Gold markets rallied a bit during the trading session on Tuesday to show signs of life again as the market has threatened to break above the $1750 level. If you can do that, then it’s likely that we could go looking into the 50-Day EMA above, which is near the $1775 level.

Looking at this chart, it’s obvious that the market has seen a lot of volatility and negative pressure, so even if we do rally, I think we probably have a lot of work to do before we start to turn around and rise for the longer term. Interest rates in America continue to rise, and that does work against the value of gold. So does the US dollar rising, although all of these things can go higher at the same time, depending on the situation that is going on. At this point, it looks to me as if gold is trying to at least get a short-term rally going, so pay close attention to the next couple of days and the statements coming out of the Jackson Hole Symposium, because it could have a lot to say as to where we are going next.

Underneath, I think the 6 $1720 level could be short-term support, but if we were to break down below there, it’s almost a given that we will test the lows again. Breaking down below the lows that we made several weeks ago could open up even further selling pressure, which would probably coincide with interest-rate spanking, and of course, the US dollar strengthening. Because of that, you need to be aware of the fact that we have a lot of concerns coming out of the bond market.

It All Depends on Interest Rates

• If the rates in America continue to rise, it will make bonds a lot more attractive than gold, which of course you have to pay to store.
• There is a lot of resistance above that if we broke through, you’d have to consider a trend change, namely, the $1800 level and the 200 Day EMA. If we can clear all of that, then gold becomes more or less a “buy-and-hold” asset.
• The only thing you can count on in the short term is going to be a lot of noisy behavior and therefore you need to be cautious about the position size that you put on in this market.

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We may see a little bit of short-covering heading into the jobs report.

The Euro initially tried to recover on Thursday but then turned around to show signs of weakness. Ultimately, the 1.02 level is an area that had been important previously, so now that we are trying to break above there, it’s interesting to see that the sellers have stepped back in. This is a market that has formed a bit of a potential inverted hammer, so it’ll be poignant as to which direction we break at this point.

If we turn around and break above the top of the candlestick, then it’s possible that the market could rally all the way to the 1.04 level. This is an area that previously had been a massive support, so a lot of “market memory” could come into play in that area. I would anticipate seeing a lot of sellers in that general vicinity, as there is a strong downtrend. The 50 Day EMA is now slicing through the 1.06 level and driving even lower. I do believe that the 50 Day EMA is going to reach the 1.04 level sooner or later, perhaps sooner being the keyword.

All things being equal, the Euro has a lot to worry about, not the least of which will be the fact that the ECB cannot tighten monetary policy anytime soon. Yes, there may be a couple of token interest rate hikes of 25 bps, but that’s about as aggressive as they will get. On the other hand, the Federal Reserve has already promised at least 100 bps of rate hikes over the next couple of months. Because of this, I think it’s probably more likely than not that we see market participants favor the greenback over the longer term.

We may see a little bit of short-covering heading into the jobs report, but quite frankly it would take a pretty shocking turn of events in the United States from that announcement to suddenly have people buying the euro. Yes, it will have to be volatile around 8:30 AM New York time, but beyond that, we should see the longer-term downtrend reassert itself on any attempt to recover. As for buying, I don’t really have a situation where I would do so, at least not until the Federal Reserve steps away from its tightening cycle, something that it simply cannot do or will have lost its credibility completely.

I do think that eventually it will become bullish again, but that might be a story for 2025 or so.

Bitcoin struggled again Friday after initially showing a bit of promise. Ultimately, this is a market that is going to continue to drop, and I suspect that the $18,000 will give way sooner or later. When it does, it’s very likely that we will flush much lower, with an initial target of $16,000.

After that, the market will go looking to the $12,000 level, where a lot of people are looking to get involved. I suspect that is probably about as far as we will go to the downside, but given enough time the best case scenario for most of market participants is going to be that we go sideways for a while, allowing you to pick up bits and pieces in order to build a larger position size.

This is exactly what happened last time during the “crypto winter” a few years ago, which then saw this market break above $60,000. It took a lot of effort, but we eventually did turn things around. This is the first time that Bitcoin has had to deal with a tightening monetary policy, and it has completely failed. Because of this, we will need to see the Federal Reserve change its overall attitude before any real strength can be found.

