Equities hold steady as gold tanks

Good day! Ever since I offered up a sell signal on gold at the beginning of December we've been seeing this commodity struggle. Despite an attempt later that month to retest those highs, the gold bulls have failed to keep the momentum going and this month has seen the commodity not only break the 50-day moving average that had held it since August, but the 100-day sma as well. That selloff increased on Thursday with the downside momentum gaining and the commodity ending the session at lows.

By the close of the Comex division on the New York Mercantile Exchange gold for February delivery had fallen $14.60 an ounce and settled at $1,318.40. Back in December it had reached a high of $1,434 an ounce.

Furthermore, the selloff doesn't appear to be over. In addition to breaking strong daily support levels, gold is testing the lower end of its weekly uptrend channel and has already busted the 20-week sma that has held since the start of 2009. While we'll certainly see some intraday corrections on the upside, continue to use caution. For those tracking the short side: Very nice job and watch for the 200-day moving average as the next level of upcoming support.

Dow Jones Industrial Average

Oil is another commodity we've seen a lot of struggle in. I started watching this once back in mid-2010 for further selling, but the price action remained mixed and stuck in a gradual uptrend since May. Since the middle of this month, however, we've started to see more of that underlying weakness come to the surface. Oil struggled 8-month highs throughout the second half of December and into January before finally breaking down sharply on January 20th. This recent bout of selling took oil to its 100-day and 200-day moving average zone, which it's testing this week. The current price action suggests that further selling over the next several months is a strong probability. Watch for a few weeks of reaction off support levels, but this should just offer another sell opportunity for swingtraders.

The price action for the overall market this week has been very choppy following Wednesday's FOMC announcement. Despite a slow trend to the upside and even higher highs on the year for the Dow Jones Ind. Ave. and S&P 500, the market has struggled. We've seen a lot of intraday back-and-forth and even a lack of decent intraday swings over the past two days. This should widen up here into next week, but the bulls are definitely fighting to hang on and simply aren't willing to give up the reins just yet.

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