Gold Bulls Should Be Concerned
New York (Aug 29) For as active and volatile as Friday's E-Mini S&P 500 futures (Es) auction was, we failed to get the definitive sort of close beneath the low-2170s that would have strengthened our confidence in more immediate, and sustained selling.
As you'll recall from Friday's morning note, our baseline expectation was that value migration beneath the low 2170s, accompanied by an auction that closed with little to no bearish excess, would likely trigger bearish continuation toward the 50-day simple moving average (SMA).
And while Friday's regular session value did migrate down to 2167.50, the Es managed to close more than 10-handles off the intraday low. In a nutshell, while price is now beneath the eight-day and 21-day exponential moving averages (EMA) and our confidence in short-term strength is greatly diminished, Friday's excess makes it slightly more difficult to trust the resolve of our current seller.
As we enter the new trading week we'll respect Friday's close beneath the 21-day EMA, and look to fade strength toward the broken eight-day EMA. Barring a close back above the short-term moving averages, our overall expectation will be for an eventual probe of 2140 and the 50-day SMA.
Gold futures suffered a nasty rejection from both the eight-day and 21-day EMA, along with the 50-day SMA. And given how many of you actively trade both the metal and miners, I wasn't surprised to receive the number of notes that I did regarding Friday's price action.
On top of being rejected from all short and intermediate timeframe moving averages, gold futures also failed to recapture the June 24 to present day volume point of control (VPOC/Value). This rejection of value should have bulls more than a little concerned.
Any bearish continuation beneath approximately $1315 to $1320 has little to no price support until the $1255 Feb. 11 to June 23 composite VPOC/Value. Failure to attract a buyer near $1255 places a target on the rising 200-day SMA and price support between $1210 and $1220.
Moving on to Monday's Es auction, let's remember that while Friday's close did leave the contract in a compromised position, we're entering the home stretch before the three-day Labor Day holiday weekend.
Overall activity and participation are likely to be extremely low, especially as we approach the end of the trading week. Be mindful of your activity level after the first couple hours if you're prone to overtrading.
We'll enter the session with 2167.50 to 2168.75 as our opening directional pivot. As long as price is above that area, a probe of 2175.50 to 2176.50 seems like a reasonable expectation. However, until value migrates above 2176.50, my inclination will be to fade any such lift in price.
Assuming price is rejected from the 2175.50 to 2176.50 area, and then slides down beneath 2167.50, we'll look for Friday's seller to take another crack at 2159.50 and that session's 2157.50 intraday low. As value migrates beneath 2159.50, a door opens for bearish continuation toward 2153.50, 2147, and 2139.50 to 2141.50.