Gold continued to climb higher last week in a narrow trend channel before finding resistance at 1,762.9, almost exactly at previous resistance of 1,763 from December 2, 2012. That high was also in the area of the 61.8% Fibonacci (1,768.72) retracement of the full downtrend from the record 1,921.10 high.
Gold
Friday Gold sold-off from that high closing below the range of the previous several days. This signals the likelihood of a further pullback lower. Minor support is at 1,716.5, but a move down to at least the lower channel line and 21 daily exponential moving average (ema) is likely in the short-term. The 21ema and trend line converged together in late-December identifying the same support area of 1,696.9.
Lower support levels include the 1,671 price area (38.2% Fibonacci retracement), and 1,642.7 (50% retracement).
So far the current uptrend is a bear market rally, which means this could be the high for some months. Or, it could be tested in the near-term. Gold would need to close above the previous rally high of 1,803 before we could say that this rally may be the beginning of another bull run, rather than a bear market rally.
If a further pullback lower bounces off the 21ema and turns back higher then watch for resistance again around the 1,762.9 price area. A break above 1,763 then targets the 1,795 to 1,803 resistance zone.
Silver – XAGUSD
So far, Silver is also in a bear market rally. Important resistance is at the previous rally high at $35.67. That level would need to be broken before Silver gives signs that it may be moving out of a bear market.
Near-term resistance is at last week’s high of $34.38, with a break above signaling a continuation of the five-week uptrend off the $26.16 low.
4-Hour
A break below $32.96 gives a bearish signal as a swing low would be broken, as well as the uptrend line. Note the bearish divergence between price and RSI on the 4-Hour chart.
Potential support levels include $31.17 (38.2% Fibonacci retracement), $31.54 to $31.49 (50% retracement and previous support), and $30.81 (previous resistance and 61.8% Fibonacci retracement). Given the added significance of the 50% retracement due to the convergence of two indicators, the odds increase Silver will reach it if $32.96 is broken.
Crude Oil
Crude Oil broke down out of the internal descending triangle pattern discussed last week. However, support was found pretty quickly at the uptrend line (bottom of larger ascending triangle) and above the 200ema. Oil ended the week back inside the descending triangle formation thereby lessening the likelihood of follow-through to the downside, at least so far.
Daily
Last week’s low at $95.80, followed by the 200ema (now at $94.97) are near-term support levels to watch. A break below the 200ema presents the $92.70 area as a target, with the next target down around $89.18, previous support and the 50% trend retracement.
Strengthening is first indicated on a break above $101.68, while a breakout of the ascending triangle and trend continuation signal is given on trade above $103.72. A bullish breakout targets $114.10, based on the ascending triangle pattern.
Until a breakout of the ascending triangle occurs, up or down, Oil will continue to trade inside consolidation.
S&P500 Index
The S&P500 Index has continued to strengthen ending the week near the high, after busting through a Fibonacci resistance zone with a top of 1,332.3, on Friday.
Daily
During weakness earlier in the week support was found at 1,299.6, in the area of the 21ema (currently at 1,309.4). The uptrend line has been drawn to encompass that swing low and identifies support of the six week uptrend. The 21ema and trend line are now a target for any minor pullback going forward.
Technology and growth companies are leading the way in the US and helping to pull the more diversified S&P500 Index higher. Both the NASDAQ Composite Index and NASDAQ 100 Index (100 largest non-financial companies traded on the NASDAQ exchange) have closed at new highs - above 2011 peaks. The tech-heavy NASDAQ 100 led the way a couple weeks ago, followed by the NASDAQ Composite last week.
Last week’s follow-through higher with a strong close, close above a Fibonacci resistance zone, along with strength in the NASDAQ, increases the odds the S&P500 could eventually get above the 2011 high.
Friday’s rally stalled at 1,345.2; close to previous resistance of 1,344.1 from February 2011 - the left shoulder of the head and shoulders top, and the 88.6% Fibonacci retracement of the larger downtrend from 2011. The next resistance zone above there is from 1,351.6 to 1,358.8, followed by the May 2011 high around 1,377.
In the meantime, the Index shows signs of being extended. Based on the Relative Strength Index (RSI) momentum indicator the S&500 is now the most overbought since January 2011 at 75.11. The Index has closed higher 16 of the past 23 days and has been up for the past five weeks.
The near-term uptrend line and 21ema mentioned above are the first support levels to watch on any decline. A move below last week’s low of 1,299.6 signals a deeper retracement, probably down to at least the 50% level of the current uptrend at 1,273.05. The uptrend line from the 2011 low, along with the 200ema (now at 1,251), which matches the 61.8% retracement level, is where strong support should be found if the 50% level is busted.
For further details please contact: Bruce Powers, CMT
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Head of Research & Analysis Trust Securities Dubai, United Arab Emirates
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