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Gold remains confused under $1,400. Is it a currency or safe haven? Whatever your philosophical view of the yellow metal, you have to use the technicals to trade it.
Gold retreated in early Friday trading after rallying into Thursday's electronic close, when it tested the $1,388 pivot level on the upside.
Thursday's low was $1,373, just higher than Wednesday's early low of $1,372. A higher low will help support this market's attempt to consolidate back towards $1,396. However, a violation of this level, and furthermore a close below, will lead to a much lower trade—at a minimum, a test of the $1,364 support level. A close back above $1,380 to $1,383 will help neutralize this market going into the weekend. However, only a close back above $1388.40 to $1390 will help ignite a trade higher.
I have spoken to several hedge fund traders with a billion or more in assets under management, and they have reduced their gold holdings by 2 percent to 6 percent, while increasing stock exposure. This is important, because physical demand alone will not bring gold to all-time highs—the big players must step back in the market.
It's been a tough month for natural gas. The futures have suffered a ten percent drop in two weeks, as inventories of the commodity have soared.
On Wednesday, nat gas hit a three-month low in the overnight session, before quickly recovering, for a 1.4 percent rally as of noon.
Summer does tend to be a better month than spring for natural gas, because nat gas is used to heat and cool homes—activities that are far more popular in the summer and winter than in the spring and fall.
If the S&P closes above 1650, we will retest yearly highs.
Equities suffered an extremely choppy day on Tuesday, as the rally in the Japanese yen caused late selling. I still feel that this a "buy the dip" market, but there are reasons to be cautious.
The S&P stalled on Tuesday against resistance at the 1639 to 1642 level, which coincidentally was a lower high in the session compared to the reopen overnight. With a rally that failed at 1639.75, many of the indexes touched the unchanged level before running out of gas. The breakdown late into the close didn't lead to a new low, but solid data out of Europe on Wednesday morning has helped keep the S&P in a range.
(Read More: Futures Climb After S&P 500 Slumps 1%)
The market is now back above the major momentum pivot of 1631 to 1633. MSCI cut Greece from developed nation to emerging market status, but the market has shrugged this off, and may still be concentrating on the positive news on the US credit status that came out Tuesday but failed to attract many headlines. The fact is that S&P upgrading the U.S. sovereign debt rating to "stable" from "negative" should be more positive for the market than many have made it out to be.
Every man has a day on which he turns a new leaf. For Peter Schiff, that day has not yet arrived.
This year, "gold can certainly make a move up to $1,700 or $1,800, but I think ultimately it's going a lot higher than that," Schiff said Tuesday on CNBC's "Futures Now."
In fact, the gold bull not only remains bullish—he remains extremely bullish.
"When the world figures out the position that we're in, gold is going to the moon," said Schiff, CEO of Euro Pacific Capital.
Not in the least.
"The Fed has no exit strategy," Schiff said. "It's all fluff. There is no taper, because taper is impossible without collapsing the economy, the banks, and the U.S. government."
(Read More: The Fed Taper: Reasons for Comfort)
In fact, he added, "what we're probably going to have to get from the Fed is more QE. They're going to have to print even more money and buy even more bonds to prevent this market from imploding, and that is extremely bullish for the price of gold."
People have blamed gold's 18 percent decline this year on many different factors: a lack of fear in the market, a bubble that has burst, talk that the Federal Reserve will soon end qualitative easing. But some market participants say the single biggest factor could be the Japanese yen.
"It is difficult to deny the strong correlation between the yen's decline and the consequent collapse in gold," said Jim Iuorio, TJM Institutional Services managing director and contributor to CNBC.com's "Futures Now."
"As in comedy, timing is everything, and the announcement of drastic liquidity in measures in Japan, coinciding with massive long positions in the gold market, led to the exaggerated downward move in gold."
As the Bank of Japan's easing policy has led the yen to decline in value, the U.S. dollar has gained relative value. And a stronger dollar logically means that people are willing to pony up fewer of those dollars for gold, so gold prices should drop.
The trade seemed to have turned around last week, when the yen surged in value. But that wasn't enough for gold to make a serious run, even in the short term.
"At this point, even a stabilizing yen may not be enough to stop the negativity surrounding the gold market," Iuorio said. "When the catalyst disappears, it doesn't always mean that sentiment will revert back."
Worse, the yen's recent strength turned back around on Monday, ahead of Tuesday's Bank of Japan meeting announcement, which some think will lead to more yen weakness.
