Gold, Euro Finding Support

by  Mike Paulenoff ,  Jack Steiman ,  Harry Boxer  - AdviceTrade.com   |   View company's profile

Jack Steiman, On the Bull-Bear Tug-of-War (SwingTradeOnline.com)

For a time on Monday, the Dow and S&P 500 were up against their near-term down trend lines at 12,200 and 1265, respectively. The bears needed an excuse to get the bulls to calm down a bit, and finally got one in the form of the S&P 500 warning they would downgrade some Eurozone countries below the top rating of AAA. The result was a drop of roughly 150 points on the Dow from the highs to the lows.

It seemed the market was ready to head into red territory, but the bulls came in again and brought the Dow back to close up nearly 80 points. Both sides had reasons to feel positive. The bears didn't allow Dow 12,200 and S&P 500 1265 to get taken out with any force, which would have been a short-covering signal, while the bulls saw the gap up hold in the end with the Nasdaq out-performing the whole day. And that's more of a positive to the bullish case as it's always better for the bulls when pure froth leads the way.

The key to the market short-term is clearly defined in the charts. With the down trend line being at 1265, and the gap up top at roughly 1225, the lines in the sand have been drawn by a mere 40 SPX points, or barely over 3 percent worth of action. It's never healthy for the top of a gap up that was created through a massive up day to get taken out by the bears a few days later. That would show that the move up was more of a head fake and not the real deal. We know the volume was heavy on that gap-up top, so it really should be defended with relative ease if things are indeed improving with this market.

We all know that the bears are more than desperate to defend the 1265 trend line. So, again, the lines are drawn. The war is on. Whatever gets taken out first with some force should cause a directional move. In between, it's all noise and should be treated as such.
 

Don't get too bearish on selling, and don't get too bullish on buying until one of these two levels go away with force. It won't take long to see which side wins. I favor the bullish case, but you can't be sure, so, please, don't overdo it.

It seems Italy, and all of the rest of the Eurozone, is getting down to business as Italy has announced strong austerity measures such as raising the retirement age. Most everyone will be included in the massive sacrifice zone, and it's going to be a long haul for them in terms of cuts, but it's the only way out of the debt mess.

While things have improved for the markets, they are far from out of the woods. The markets have a lot of work to do in order to become more bullish in nature. A longer-term trend line would have to be tested and broken through at S&P 500 1325. That won't be easy. It may never take place. It's hard to predict how the markets will respond to the actions the Eurozone will be putting in place over the coming weeks, months, and even years. Many programs will be implemented that we don't even know about, yet.

All we can do at this point is be aware of them when they happen, and watch how the markets respond day by day. We let the technicals guide along with an eye towards the fundamentals. Nothing will be easy for quite some years to come, so, please, be smart.
 

Don't overdo things. Day by day we learn and move along.

Mike Paulenoff, On Gold, Euro Finding Support (MPTrader.com)

In the aftermath of the S&P downgrade of 15 Euro-zone members, the Euro/USD appears to have found support at 1.3375, which is just above its prior pullback low of 1.3360 from last Friday. From a strict technical perspective, this is a positive development and preserves the series of higher-highs and higher-lows off of the November 25 low at 1.3210/15.

Although spot gold reacted negatively to the plunge and intraday swoon of the Euro/USD, so far it has managed to find support in the $1722-1718 area, which we notice is right at the "neckline" of the base-like, near-term pattern that developed during the latter half of November.

As long as $1700 contains any additional selling pressure, spot gold remains in a near-term buy mode.

Avi Gilburt, On Targets for a Tuesday Low & Ensuing Short-term Rally (ElliottWaveTrader.net)

In my weekend update, I noted that it seemed the market made a low on Friday. Although I assumed that it completed the 4th wave with that move down that we were prepared for on Friday, the overnight action Sunday on the way up did not look impulsive to me. So, Monday morning, after the market gapped up as expected, I wrote the following in our Wave Update prior to the market open:

"The market action from last night and this morning are leading me to believe that we are still within the 4th wave of the (a) wave. If this is correct, then we should be coming back down toward the 1.00 extension again over the next day. That would mean we may begin our 5th wave up tomorrow, which can potentially complete around Thursday.
 

This would then set up the larger yellow (b) wave back down towards the break out region we discussed over the weekend, which could potentially bottom Monday/Tuesday of next week, and then we would be off to the races over 1300."

As we were moving up in the morning, I noted that the 1267es would provide the maximum upside resistance before we start moving down in earnest in a c-wave of this 4th wave. This is the level at which the c-wave of this yellow b-wave up was equal to 1.382 times the size of the a-wave of this yellow b-wave up. I believe the high we hit Monday was 1266.25es before we started heading down hard.

