XULF Report
US equities benchmarks reached new highs yesterday as two Federal Reserve officials said any adjustments to monetary stimulus, either increases or decreases, will be in the light of forthcoming data on growth and inflation. Investors liked this because it reassures the market that the Fed will only reduce stimulus if the growth is there to replace it which creates almost a win-win scenario in many investors’ minds. Gold seems to have dismissed the daily change in expectations for when the Fed’s next move will be and has let the technicals take control on price direction in the short term. This was the case yesterday as gold completed the triple top neckline at $1382 and declined as low as $1359.
The next move for gold is unclear as it is difficult to determine whether we are in a pullback of an uptrend or a retracement in a downtrend. However price is finding short term resistance at $1382 and if price can attack short term support at $1372 for a fourth time today it is likely to give way to the bears. If this happens then we have a rather shallow double top which should lead to a test of yesterday’s low of $1359. On the contrary another test of today’s resistance at $1382 could lead to gains. Any additional tests of these support and resistance levels will more likely than not lead to a breakout although any bullish break may be limited. Also keep an eye on the 20 period MA crossing below the 50 period MA which could happen soon and build the case for a short trade. Be aware that the market could be affected by any headlines coming out of the BoJ press conference today and of course we have Ben Bernanke’s testimony tonight at 10pm.
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