"In the last week or two, the markets have been disappointed by what dollar/yen has done," said Todd Gordon, founder of TradingAnalysis.com. "But I bought dollar/yen, because I think the Bank of Japan is scheduled to do something on asset purchases to reignite confidence."
(Read More: Dollar-Yen Shake-Out Could Just Be the Start)
In the longer term, Gordon believes that increasing U.S.Treasury yields will drive dollar/yen higher. He says a spike in yields would be good for gold if it reflected inflation fears. But since this move is due to expectations that the Fed will roll down bond purchases, Gordon says it will offer no help to the gold trade.
"This is an inflation-less recovery, and that leaves gold behind," Gordon said.
Japan rebounds and China disappoints, as U.S. stocks forge ahead. So what does this mean for the metals?
Gold traded to a lower high overnight heading into Friday's nonfarm payrolls report, reaching only as high as $1,417.70. Investors and traders raised bets on gold through the week, keeping prices stabilized above $1,400 for much of the time. As uncertainty came into the market and equities were under tremendous pressure, gold once again became a safe haven currency. But the market could still not extend itself above major resistance, or close above that all-important $1,413.20 level.
(Read More: Gold Eases as Payrolls Data Fuel Fed Speculation)
When the jobs data fell in line with expectations, the stock market enjoyed a major bullish reversal, and gold was once again seen as less attractive. The selling pressure resumed, and gold retested major support at $1,380 to $1,383, running stops and reaching a low of $1,377.10 on Friday.
As I mentioned on the "Futures Now" blog, the close is very important, and gold was able to maintain much of its price action back above support and saw an electronic close of $1,383. Much of this session's trade has been sideways, but the session high has come in right against resistance, and the market is now trading $10 down from there.
(Read Rich's previous post: Pro: This Will Determine Gold's Next Move)
After a volatile week for the market, it looks like the bull case for stocks is intact.
The payroll numbers on Friday appear to have shaken the S&P 500 out of its correction phase. The data landed in the "sweet spot"—it was decent, but not good enough to suggest the Federal Reserve will pull back on bond purchases anytime soon. The stock market appears comfortable with the notion that the Fed probably won't announce a reduction in purchases until the October meeting at the earliest, and only in conjunction with evidence of an improving economy.
Friday's close will be paramount for gold.
Gold traded to a high of $1,423.30 on Thursday, after coiling into a tight range early in the session. Early price action from $1,408.50 to $1,410 ran stops, and allowed traders to ride a wave of fresh buying to press this market to new swing highs. With a lower high overnight at $1,417.70, gold consolidated lower ahead of the nonfarm payrolls, and back toward support at $1,408.50.
This payrolls report was the most anticipated data release of the year thus far, as traders were hoping it would give them to get a further indication as to the state of the economy, and consequently the Federal Reserve's monetary policy going forward. However, 175,000 jobs were added, and this is basically in line with the 170,000 predicted. Meanwhile, the unemployment rate suffered a uptick to 7.6 percent from 7.5 percent. With a slight downward revision of the previous month's data, this report gives no significant indication that a change in policy will be coming.
(Read More: No Swoon: Job Creation Continues, Rate Up to 7.6%)
It's already been a hard week for natural gas, but it looks like there's more pain to come.
Natural gas futures were hammered on Thursday, as government supply data showed the biggest weekly gain in inventories in four years. Supplies rose by 111 billion cubic feet, which was more than the 93 million to 97 million expected, and well above the 72 billion cubic feet we saw last week.
(Read More: US natural gas supplies grew last week)
Worse, the consequent downdraft happened to coincide with the break of a key technical level at $4, causing many long positions to liquidate.
This year, Doug Kass has suffered the unenviable fate of watching the market rise 13 percent while he remained bearish. But on Thursday's episode of "Futures Now," he said that the end of the rally will soon be upon us.
"The narrative now is whether the Fed is simply pushing on a string," Kass said, "and many market participants are coming to this 'aha' moment."
Kass, the founder and president of Seabreeze Partners Management, believes that the data have been weak, and will get even weaker.
"I have a variant view on both corporate profits and the outlook for economic growth versus the consensus. My concerns have been ignored by the markets, but they have been supported by the cautious guidance by corporations during the first-quarter earnings calls as well as by the recent economic data," Kass said.
(Read More: Housing Grows, Hiring Slow, Sequester Hits: Fed)
The problem is that "central bank liquidity blurs the line of demarcation between economic reality and stock market euphoria." For Kass, market participants are buying into the idea that the U.S. economy is growing, when we're simply seeing the impact of more liquidity.
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