I do believe it is only a matter of time before the bears come in and punish the market yet again.

The Euro Stoxx 50 rallied rather significantly after dropping in the early hours on Tuesday, as it looks like the oversold condition has caused a bit of profit-taking. Ultimately, the market is likely to continue to see the negativity around the world as something to be shorted. However, markets do not go in one direction forever, so it is likely that a bit of a rally will probably get sold into. The €3600 level is an area that we had gapped below over the last couple of days, so it does suggest that we are going to see a lot of resistance.

If we do break above there, then the market has to deal with a lot of selling pressure from the previous trading, as the 50-day EMA is currently sitting just below the €3800 level. That is an area that we would have to break above to think that the Euro Stoxx 50 would suddenly turn around. After all, the index is a collection of nine different countries, and it is likely that the index will eventually see a lot of shorting pressure.

If we did break above all of that, specifically the €3800 level, then we could see a significant turnaround to reach the 200-day EMA. That obviously would be a huge turn of events, but ultimately this is a market that still has further to go before testing the previous lows, which is near the €3400 level. The market breaking down below that level could send the market much lower, in a huge flush. That being said, I think the only thing you can probably count on is a lot of volatility, so you should probably be cautious about position sizing, and look for rallies to sell into as it should be more or less a continuation of what we have been seeing for quite some time.

As long as there are a lot of concerns coming out of the European Union, and the European Central Bank has done nothing to increase liquidity, it is difficult to imagine a scenario where the Euro Stoxx 50 takes off. I do believe it is only a matter of time before the bears come in and punish the market yet again. Volatility should remain high, which is typically a negative sign.

This is a bit of a “push-pull” type of market, and I think it should be noted that more choppy volatility should continue to be the case. 

The gold markets rallied significantly on Monday but gave back the gains rather drastically as the interest rates in America shot up straight in the air again. That being said, the market still looks like it is in the midst of a major consolidation area, so I do believe it is only a matter of time before we have to make a bigger decision.

If we can break above the top of the candlestick for the Monday session, it is very likely that we could go looking to the $2000 level, something that might take a significant amount of time. After all, this is a market that had been overbought, so the fact that we have gone sideways over the last couple of sessions should not be that big of a surprise. Ultimately, this is a market that needs to see the 50-day EMA hold, which is currently down at the $1913 level. That is an area that needs to be defended and it should be. In fact, I think there is a significant amount of support that extends all the way down to the $1800 level, as it is a “zone of support.”

The fact that we continue to go sideways overall just shows that we do not really know what to do with ourselves at the moment, and that should not be a huge surprise based on all of the noise that is going on around the world. After all, there is a war going on at the doorstep of Europe, and of course, there are a lot of concerns when it comes to inflation. Furthermore, a global slowdown is on the horizon, so it all ties together for problems going forward. This is favorable to gold, but it is also favorable to the US dollar. This is a bit of a “push-pull” type of market, and I think it should be noted that more choppy volatility should continue to be the case. Ultimately, I think the market is going to continue to be very difficult, so keep your position size somewhat reasonable, because it is a huge factor in whether or not you are going to survive all of this noise that we currently are going through at the moment.

Ultimately, I do favor the upside but I also recognize that we are just not quite ready to go higher.

Gold markets initially rallied on Tuesday but gave back gains rather rapidly in the middle of the session as yields in America continue to climb rapidly. Because of this, the gold markets continue to be very difficult to trade from anything more than a short-term perspective, as we have been in a range for a while. The gold markets are volatile most of the time, but recently we have settled into a relatively well-defined range between $1910 and $1950.

There is a mix of factors out there that are pushing the market around, not the least of which would be the interest rates on the 10-year note. They continue to spike higher, and that is negative for gold. At the same time though, we have the inflationary concerns around the world that are driving those higher, and that gives a little bit of support for gold where it would normally not find it.

Looking at the technical analysis, the range has been reliable over the last couple of weeks, but sooner or later we will make a bigger move. A long daily candlestick is probably needed to add enough confidence to make traders get involved, and it should be noted that we are seeing support from the 50-day EMA as well, which is something that will attract a lot of attention. The $1900 level sits underneath there, so I think we will see a huge barrier of support in that general vicinity.

That being said, you could make an argument for a bit of a descending triangle right now, but until we break down below that $1900 level on a daily close, I am not completely convinced. The market breaking down below there would open up the possibility of a move down to the 200-day EMA, which sits just below the $1850 level, but I do not think that is the most likely of moves, at least not without some type of massive strengthening of the US dollar.

On the upside, if we were to take out the $1950 level, then it is likely that we will go looking towards the $1970 level, and then even the $2000 level, an area that has a lot of psychology attached to it to say the least. Ultimately, I do favor the upside but I also recognize that we are just not quite ready to go higher.