Pay close attention to your position size, these types of markets get very dangerous.

Gold markets have broken down significantly during the trading session on Thursday, as the 200 Day EMA continues to offer a significant amount of resistance. By doing so, the market looks as if it is ready to fall somewhat hard, and now that gold is more likely than not to continue selling off, perhaps reaching down to the $1800 level. That is an area where I would anticipate seeing a lot of noise. It is a prominent, round, psychologically significant figure and where we have previously seen buyers.

For most markets, the US dollar has been like a wrecking ball, and gold has been no different. Ultimately, this market has broken significantly through the 200-Day EMA, which is a very negative sign for most technical traders. Given enough time, rallies will continue to attract sellers, and it looks as if the “fear trade” has gripped the markets entirely. The size of the candlestick is worth noting, it is longer than a previous couple of candlesticks, and therefore a lot of people will be paying attention to it. Rallies will probably see the 200-Day EMA as a barrier.

If we were to break above the 200 Day EMA, then it is likely that we could go higher, perhaps reaching the $1880 level. That is an area where we had seen a lot of selling previously, and therefore I think it makes quite a bit of sense that we would see short sellers coming back into the market. I am not interested in buying this market because, quite frankly, the US dollar looks like it is nowhere near selling off anytime soon. Because of this, the market will more likely than not continue to be a “fade the rally” situation.

If we were to break down below the $1800 level, it would be extraordinarily bearish and could have the “floor of the market” coming undone. At that point, we would probably have an intense move. If we did turn around a break above the $1900 level, then you can make an argument for a recovery. Until then, I would not look to the upside. The Thursday candlestick confirmed just how bearish this market is going to be. Ultimately, it seems as if we go much lower. Pay close attention to your position size, these types of markets get very dangerous.

At this point, you need to be very nimble and cautious about your position size more than anything else.

The West Texas Intermediate Crude Oil market broke much higher on Wednesday as we are clear of the 50-day EMA. Ultimately, this is a market that seems to be very noisy and unsure, as we have been grinding away in a symmetrical triangle for what seems like a lifetime. Keep in mind that there are a lot of external factors pointing in both directions, so it does make sense that we would continue to see this type of behavior.

The Russian supply has been taken offline, so a lot of the major powers will continue to suggest that we should go higher, just as the idea of the market getting slammed by demand due to the reopening of trade should. The market will continue to see a lot of volatility, and it is worth noting that we have a couple of trendlines that have been fairly reliable.

As for a negative turn of events, I think you need to keep an eye on the fact that there is a lot of concern out there that the global economy is going to slow down. If that is going to be the case, then it is likely that we would see a lack of demand for crude oil, so you can make an argument for both directions at this point. The easiest way to trade this market is to simply trade price and follow with the market does, not what it “should do.”

This has been a very strong move to the upside, but it has not necessarily broken out of an area that makes it anything that is tradable. If we were to break above the $110 level, then it would be an explosive move to the upside that was just waiting to be had. On the other hand, if we break down below the $100 level on a daily close, then it is very likely that this market would fall apart, perhaps looking to get down to the $90 level eventually, which is where the 200-day EMA is currently rushing to. At this point, you need to be very nimble and cautious about your position size more than anything else. It is very likely that we continue to see a lot of volatility on a day-to-day basis.

It still looks as if the US is still going to be favored as things stand right now.

The US dollar initially fell a bit during the trading session on Thursday but turned around to show signs of life. The 1.25 level has been significantly supported over the last several months, so it is not a huge surprise to see a little bit of a bounce from here. Furthermore, most of the Canadian dollar strength that we had seen leading up to this trade was based upon a bit of a surprise coming out of inflationary numbers in Canada.

That being said, we already know that the Federal Reserve is going to be aggressive about hiking interest rates, and even if the Bank of Canada were to start to tighten, they are still behind the US. This is expressed in interest rates, which of course have a major influence on the Forex markets.