If we did break above $22,500, it would allow for short-term relief rally. More likely than not, there will be plenty of people waiting to short this market again, so that’s probably my play. It’s not until we break above the $32,500 level that I would be convinced we are going higher. Fading rallies will continue to be the best way to play this market, as it has no real fundamental reason to go higher.

I do think that eventually it will become bullish again, but that might be a story for 2025 or so. It would not surprise me at all to see this market do very little for a year or two, just like it did the previous time. With this, you can be an accumulator at lower levels, but you have all of the time in the world. The only thing that could change this is if the Federal Reserve loosens its monetary policy again. Some traders are hoping that will happen early next year, but inflation has to be kept under control.

This is a market that continues to see plenty of sellers.

The euro fell on Wednesday as we continue to see US dollar strength increase. We have been in a downtrend for quite some time, so it does make sense that we would see the euro fall because of it. That being said, the market is likely to continue to be one that looks at these rallies as selling opportunities. The overall attitude of the market will continue to see quite a bit of noisy behavior, as there are quite a few different things going on at the same time that greatly influence what happens with the US dollar.

It’s interesting that the Austrian central bank chief had suggested 50 basis points of rate hikes would be necessary, and the euro promptly fell. This shows just how weak the currency is, and how the recent rally was absolute nonsense. Given enough time, it’s likely that we would see the euro sell off every time there seems to be a rally, and it’s likely at this point we will go looking to reach the 1.04 level over the longer term. The euro continues to suffer at the hands of every weak economy and the fact that growth is more likely than not going to be a major issue.

Even though the ECB may start to raise interest rates, they are far behind the United States and that will continue to be a major factor in where this pair goes. It is obvious that the 1.08 level has offered significant resistance now, and it has become apparent that the previous support has now been a significant area of selling. Looking at the chart, I believe that the 1.05 level could be a bit of a target over the next several days, and if we can break down below that level, then we will go looking to break through the recent lows. Given enough time, we could even see parity, but that’s something that comes down the road. Obviously, the trend remains very negative, and you cannot fight it. In fact, it’s not until we break above the 1.09 level that we would have to think about buying, and then we also have to deal with the 200-day EMA as well. This is a market that continues to see plenty of sellers.

Ultimately, this is a market that is going to be very noisy, so you need to be very cautious about your position sizing and risk management overall.

The gold market rallied during the early hours on Friday but gave back gains quite significantly. At this point, the market is dancing around the 200-day EMA, suggesting that the markets are trying to figure out where we’re going next. As the 200-day EMA is so widely followed, this is going to be an interesting place to watch the market.

Forming a hammer that is followed by a shooting star suggests that the market is looking for some type of momentum. If we can break above the highs of the shooting star for the Friday session, that would be very bullish, just as a breakdown below the bottom of the hammer would be an extraordinarily bearish turn of events. In that scenario, we would more likely than not drop toward the $1825 level, maybe even the $1800 level. It is at the $1800 level that we are trying to figure out whether or not we can form a bottom or at least stabilize enough to continue to attempt a move to the upside.

Alternatively, if we break to the upside is likely that the market will go looking to reach the 50-day EMA, and then possibly even the $1900 level. The $1900 level will be an area of interest as it is not only a large, round, psychologically significant figure, but it is also an area where we had seen support previously so a certain amount of “market memory” would be expected in that neighborhood. Breaking above there allows gold to go much higher, perhaps reaching the $2000 level.

The gold market will pay close attention to the bond market because as yields spiked previously, it put a lot of downward pressure on gold. Now that we are starting to see buyers step in and buy bonds, it has been driving yields down. If the yields continue to drop, that could be a reason for gold to rally. Furthermore, we have a lot of geopolitical issues out there that could continue to have people running toward safety, and of course, inflation to say the least. Ultimately, this is a market that is going to be very noisy, so you need to be very cautious about your position sizing and risk management overall.

At this point, it would take some type of major shift by the Federal Reserve for me to start thinking about buying this market.

The S&P 500 initially rallied on Wednesday, but the stronger than anticipated CPI numbers had a lot of volatility entering the market. Because of this, the market has given up a lot of the gains at the end of the day, as it looks like we are continuing the trend of expecting the Federal Reserve to become extraordinarily tight. There are a lot of other concerns out there, of course, so it should not be a huge surprise to see what has happened.

