"I think the fundamentals for gold are pretty good," Rick Rule of U.S. Holdings says.» Read More
The S&P 500 is the gift that keeps on giving.
The equity market was able to consolidate yesterday, as the June S&P futures put in a slightly new high, reaching 1,615.25 after holding support against 1,605. The S&P futures have begun grinding higher in today's session, and are seeing aid from the central bank in Australia which cut their key interest rate to 2.75 percent to the surprise of some. We are seeing the global theme of easy money policy continue, just when many were started to believe earlier in the year that it was going to be curtailed.
(Read More: Reserve Bank of Australia Cuts Rates to Record Low)
German factory orders unexpectedly increased, and many investors are encouraged to see positive data out of Europe. Look for a test of 1,623 in the S&P today. The short-term range will be between 1,605 and 1,623. A close above here will find our first target of 1,631, and do not forget our ultimate upside target is 1,655. Only a close back below 1,605, and furthermore 1,600, will lead to a consolidation. And it will take a close below 1,593 to 1,595.50 to signal a further correction.
Keep an eye on Friday's high, as a close above it will further confirm immediate upside momentum. The low in the June futures is 1,609.25 this morning. If the market falls back slightly after the cash open, use this level (a slight new low) as a buying opportunity.
The situation in the Middle East grew increasingly tense over the weekend, as Israel struck Syria with targeted air strikes, leading to increasing concern that a broader Middle East conflict could be imminent.
While oil traders and analysts credited the tension with driving crude up nearly two dollars on Sunday, crude quickly retreated on Monday morning, and traded below its Friday close.
"Surprisingly enough, we're selling down," said Addison Armstrong, director of market research at Tradition Energy. "It will be different if Syria launches strikes against Israel, but for now, the market seems to be taking it as not such a big deal."
One aspect to note is that neither Israel nor Syria is a major player in the oil markets. However, "it's not about Syrian oil," Armstrong notes. "It's about tensions in the Middle East. This conflict is not just Israel versus Syria, it's a proxy war that involves Iran. And wars can be very unpredictable—that's the risk premium that the oil market always has to face. And sometimes it's less, and sometimes it's more."
(Read More: US Crude May Hit $100 on Payrolls, Geo-Politics)
But in the broader picture, a nod lower for crude makes sense to Armstrong. "We're pushing up against the highs for the year, and the fundamentals don't support it," Armstrong said. "The only thing that will get us moving into new highs for the year is the situation in Syria. Otherwise,the fundamentals are pointing lower."
Anthony Grisanti, founder and CEO of GRZ Energy, believes that the market is consolidating after Friday's 1.7 percent jump. "We were overdone because of the jobs number," he said. "One-hundred-sixty-five thousand jobs doesn't equate to a huge uptick in demand for oil products."
For that reason, if not for the news out of Syria, "we would be a lot lower today," Grisanti said.
As oil trader Dan Dicker pointed out, "We've had a nice rally here. We had oil under $90 just under a week or so." He thinks WTI crude oil will continue go higher, but not because of Syria.
"There is continued catching up of domestic crude to global crude pricing, and that will continue," said Dicker, who is the president of MercBloc.
Jeff Kilburg of KKM Financial says the bottom line is that volatility is back. "We have zero certainty right now, and it seems like tensions are finally escalating," he said. "The political tension over there really ripped up a lot of shorts."
So how is Kilburg playing oil now? "As long as the stock market is up here, oil prices will continue to tick higher to $100," Kilburg said.
GRZ Energy's Grisanti is of a similar mind: "In this situation, you probably want to be long crude oil."
Gold has firmed up and is consolidating higher after trading more than $20 off of the highs it made on Friday.
On Friday, nonfarm payroll data beat expectations with 165,000 jobs added, causing equities to remain the main focus over gold for fund managers and institutions. However, gold is attempting to find some footing to begin the new week.
Gold has consolidated in a range that we have defined to be between $1,437.50 and $1,487.50. After testing the exact high of this range on Friday, gold put in a session low at $1,455.40, which was very important for the bull camp, since Thursday's low was $1,448.10 and so a higher low avoided an outside bearish day.
After closing nearly $10 off of the lows on Friday, gold reached $1,478.40 on Monday morning, a major level that we have eyed. Look for this high to be a solid level of resistance on Monday. A close above this level will give a bullish feel, likely allowing the market to extend the range up to $1,505.50 before week's end.
On the downside, $1,467 is a major pivot point. As long as we can continue to see closes above here, the bull camp will remain in control. Only a close below Friday's lows against support at $1,455 to $1,458.50, and further below to $1447.20, will send this market into bearish consolidation territory.
Crude is benefiting from a good jobs number, but I believe it has moved a little too far, too fast
On Friday morning, crude rose well above $95. But I don't think demand at this point supports $95 crude. Still, crude has obviously been helped by the strength of equities, which were buoyed on Friday by a better-than-expected April jobs report, as well as huge revisions of the March and February numbers.
I won't ignore the strength in the oil market today, but if we get to $96.50 to $97.00, I am looking to sell. After all, we have record supply in Cushing, even while demand for products is still lagging.
But I'm not selling forever. The market looks like it has established a range between $90 and $95, so if crude dips to the $90 area, I am a buyer.
Gold shorts covered on Friday morning. That led gold to press new swing highs to $1,487.20, which is our major resistance level.
