Quick mid-week update
Posted by Danny on August 7, 2013
Yesterday gold closed below its daily key reversal level, which puts it in decline mode again. This means gold could now go on to retest the June lows.
The daily key reversal for gold is now at $1315.30, so it takes a close back above that level to switch into rally mode again.
Stock markets have started the week fairly poorly and seem to struggle to add to recent gains. The time window where we could see further new highs is slowly closing. There is still room for another spike to the upside, but it has to come before the upside momentum wanes too much.
Several market indices have already seen their daily momentum turn down yesterday. This includes the DAX, the Dow Jones Industrials and the FTSE100. For these indices you can start using my trailing stop method, using a stop-sell order below yesterday’s low. See: Trailing stops when you think a peak is near.
Meanwhile, the Nikkei has switched into decline mode already.
So, we see clouds starting to gather above world stock markets.
For those indices that still have upward daily momentum we keep a close eye on the daily key reversal levels. For the S&P 500 the daily key is now at 1676.60, for the Nasdaq it stands at 3583.
Daily closes below these levels would signal the start of the correction we are expecting this autumn. In that case we will have to forget about new highs for a while.
Crude oil is also acting weak again, failing to build on last week’s rebound. If it closes below its daily key at $103.75, then the recent rally in oil prices is probably over. A drop back to $95 or even $85 will then be in the cards.
A couple months from now, I think we will be looking at higher bond prices, lower stocks, lower oil and lower gold. But the transition will probably not happen overnight, unless triggered by an external shock. We will be getting mixed signals for a few weeks, and then clear moves will emerge.