Fibonacci retracement (taken from the last spike low at 96.51 to the last spike high at 100.40). The market breached the pivot but failed to close below it on four different candles which strenghtens my bullish view in the near-to-medium term.
If it wasn't so early in the day I would personally go long now but mondays are usually hard to trade due to lack of liquidity and indecision of direction so I'll be staying aside until the late US session even though I may miss this great opportunity to go long at 98.91 where the price currently resides.

EURUSD intraday technical analysis - optimistic on EZ finance ministers' meeting

The EURUSD is in a strong bull move following the optimism of the EZ finance ministers' meeting today. The QE3 announcement yesterday by the FED chairman Ben Bernanke also added to the already strong Euro and I see no reason to change to bearish bias. The pair broke easily the 1.2994 ex support now turned resistance which is the 16.04.2012 low but this seems too good to be true and I think that the pair will go back to test for support around 1.30 before going up.

Crude Oil intraday technical analysis - the bias remains bullish

QE3 is the main price driver now of the Crude Oil (Oct.12). The short-term trend remains up and the momentum is strong. However, it has limited upside as it stalled at important psychological resistance at 100.00 forced by ex-support now turned resistance at 100.67 on the daily chart and it will need more than a prayer for the bulls to break it substantially. Intraday pivot is 98.7.

Gold intraday technical analysis - short term trend remains up and the momentum is strong

After the FED and Ben Bernanke announced the highly anticipated QE3 yesterday, the gold, as an inflation hedge and an alternative to the US dollar, has only one direction to go in the short and medium term and it is north.
The short term trend remains up and the momentum is strong so I'm bullish and looking for a small pullback towards 1760 and 1745, then sharply up to the psychological barrier 1800 which should act as an intraday resistance. 1745 is an important pivotal point for today which is ex-resistance that now should act as support.
My strategy for today will be to go long as close as possible to 1745 with 1800 as take profit target.