After the European Central Bank lowered rates, many traders questioned how much of this was already priced into a euro that is currently about 5 cents from highs, and could not break 1.30 euros against the dollar upon the announcement. This hold has allowed commodities priced in dollars to rally back from a midweek sell-off. This has pushed gold higher, helping it to find a solid base at our $1,458 support over the last 24 hours, and to test the top side of our expected trading range ($1437.5 to $1487.5).
Now that we see nonfarm payroll data beat expectations,with 165,000 jobs added in April, gold will be even less attractive, as equities become the main focus for fund managers and institutions. However, we find the revisions from last month to be the major story Friday, as the March payrolls were revised from 88,000 to 138,000. This is a green light for equities, and gold's luster will continue to diminish.
Gold has consolidated in a range that we have defined to be between $1,437.50 and $1,487.50, and now we are trading $20 to $30 from the session's highs, as gold has proven to be just that: a range trade. A close below $1,437.50 will be very bearish, and will cause those who chased a run higher, as well as value investors, to once again hit the sidelines. This will likely cause a consolidation closer to the psychologically important $1,400 level at $1,402 to $1,404.20. The next line in the sand though will be $1,383.90. If that goes, then $1,320 and below will likely be in the cards.
On the other hand, if gold can consolidate above $1,466 on Friday, then major resistance will still be the $1,474 to $1,478.20 levels, and a close above there will negate the downside action.
Gold edged up on Thursday after the European Central Bank cut its main interest rate cut by 25 basis points to a record low of 0.50 percent.
Lower interest rates should favor gold as they encourage investors to put money into non-interest-bearing assets like the metal.
Spot gold rose to a session high of $1,473.40 an ounce after the rate decision and was last 0.9 percent higher at $1,469 per ounce.
It's all up to Ben Bernanke and his merry men.
Gold's smaller overnight range above $1,467 an ounce now has the bulls on their toes ahead of today's Federal Open Market Committee meeting, as we press below $1,450. Despite disappointing ADP employment data, which should encourage easing-related buying in the shiny metal, the $1,474.00 to $1,478.20 resistance levels have remained strong, and have kept gold in check far away from last week's swing highs.
This consolidation from between $1,437 to $1,487 is exactly the one I wrote about last week, with physical buyers and value hunters buying at these levels. Nonetheless, $1,500 will remain an enormous line in the sand.
Gold has taken out a pivotal support level below the $1,455.80 to $1,458.50 range and Friday's low of $1,447, but is hugging $1,450.This will likely remain ahead of the meeting today.
Gold's industrial counterparts began today heavy following poor Chinese manufacturing. Gold has since followed with a lack of physical buying as Asia and parts of Europe are on Labor Day holiday.
Additionally, traders are not making any big bets ahead of the FOMC meeting. A slightly dovish tone later today can potentially send gold back to test the session's highs. Some analysts expect a slowdown of bond purchasing by the Fed in the fourth quarter of 2013, from $85 billion to $50 billion. That would be a premature overcompensation for an economy that has not shown the necessary strength for that type of action given such data as from ADP and ISM this morning.
Nonetheless, if a bond purchasing slowdown is announced, we will likely see gold stretch below $1,437.50 to $1,438.00 support levels.
A European Central Bank interest rate decision tomorrow can be a bigger event than whatever the FOMC does today. Many expect the ECB to lower its benchmark rate, which would be bullish for gold priced in euros.
Gold fell on Wednesday as buying slowed down due to holidays in China and parts of Europe, and as investors waited to see if the U.S. Federal Reserve would stick to its stimulus program to spur the economy.
The Fed's policy-making committee ends its meeting later in the day and is widely expected to keep the current pace of bond buying at $85 billion a month due to recent weak economic data.
This morning's ADP report shows that private employers added just 119,000 jobs in April employment data, which was well below estimates and is the lowest gain since September. This should serve as a well-timed reminder of the current forces driving markets.
(Read More: Spring Slowdown Paints Ugly Picture for Jobs: ADP)
Softness in the latest string of numbers, coupled with tame inflation, has eliminated any chance that the Fed will change their dovish rhetoric. Stocks and bonds have broken from the traditional risk-on/risk-off rotation which saw them moving in opposite directions, and they have become comfortable rallying together. This makes sense to me, as the Fed has pledged to keep a strong bid in the Treasurys, which forces everyone else to look for yield in risk assets.
Another element in this trade is a perception of less issuance by the Treasury as a response to increased tax receipts. Persistent Fed demand, coupled with less supply, could provide some extra torque in the move toward lower yields.
As for equities, we will get a glimpse of their underlying strength later today after the highly anticipated Fed announcement, and my guess is it will be just what the S&P futures need to take out the 1595 highs with conviction.
My current objective in the June S&P e-mini futures is 1624, and my target for the June 10-year note futures is 134.
Mark Dow, a former hedge fund manager who writes at the Behavioral Macro Blog, notes a key difference between the two. While "Apple is a bubble that has popped," Dow said, "gold is a bubble that is in the process of popping." For that reason, on Tuesday's "Futures Now," Dow advised going long Apple and short gold.
Apple and gold are certainly two charts that are at the front of investor's minds. After all, both appear to be making runs at technically important levels. For the first time in a month, Apple has managed to rise about its 50-day moving average. Gold, meanwhile, is edging closer to the psychologically important level of $1,500 an ounce.
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.