Friday's E-Mini S&P 500 futures auction turned out to be a non-event, with the contract rotating within a 7.25-handle range for the entire session. Traders looking for a reason to be bearish are apt to point to the fact that the contract's regular session high was established during the initial 20 minutes of trading. However, basing anything other than an extraordinarily short timeframe bias on such an observation seems like a stretch to me.
The daily chart above paints a picture of an instrument stuck in horizontal consolidation. The lack of short-term momentum is undeniable. But beyond the short term, the market looks fine. Over the next week, I expect to base my short-term view around 2265. As long as value remains above that level, a continued push toward 2277 and new contract highs appears to be that path of least resistance. Value migration beneath the mid-2260s, while not necessarily concerning to the intermediate or higher timeframe participant, is apt to push the short-term trader toward a bearish bias, with near-term targets of 2248.50 and 2240 being first on their list.
Last week's most requested charts revolved around the gold sector, so let's take a look at a few charts.
Before we review the actual chart of the continuous gold futures contract, I want to make sure everyone remembers that gold futures and gold stocks (or sector ETFs) don't always move in perfect harmony. Put another way, if you're trading gold stocks, devote the majority of your attention (and risk management) to the chart of the stock or ETF you're trading, and not to the futures contract.
Gold futures have a very bear-market-rally look to them. So while I'll be the first to admit the contract looks OK on a shorter timeframe, that $1205 to $1220 zone (highlighted in yellow) might prove challenging. As long as the contract continues to close above the year-to-date (YTD) volume weighted average price (VWAP), I'd be willing to give bulls some leeway. A dip under that $1184 YTD VWAP figure, however, and I'd be gone.
The Vaneck Vectors Gold Miners ETF (GDX) has a slightly more constructive chart, but we mustn't fall asleep and ignore the likely resistance toward the 200-day simple moving average (SMA) and early November highs. This is likely an instrument one might want to buy on dips, rather than strength. Given that supply has a nasty habit of appearing as instruments rally into flattened or declining higher timeframe moving averages, my inclination would be to maintain a bullish posture as long as the GDX remains above the 50-day SMA, but not chase strength into that 200-day SMA.
Newmont Mining (NEM) was the most requested individual gold chart last week, and while this stock was rejected from its 200-day SMA earlier this year, I don't want to give up on the name. I see two logical ways to approach NEM. The first, and arguably more frustrating approach, would be to buy after it closes above the 200-day SMA again. In this scenario I would simply use a close under the 200-day SMA as my stop. The caveat here is some resiliency is required. The stock might chop above and beneath the 200-day SMA for a frustratingly long amount of time before finally embarking on a more defined trend.
The second approach would be to buying anywhere around the $34.55 mark it closed at on Friday. In this scenario, I'd be trading against the yellow uptrend line I've drawn in (approximately $33.65). Since that trendline coincides neatly with the 50-day SMA, a close beneath it offers a logical point to cut losses short in a hurry. I'd likely remain long the stock for as long as it manages to close above the 50-day SMA. And for what it's worth, the second approach fits my own approach for a name like this.
Moving on to Tuesday's Es auction, we'll begin the session with a focus on 2265. As long as any early-morning weakness stabilizes and attracts buyers in and around the mid-2260s, our expectation will be for continued momentum toward 2273, 2277 and new contract highs. As a reminder, no legacy supply issues exist above 2277.
A failed trade from 2265 is expected to convert short-term bulls to the dark side. All trading beneath 2265 shines a light on 2255.75 and 2249.50 to 2248.50. As value migrates beneath 2255.75, selling pressure toward the upper-2240s is likely to intensify, and near-term bearish continuation toward 2240 becomes a logical expectation.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at firstname.lastname@example.org or posted to my twitter feed @ByrneRWS.