The market did break above the 4000 level at one point, but you can see we have closed well below there. In fact, the candlestick ended up being an inverted hammer, which suggests that we are going to continue to see a lot of negativity. At this point, the 3900 level is more likely than not going to be targeted, and if we can break through there, it is likely that we have yet another leg lower. At that point, I would anticipate a lot of momentum entering the market, and a massive and nasty selloff being the norm.

Rallies at this point in time should be selling opportunities, as we will continue to see a lot of concern out there when it comes to the attitude of the market due to inflation, a tightening Federal Reserve, and the recession that is almost certainly coming down the road. Because of this, think the markets will be very hesitant to become “risk-on” going forward. Any rally at this point in time should be a nice selling opportunity, and I think that is how you have to look at this market: one that will continue to be shorted occasionally. It should be noted that the market breaking down below the bottom of the range from the previous session and closing at the very bottom of the candlestick does, in fact, suggest that we are going to continue seeing a lot of negativity that will see a certain amount of follow-through. Typically, when you close at the very bottom of a range, sellers are going to show up during the next session as well. At this point, it would take some type of major shift by the Federal Reserve for me to start thinking about buying this market.

When a market gets parabolic the way this one did, it quite often is a sign of significant overextension.

The West Texas Intermediate Crude Oil market initially rally during the trading session on Thursday to retest the 50 Day EMA and of course the previous uptrend line. Because of this, it looks as if the downtrend is intact, and I do think that it is probably only a matter of time before crude oil breaks rather significantly, perhaps reaching the $95 level early during the session on Friday, and maybe even breaking down below there.

If we do break down below that level, then I will be targeting the $90 level. The market is going to be concerned about the fact that gasoline demand is dropping, which of course is a situation where perhaps the market had gotten so far ahead of itself that it forgot that the “cure for higher prices is higher prices.”

As the world looks likely to head into recession, this is weighing upon the crude oil market because it will drive demand down. There is a structural problem with supply over the longer term, but perhaps a recession might give the oil industry a chance to catch up. As we had been locked down due to the pandemic, it is not a huge surprise that when the economy opened up around the world that the demand shock pulled prices much higher. Now that it looks like the tide is turning, we may see oil drop rather significantly.

On the upside, if we were to take out the top of the Wednesday candlestick, then it is possible that the WTI Crude Oil market could go higher, perhaps reaching the $110 level, maybe even the $115 level. All things have been equal, it looks as if oil is starting to lose its mojo, making lower highs along the way. As long as that is going to be the case, then I think that you continue to fade rallies, but you should keep in the back of your mind that oil markets have been extraordinarily volatile, especially with the Russian supply essentially being taken off of the open market. The US dollar has its influence as well, but this market has been rather strong for a while, and now it looks like it is finally running out of momentum. When a market gets parabolic the way this one did, it quite often is a sign of significant overextension.

In the short term, this is a market that looks more likely than not to go sideways with more of a downward tilt than anything else.

The British pound initially tried to rally on Tuesday but gave back gains to show signs of weakness. By doing so, the market looks as if it is going to continue to see a lot of trouble above. The 1.32 level above is an area that has seen a significant amount of resistance, and we have the 50-day EMA dropping towards that area as well. With all of that being said, it looks as if rallies will continue to be sold into.

The shape of the candlestick is an inverted hammer, and a breakdown below the bottom of the candlestick could kick off even more selling, perhaps sending the British pound to test the 1.30 level. This is an area that is psychologically important and will attract quite a bit of attention not only from a psychological standpoint but a structural one as well as we have seen so much in the way of action at the 1.30 level over the last several years.

On the upside, if we can get above the 1.32 handle and the 50-day EMA, I might be convinced to start buying, but I would also need to see the US dollar falling in general, which is something that I do not anticipate being part of the markets anytime soon. After all, there are plenty of reasons to worry about risk appetite right now, which is something that the market would need to have in order for this pair to continue rising. I do not necessarily think that we will mellt down, I just recognize that this is a market that still has plenty of downward pressure on it, and not much has changed.

If we were to break down below the 1.30 handle, then there is a “zone of support” down to the 1.28 handle, and I think there is a lot of noisy behavior between those two levels. If we break down below the 1.30 handle, I would anticipate a move to the 1.28 level, but I also would anticipate that it will be very hard-fought, and choppy to say the least. Any breakdown below the 1.28 level would be extraordinarily negative, allowing more of a “trapdoor effect” in this market. In the short term though, this is a market that looks more likely than not to go sideways with more of a downward tilt than anything else.