Many of our subscribers were amused at the fact that as soon as we were expecting a top in the market, "bad news" broke, which seemingly made the market come down hard. But, in truth, news breaks with the cycles, and we had just reached the top target that we were looking for before the market started the pullback which we expected BEFORE the news broke.

For those that want to learn more about this phenomena, feel free to go into the Member's Library and read "News Does Not Move Markets, It Just Follows Their Cycle."

So, what do we expect for tomorrow?

Based upon the current pattern, we have two potential targets for a low of this 4th wave: 1246es (1:1 Fibonacci relationship between yellow a and yellow c waves) and 1238es (1:1.382 Fibonacci relationship between yellow a and yellow c waves). I would expect that we will hit one of these levels tomorrow morning.

After completing a full 5 wave move down into one of these levels tomorrow, then I would expect a rally that can potentially take two to three days to complete.

In the Weekend Update, I noted that since the 1st wave was approximately 60 points, and we will usually see a 1:1 Fibonacci relationship between waves 1 and 5, we may expect a 60 point rally once we hit our low tomorrow. However, I also noted that "I am not really certain that we will have such a large 5th wave. Rather, since there is significant resistance overhead and I don't think the larger a-b-c pattern works best with such a high (a) wave, I am seriously considering smaller Fibonacci relationships within this next potential wave up."

Therefore, this 5th wave can be either 30 points (.500 Fibonacci relationship to wave 1), 37 points (.618 Fibonacci relationship to wave 1), or even 45 points (.764 relationship to wave 1). Therefore, assuming we do hit a bottom tomorrow morning, when we see a full 5 wave move thereafter that extends either 30,37,45, or 60 points from tomorrow's bottom, then we will know to look for short positions. Again, we will need to see 5 full waves that represent an extension of one of those Fibonacci relationships with wave 1 in order to know that we most likely have a top.

Assuming that this count is correct, this upcoming top that we expect later this week can potentially trigger a correction, with a target all the way down to the break out region surrounding the 1218es region.

The alternative count provides that the top of (a) was hit today, and we will move down towards the 1218es region for the rest of this week.

Harry Boxer, On 4 Charts to Watch (TheTechTrader.com)

The market was sloppy on Monday, but ended up on a positive note. There were quite a few stocks that had some movement that we want to show you, which includes some of the low-priced stocks that were moving and reached resistance levels that we want to point out to you.

First Security Group, Inc. (FSGI) has exploded from 1.10 to over 4.00, reaching as high as 4.48 on Monday, closing up 1.41 to 3.66, or 70%, on 383.900 shares. That's more than quadrupling in two sessions, so we've got to be careful. But this kind of thrust on this historical volume is quite intriguing. It may find resistance near Monday's high. If it pulled back and consolidated in this zone, it would be construed as a basing process as it goes up to the next level targeting 6 1/2.

Kenexa Corp. (KNXA) had a big move on Monday as it popped 4.12 to 29.44, or 16%, on 1.4 million shares. It's breaking out across resistance, with a short-term target at the May double-top highs up around 33.

First SecAstronics Corporation (ATRO), which we've liked for a couple months now, broke out, pulled back, broke again and pulled back again. Each time it held support, broke out, pulled back, and on Monday it popped 1.27 to 36.30, or 3.6%. The next target is up around 22.

Pizza Inn Holdings, Inc. (PZZI) hit new all-time highs and backed off. It still managed to gain 20 cents on Monday, and closed about 50 cents off its high at 6.48. Look for more upside. The target is up around 8 1/2.

Other stocks in our Charts for the Day are First Athersys, Inc. (ATHX), Sino Clean Energy Inc (SCEI), ZOOM Technologies, Inc. (ZOOM), iGo, Inc. (IGOI), Taleo Corp. (TLEO), Affymax, Inc. (AFFY), Netlist Inc. (NLST), TAAR Surgical Company (STAA), Spectrum Pharmaceuticals, Inc. (SPPI), Flotek Industries Inc. (FTK), Targa Resources Corp. (TRGP).

Sinisa Persich, On Free Stock Pick PLCE (TraderHr.com)

The Children's Place Retail (PLCE) is positioned for an upside breakout from a narrowing ascending triangle pattern.

The stock has been consolidating the 52 1/2-54 1/2 range for several weeks after a big up-gap from the mid-40s to low 50s.

An ideal entry would be just above resistance, at a buy stop price of 55.35, which would confirm the breakout and continuation of the uptrend towards a target of 57.05-59.52.