Home > Commodities and Rates, Short-Term Trader > The Euro and Gold/Silver Look Due To Pullback

The Euro and Gold/Silver Look Due To Pullback

Euro

The recent leg up for the Euro, which commenced back towards the end of August, looks ready to take a rest.

1. A symmetrical relationship exist between the rally from June – August and the rally from August – Current. The first leg up was 1459 pips, while the peak from today puts the current rally at 1441 pips in length. Another interesting point to make on symmetry is the pullback in August from 1.333 down to 1.2587 was almost exactly a 50% retracement of the June – August rally.

2. Price just surpassed, by a modest amount, the 61.8% retracement level from the November 2009 peak down to the trough created in June of 2010.

3. Dollar Index (DXY) on a weekly basis just traded down to a major long term trend-line extending back to to 2008. I will delve further into this soon. There could be some major implications across alot of fronts should this prove to be another significant pivot point for King Green.

Dollar

3. Momentum has pushed the market into severely overbought conditions when looking at momentum oscillators such as the 14 period RSI.

4. The 200 week SMA could act as stiff resistance. This comes in at 1.3920

Euro

Gold & Silver

Gold and silver have obviously been in a secular bull market for many years now, but every few months or so, traders and investors get ahead of themselves and push these precious metals to unsustainable prices.  One of these times a correction will turn into something much larger, but before I get ahead of myself I want to simply point out the likely hood that today's action, consistent with temporary tops (at the least), could mark the beginning of a sharp pullback.

1.  Price of Gold has run up 18% in about 10 weeks with little reprieve. Silver has run up 33% since breaking out of a multi-month triangle.  A rest, at the least, is in the cards.

2.  Gold, and especially Silver, put in wide range reversal bars on very heavy volume. December Silver traded nearly 83,000 contracts which is 2.27 x's its 21 day average volume. In fact, it's the heaviest volume day I can find when examining the past 10 years of data. That MUST be telling us something.

3. On a momentum basis, Silver is almost as overbought as any other time I have seen in recent years – not to be unexpected given it is at a 30 year high.

4. Sentiment  has gone bananas alongside price. The Daily Sentiment Index is clocking readings in the  upper levels of historical extremes with readings in the upper 90's. This means there are very few traders who aren't betting on higher prices. Each time the DSI has gone to such lofty levels silver retraced shortly thereafter, and in a few instances – very sharply.

Gold

Silver

Bottom line – the Euro looks like a pullback is about to take place. Gold and Silver really look to have outdone themselves for the time being, and taking a crack from the short side looks like a pretty good bet to make.

Does this mean its the end? No, it most certainly doesn't. What I take away from this analysis is that this would be a good time to pare back longer-term positions (locking in gains), and aggressive traders can take advantage of a high probability scenario and catch a few ticks to the downside.  After that we will need to take another look, until then – It's one trade at a time!

 

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