Bank of America technician Stephen Suttmeier explains why weak seasonals and tactical complacency could mean trouble for stocks heading into next month. » Read More
All eyes are on the Federal Reserve.
Gold's choppy overnight trade kept the metal above $1,380, and it rallied to $1,388 shortly after midnight. Traders will be tuning into Fed Chairman Ben Bernanke's testimony in Congress on Wednesday morning for any clues about the bank's bond purchasing program.
Additionally, the Federal Open Market Committee Meeting minutes will be released in the afternoon, and traders again will be looking closely. The big question is when the Fed will stop or taper quantitative easing.
(Read More: Hilsenrath: Here's What Bernanke Will Say)
With Consumer Confidence at the highest levels in years, and the equity market continuing to rise, gold has taken a back seat as investors flock to more attractive investments. The metal was able to trade well off the lows it put in on Sunday night, but gold has been capped at $1,400. Only a close above $1,404 will be able to signal a potential bottom in this market.
In a hearing starting at 10 a.m. EDT, Federal Reserve Chairman Ben Bernanke will go before the Joint Economic Committee to give his outlook on the U.S. economy. But what investors will really be listening out for is what Bernanke says about when quantitative easing will end.
However, according to The Wall Street Journal's chief economics correspondent, Jon Hilsenrath, the chairman's testimony could be hamstrung by disagreement within the Fed.
Gold prices fell two percent on Tuesday, surrendering much of the previous session's hefty gains, as strength in the dollar against a basket of major currencies weighed on the precious metals.
Gold, down in seven of its last eight sessions, fell on a firm dollar, weak technical signals and speculation that the U.S. Federal Reserve might rein in its stimulus program.
Meanwhile, silver remained under pressure, but well off Monday's lows, when it slid nearly 10 percent to a 2-1/2 year trough, on heavy fund liquidation in Asian trade and generally weak fundamentals for the metal.
It's been a tough month for bonds. In May, 10-year Treasury Notes have dropped by four and a half percent. But with Fed Chairman Bernanke testifying before Congress on Wednesday, would you rather be long or short bonds right now?
Crude oil was extremely volatile last week, with big moves both to the upside and the downside, but one pattern did emerge. The range it has traded in has held over the last few weeks. Crude oil has been a sell in the $96.50 to $97 areas, and a buy between $93 and $92.
But let's take a closer look. I would like to buy dips in crude this week for two reasons.
First, as we head toward Memorial Day weekend, demand for products picks up. This applies to
Second, there are rumblings on the geopolitical front. Syria is still out of control, Iran nuclear talks are going nowhere, and over the weekend, North Korea launched short-range missiles.
Because of these overhanging geopolitical factors, if you are shorting crude, you have to place stops. Indeed, if something breaks out, crude could instantly pop $20. That has always been the interesting dynamic of crude: Any news about it usually means it will spike higher.
Only economic weakness sends it lower. And for now, the U.S. seems stronger, and demand worldwide has been growing.
So where would I buy in to this market?
The support areas at which I would look to buy are $95 to $94.50,and then $94 to $93.50. I would sell cautiously between $96.50 and $97.50, with a tight stop above $97.50. But I would rather trade it from the long side right now.
Expect gold to bounce when it retests April's low for the first time. But after that, there could be more trouble.
Gold opened up much lower on Sunday night, as metals took a beating once again. Silver was down as much as 8 percent, dipping to $20.25. Gold tested our next major support level, putting in a low at $1,336.30.
(Read More: Gold Heads for Longest Slide in Four Years)
Since the open, things have stabilized. Gold has reached back above $1,350, testing the electronic close from Friday, although still down more than $10 from the marked floor close. Silver has erased much of its losses, but is still down sharply on the day.
Much of this choppiness can be attributed to
Look for the prior $1,335.60 low to act as a major support now, but note a retest will likely send this market lower, with less emphasis on the $1,321.50 April low. The next major downside level is $1,283.50, but as we have previously mentioned, a close below that could potentially send this market down to $1,154.
CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.
Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.