The Technical Trader
Monday May 01, 2017 08:36
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(Kitco News) -May 1 – Gold prices slid slightly lower in pre-market trading Monday. The precious metals market has shifted into a neutral “wait and see” mode ahead of a number of key macro events. The very short-term trend bias is neutral in a corrective phase as financial markets await a number of big potential triggers on the horizon.
Over the short-term, June Comex gold futures have settled into a neutral corrective range bordered by resistance at $1,297.40 and support at $1,241.50, marked at points A and B, respectively on Figure 1 below. What else can we see on the chart?
June gold is trading below its 20-day moving average (shown in blue), which is a weak short-term trend signal. The 40-day moving average (shown in green) is support for the gold contract.
The 14-day relative strength index (shown below the price chart) reveals that gold is in a correction phase. The indicator turned down from the overbought line in mid-April and remains in a defensive posture.
The daily uptrend that began at the December 2015 low remains intact, shown by the rising bull trendline.
Trading Tips: Trading action within a range is often choppy and by definition trendless. Unless you are a day trader scalping intraday trades, this could be a difficult environment. In order to signal the next directional trend move in gold, June futures would need to post a bullish breakout above resistance at $1,297.40 or below support at $1,241.50.
Key Levels to Monitor
A bullish breakout above $1,297.40 would target potential gains toward $1,347.40, the post-Presidential Election Day spike.
A bearish breakdown below support at $1,241.50 would turn the near-term trend down and open the door to a retest of the March swing low marked at Point C. (That is not the favored technical view).
Macro Events to Watch This Week
This week’s Fed meeting should likely be a non-event, with the Committee expected to release a statement at 2 pm ET on Wednesday, indicating no monetary policy change. Traders will be watching for language changes in the statement.
Friday’s employment report will be key. Following weakness in the March report, continued signs the labor market is weakening could prove to be gold bullish.
The May 7 French Presidential Election will also be a key event. A Le Pen win at this point would be unexpected and would likely trigger a rush into safe-haven assets, which would be a supportive factor for the gold market.
Bottom line: Respect the trading range. Trade what you see, not what you think.
By The Technical Trader