Morning Futures Roundup
Posted on 7/28/2010 in Unusual Activity by Mike Zarembski
Safe Haven No Longer?
Fundamentals
Gold bugs may not want to hear this, but Gold futures appear to be losing their longer-term bullish momentum, with the lead month August futures falling to 12-week lows. Some traders' views that the global economy is improving can be partly to blame for Gold's recent weakness, especially as concerns over the European debt situation have lessened in recent days. Ironically, the recent recovery in the value of the Euro vs. the U.S. Dollar may have also played a part in Gold's decline, as traders begin to unwind long Gold and short Euro positions that gained speculators favor during the height of the European economic turmoil. Even the recent recovery in the U.S. equity markets has had a negative effect on Gold, as investors move back into equities and away from precious metals.
The most recent Commitment of Traders report shows that speculators have lightened-up on their long Gold positions, with the combined non-commercial (large speculators) and non-reportable (small speculators) net-long position totaling 238,128 contracts as of July 20th. Although this long position is well off the record 328,344 net-long contracts being held for the week ending October 20, 2009, it is still a formidable one-sided position. Should near-term chart support points come under pressure, we may start to see further long liquidation selling as protective sell-stop orders are triggered.
Technical Notes
Looking at the daily chart for October Gold, we notice a potential double-top formation made in late June, as the test of the contract high of 1267.10 that occurred on June 28th failed to make a new high. In fact, prices closed near the lows of the session and set the stage for the over $100 per ounce decline in prices we are currently seeing. The sell-off really accelerated to the downside once prices closed below the 20-day moving average.
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The 14-day RSI is approaching oversold territory, with a current reading of 32.50. The widely-watched 200-day moving average is now in play and offers near-term support around the 1150.00 area. Should this support level fail to hold, a test of the April 19th lows near the 1128.00 area is possible. Should support hold, the next resistance point is seen at the 20-day moving average near the 1200.00 area.
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