Gold buyers beware at record levels; E-mini report

Good day! Although action in the indices was lack-luster, precious metals shined. Gold set a new closing high at $1,416.10 an ounce for February on the New York Mercantile Exchange after hitting an intraday high of $1,422.40. Despite the bullish action on the daily charts, this is the third high to form since mid-October after rallying steadily off July lows. This had shifted the pace of the buying on the weekly time frame and is leading to the development of a Momentum Reversal (a strong short setup) on the 6-month chart for gold, so buyers beware! Meanwhile, silver set a new 30-year high by pushing through the $30 an ounce level before settling at $29.73. This was not a longer-term record, however, since silver had surpassed $50 an ounce in early 1980.

SPDR Gold Trust (GLD) (Figure 1)

In stocks, the market was facing a fierce stalemate heading into Monday morning. After a strong rally last week, neither the bulls nor the bears wanted to make stand and both moved to the sidelines. The pace of the rally was strong for several days and the rally took place with better-than-average upside momentum. Corrections following such a move typically begin gradually. Rounded highs, whereby the market will establish slightly higher highs before pulling back, are common. This is what took place at each of the highs shown on the charts below, such as in early August, late September, and early November.

Dow Jones Industrial Average (Figure 2)


The index futures traded lower out of the start of trading on Sunday evening. Two wave of downside formed on the 15 minute time frames with the second wave of selling hitting support at 6:00 a.m ET. The momentum on the reversal off those early morning lows was slightly stronger than the descent and by the time the opening bell rang the futures had already recouped the morning losses with two waves of upside between 6:00 a.m. and 9:30 a.m. ET.

When Monday's session began, the Nasdaq futures were back at Sunday evening's highs and the S&P 500 futures were retesting the premarket highs. These levels served as strong price resistance and the indices began to struggle once again. Slightly higher highs at 10:30 a.m. ET were followed by a further corrective action into noon. The entire session was a difficult one for daytraders, however, due to the narrow trading range and light volume. The Nasdaq had the best reward versus risk strategies intraday, but even its gains were limited compared to typically intraday swings. Individual exceptions did exist though, such as Whirlpool (WHR) (+4.61%).

S&P 500 (Figure 3)


The Dow Jones Industrial Average ($DJI) had a loss of 19.90 points, or 0.17%, and closed at 11,362.19 on Monday. A third of the Dow's thirty index components posted a gain. The top performers were Cisco Systems (CSCO) (+1.89%), JP Morgan Chase (JPM) (+0.76%), and Pfizer (PFE) (+0.54%). The weakest were Bank of America (BAC) (-1.85%), Coca-Cola (KO) (-0.79%), and AT&T (T) (-0.67%).

The S&P 500 ($SPX) fell 1.59 points, or 0.13%, and closed at 1,223.12. The best performers in the index included Sprint Nextel (S) (+6.38%), Teradyne Inc. (TER) (+5.89%), Goodyear Tire (GT) (+4.93%), and International Game Tech. (IGT) (+4.84%). Celgene Corp. (CELG) (-8.17%) was the worst performer. Losses in Big Lots (BIG) (-3.15%), Radioshack (RSH) (2.66%), and Kroger (KR) (-2.27%) followed.

The Nasdaq Composite ($COMPX) ended the session higher by 3.46 points, or 0.13%, on Monday and it closed at 2,594.92. The top performers in the Nasdaq-100 included Flextronics Intl. (FLEX) (+3.48%), First Solar (FSLR) (+2.30%), and Cisco (CSCO) (+1.89%). The worst percentage performers were Celgene (CELG) (-8.17%), Nvidia (NVDA) (-1.89%), and Patterson Companies (PDCO) (-1.64%).

Nasdaq Composite (Figure 4)


Unless otherwise stated, the index action described in this article relates to the E-mini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.

Toni Hansen is president and co-founder of the Bastiat Group Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.

About the Author
Toni Hansen

Toni Hansen is president and co-founder of the Bastiat Group, Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.

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