Futures Outlook for the Week of 4/01/13
At the end of January I wrote about Gold and Soybeans and I would like to revisit both of these this week for an update on them and briefly touch on the grains complex outright.
Gold
Let’s begin with Gold and the Monthly chart for June 2013 COMEX contracts. At the end of January I mentioned that Gold has a range that it needs to break. We still have not seen that breaking action, but we have seen an interesting approach to one of the levels which will need additional observation.
I mentioned previously “On the low end, should Gold break down, I would like to see 1525 broken well to confirm.” At this point, we have not yet broken down that 1525 territory. We have, however, dropped well enough to hover around and test the 1550 level. The look on the month is one that remains potentially bullish (as we have yet to break those lower boundaries and have thus far respected them), but is teetering on the verge of a breakdown. In addition to keeping a close eye on the major support levels for Gold, you will also want to keep an eye on the stock market indices and also the US Dollar Index as these are inherently relative.
The Daily chart for Gold becomes very important right now as we are sitting 100 points lower than we were at the end of January and we are still within reach of our major support level. You can see by the chart where Gold dropped and tested towards the 1550’s and slowly climbed back up to test a psychological resistance level around the 1600’s. If Gold can beat the area around 1625 and shift the Daily chart trendline to a bullish nature then the respect shown for the major support level could be impressive. However, we are not seeing a tremendous amount of upward momentum here just yet. Remain cautious and aware that with any real momentum to the downside, and should that 1525 level break well, Gold could take a tumble.
Soybeans
In January I wrote: “With Soybeans, I would keep an eye on the Monthly chart. Watch to see whether or not we build a head and shoulders pattern here that would allow bearish plays on Soybeans. If this develops, then it could end up breaking the trend.”
We have started to see the development of that potential head and shoulders pattern on the Monthly chart and we have definitely seen some serious selling momentum in the last couple of days.
This downward momentum at this point, however, has not broken the neckline on this potential longer term head and shoulders development. The best chart to watch at this point is the Weekly chart.
The Weekly chart shows us a secondary Head and Shoulders pattern which I would typically view as an additional bearish pattern to stack the odds in favor of a breakdown. However, the Head and Shoulders pattern on the Weekly chart is having a little bit of a rough time finding the opportunity to break the neckline. The longer we hesitate and move sideways without breaking down the 1375 and subsequently the 1300 territories, the more questionable the potential break becomes. Continue to watch Soybeans for their short side potential, but be very aware of the fact that via a failure to complete this Head and Shoulders pattern on the Weekly chart, you just might see a long sided rebound.
Sidenote: The Grains have been extremely bearish in the last couple of trading days which could provide new opportunities for breaks to the short side on a weekly basis, but keep in mind that Corn and Wheat are a bit overextended on the short side per the Monthly charts already. Note the short term momentum and always keep an eye on the big picture.
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