The candlestick did not wipe out all of the losses from the previous session, but considering that it was done organically, and not necessarily based upon any type of announcement, it does suggest that there is real demand underneath. As long as we can stay above the 1.25 handle, there is a really good chance that we stay within this range going forward. The top of the range is closer to the 1.29 level, so we have quite the distance between here and there to cover if we do start to rally. This would also jive fairly well with a “risk-off” type of environment, as it would favor the US dollar regardless.

Crude oil markets of course have their influence on the Canadian dollar, but it seems as if they are at least trying to stabilize, and therefore it might give the Bank of Canada a bit more clarity going forward. Having said that, it still looks as if the US is still going to be favored as things stand right now. If we can take out the top of the Wednesday candlestick, that would then have the market threatening the 200 Day EMA. By breaking above there, the pair is likely to continue going higher, perhaps reaching to the 1.28 level above. It is difficult to imagine this market breaking above that level, but if it does then it is obvious that it would lead to a much bigger move. I do not necessarily see that right now, but I certainly see an attempt to get back to the 200 Day EMA in the short term.

Small positions that you build on when they work out in your favor will probably be the best way to attack this market.

The West Texas Intermediate Crude Oil market fell rather hard during the trading session on Tuesday to reach the $102 level. This is a market that has plenty of support underneath though, so I am not necessarily looking to short this commodity anytime soon. The 50 Day EMA sits just below the $100 level, so that would be the next major support level for a bigger move.

The daily candlestick for the next 24 hours should be interesting, and if we did end up turning around to form a hammer, that would be an excellent buying opportunity from everything I see. Even if we were to break down below the $100 level and the 50 Day EMA, there is still an uptrend line that comes into the picture as well, so all things being equal, this is a market that I think has plenty of areas that buyers could be attracted to.

The size of the candlestick for the trading session on Tuesday does suggest that we have a little bit of follow-through coming, but that does not necessarily mean that the market is suddenly going to fall apart. Quite frankly, the bounce over the last week or so has been very strong, so I do think it makes quite a bit of sense that we would see follow-through to the upside eventually.

If we do break down below the uptrend line, then it is likely that the crude oil market could go racing to the $90 level, which is a large, round, psychologically significant figure, and an area that we have seen quite a bit of support at previously. In general, this is a market that I think will continue to be very noisy, and because of this, it is very likely that you should be cautious about the position size that you put on. After all, with all this type of volatility and confusion, it is likely that the market will continue to be noisy and difficult. Small positions that you build on when they work out in your favor will probably be the best way to attack this market, as headline risks are still out there, and of course, we have the first job of protecting our accounts, and therefore it is likely that the market could be a bit dangerous.

The gold markets have rallied rather significantly during the trading session on Thursday as we gapped higher and then went looking to reach the $1950 level. It does look as if it is probably only a matter of time before we break out above there, but in the short term, we may get a small pullback in order to pick up enough momentum to go higher.

The gold market had launched itself into a parabolic move a couple of weeks ago and has since absolutely broken back down to wipe out that move. I think this is simply a continuation of the overall trend, so we will have to wait and see whether or not we can break above the small gap that sits right around the $1950 level, because if we do then there is no reason to think that we will struggle to get to the $2000 level over the next couple of weeks. Simply put, I believe that gold is a market that got out of hand there for a while, and now is starting to focus on the longer-term trend again.

Underneath, I see the 50 Day EMA at the $1890 level as significant support, right along with the $1880 level as long as we can stay above all of that, then the market will more than likely find buyers every time we dip. However, if we were to break down below the $1880 level, then it is possible that we could break down rather significantly. I would anticipate that the market goes looking towards the 200 Day EMA. The market would more than likely may try to find buyers again but a lot of this will come down to inflation expectations and of course whether or not the world is a safe place so to speak.

I do believe that it is only a matter of time before we would see volatility pick back up, but I still think that gold more than likely will go higher so therefore I am bullish on this market now that we have saved the overall trend at the crucial area that I have marked on the chart.  I also recognize that it is going to be very noisy and volatile, so building your position up slowly makes the most sense.