Looking back at the past two months, you can see we have just been in a very broad trading range. I believe that professional traders will be shorting the S&P 500 against the highs that were seen just recently. The risk is maybe 10 or 15 points and the downside is maybe 200 points. So the risk reward ratio is really quite attractive from a trading standpoint.
There are “two flies in the ointment” we see right now. First, the S&P 500 is heavily overbought on the Williams% R indicator and at resistance. Secondly, our monthly Trade Triangle continues to be negative for this market. I believe that this combination will begin to put this market on the defensive, perhaps even later today and next week.
It has been an interesting week and it would appear that all of the markets we track are closing against the major trends. This is not to say the markets have reversed course, rather we are seeing a counter trend rally against the bigger trends.
Now let's look at the gold market......
The spot gold market is up over $30 for the week. Unlike Silver, the gold market has a positive long term Trade Triangle indicating that the longer term trend is still positive. With a Chart Analysis Score of +65, we expect this market to continue to remain in a trading range. Gold has reached the midpoint of the Donchian trading channel, which will probably halt its upward momentum for the time being.
We would not be surprised to see this sideways action continue for another week or so. I think most traders would be better off just watching from the sidelines until the volatility subsides. Only long term traders should maintain long positions with the appropriate money management stops in place.
Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 65
Here's our week ending video covering the 6 major markets we track every day.
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