Gold and Wall Street 30

The equity markets retraced a great deal of their selloff yesterday with US markets performing very well. The rebound was widespread across many markets as the selloff since the middle of last week became overextended on a short-term basis. From a seasonal perspective, the sellers are gaining the upper hand. The period of late July and August into September has experienced many bouts of selling down the years. However, there are a number of factors at play beyond seasonal cycles. Economic conditions are beginning to weaken after the rebound out of lockdown. Yesterday’s US Housing Starts improved to 1.64M against the forecast of 1.59M and the previous 1.55M which was revised down from 1.57M, but looking forward, Building permits fell to 1.60M against the expected 1.69M and the previous 1.68M. Australian Retail Sales fell to -1.8% overnight from a forecast of -0.7% and a previous read of 0.4%. Half of Australia is back in lockdown after cases were detected last month. Lockdowns in Australia have been effective at controlling the spread of the virus but have created a dreadful economic toll on the country. Vaccine take up in the country has been weak in comparison to other advanced nations. Meanwhile, new daily cases in Sydney have increased by 40% in 24 hours. The AUDUSD pair was hammered lower as a result of the dreadful news. In the US Senator Romney said that the US infrastructure bill’s issues can be solved by the end of the week and urged Senate Majority Leader Schumer to delay a vote on the bill until Monday. Senator Manchin said that they were close to a deal on the bill which is getting bi-partisan support. This would boost the prospects for the US economy going forward if it were to pass but there is also significant opposition with Senator Capito saying that the bill is in a precarious position and needs more specifics. He added that it will be difficult convincing lawmakers that the bill is paid for. The Japanese 225 closed up 0.58%. The Hang Seng is trading down -0.52%while the Shanghai Composite is trading up 0.68%. Gold is trading at 1813.00. USDJPY is trading at 109.830.

On the calendar today, a German 30-year bond auction is taking place. Canadian NHPI is expected to weaken to 1.1% from 1.4%. US Crude Oil Inventories are forecast to come in at -4.6M from a prior -7.9M.

Gold

The Gold chart shows that the commodity has sold off below 1850.00 after the last FOMC and continues to consolidate creating lower highs and higher lows. Resistance can now be seen around 1815.00 followed by 1825.00 and the 1845.00/1850.00 area. Further resistance may be found at 1880.00 followed by 1900.00. The price may find resistance at 1907.00, 1915.00 and 1933.00/1935.00, followed by 1950.00. Resistance may also be seen at 1959.00 and 1975.00. The 2000.00 level was used and may form as resistance ahead of 2015.00, followed by 2032.50 and 2065.00 incorporating the high at 2075.00. 

Price is consolidating around the 1800.00 area with supports at 1755.00/1750.00 and 1740.00. The 1800.00/1795.00 area is providing support in the very short term. A loss of the higher low at 1723.00 and 1700.00 may open the way to this area. A break of the 1670.00 area negates the pattern and may provoke a test on 1650.00. The 1640.00 area has been used as support on the chart and is followed by the 1600.00 round number and 1567.50 higher low. A loss of the lower support at 1557.00, may allow a test on the next level of support around 1535.00. This is followed by the 1500.00 area. Below this the new higher low at 1455.00 may be supportive and this is then followed by the 1400.00 area. A continued move to test the 1400.00 round number may indicate a more significant pullback to test the falling trend lines and open up the 1400.00 region. Price consolidated in this area with support at 1380.00 for much of last summer before breaking out. The 1360.00 area may also be used as support in the event of a deeper selloff. 

Wall Street 30 Index

The Wall Street 30 Index is trading at the 34525.00 area after running into the all-time new high from May at 35092.00 last week and potentially creating a double top. Price is moved back higher from support at 33030.00 and tested the trend line from the 2020 low over the last few weeks. The index has recovered yesterday from support at 33740.00 and some short-term weakness may still be on the cards. The 34350.00 may be supportive followed by 34136.00. Support may be seen at 34000.00 and 33840.00. The 33700.00 and the 33500.00 levels may be used as support in the short term. These levels are followed by the 33200.00 and 33000.00 areas of potential support. Support may be seen at 32960.00, 32800.00, 32360.00 and 32150.00. The 32000.00 level may also be supportive followed by the 31730.00 area. The 31000.00 round number level is followed by potential support at 30615.00. The high in December reached 30425.00 and this may act as support ahead of 30000.00. A loss of the higher low at 29660.00 may lead to some selling pressure. The 29425.00 area has been used as a higher low after a bout of risk aversion earlier in the year. A loss of the 29000.00 round number opens up a potential test on 28160.00 and the 28000.00 round number. Below this the 27783.00 level comes into play with further support around 27000.00 followed by 26541.00 and 26285.00. Below 26000.00, potential support may be found at 25850.00 and 25500.00. A loss of these levels may push price back towards the 25200.00 area followed by 25140.00 and 25000.00 levels. 

The price action shows that the index has rallied significantly in recent months and price is making higher lows. The trend line marries with the resistance level around 35320.00 today. Resistance may also emerge around 34750.00, 34865.00 or 34900.00. The 34950.00 level is potentially resistive but buyers would target a breakout there to continue the bullish theme and is this area followed by 35000.00 and 35030.00. These levels are part of the 35000.00 round number area with further levels of potential resistance at 35250.00 and 35500.00 leading into 35570.00. 

Phillip Konchar

Core Spreads

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