DOLLAR PULLS BACK WITHIN RISING CHANNEL - OIL AND GASOLINE CHALLENGE RESISTANCE - GOLD CHALLENGES FLAG/CHANNEL RESISTANCE - GOLD HOLDING UP BETTER THAN THE EURO - PLATINUM, SILVER AND COPPER MAINTAIN UPTRENDS
DOLLAR PULLS BACK WITHIN RISING CHANNEL... Link for todays video. Wednesday is turning into a redux of Monday. The Euro advanced, the Dollar fell, oil bounced and commodities moved higher. Lets start with the Euro and the Dollar. Chart 1 shows the Euro ETF (FXE) within a clear downtrend defined by a falling price channel. The ETF became oversold after breaking below its prior low with a plunge below 134. I suggested that broken support would turn into resistance and FXE did pullback on Tuesday. However, the bulls came back on Wednesday and pushed the Euro ETF above broken support. This puts FXE near the channel trendline and RSI near 50. Even with this bounce over the last four days, the bigger trend remains down and I would expect the ETF to met resistance sooner rather than later. There is a lot of resistance in the 136-138 area and the 50-60 zone marks RSI resistance in a downtrend. A break above 138 in FXE and 60 in RSI would fully reverse the downtrend.
Chart 1
Chart 2 shows the DB Dollar Bullish ETF (UUP) pulling back over the last four days. Despite this pullback, the ETF remains within a rising price channel, quite the opposite of the Euro. There is a lot of support around 23.5-23.75 and RSI is nearing its uptrend support zone (40-50).
Chart 2
OIL AND GASOLINE CHALLENGE RESISTANCE... Spurred by weakness in the Dollar, oil and gasoline moved higher on Wednesday. There was also a bit of news and commentary surrounding todays move in the oil complex. The Energy Department reported an increase in oil inventories, which is usually bearish for oil. This was countered by weakness in the Dollar. One analyst noted that the market ignored the bad news and suggested that this weeks advance was based on end-of-quarter position squaring. Truth be told, nobody really knows where the buying came from. The market is simply too big. All we know is that oil and gasoline moved higher today. This means there were more buyers than sellers. Chart 3 shows the US Oil Fund ETF (USO) pushing against resistance from the March highs and the October trendline. This ETF has been locked in a consolidation the entire month. A break above the March highs would be bullish.
Chart 3
Chart 4 shows the US Gasoline Fund ETF (UGA) also consolidating near resistance. This chart actually shows two similar patterns covering two different time frames. The first pattern is a sharp advance in October and then an extended consolidation from November to March. The second, and smaller version, is a sharp advance in February and consolidation in March. These patterns have the same structure. A break above the March highs would signal a continuation of the February advance, while a break above the bigger resistance zone would signal a continuation of the October advance. Should UGA fail at resistance, look for a break below the mid March lows to put the bears in the drivers seat.
Chart 4
GOLD CHALLENGES FLAG/CHANNEL RESISTANCE ... Weakness in the Dollar spurred the bullion bulls into action on Wednesday. Chart 5 shows the Gold ETF (GLD) holding support and moving towards flag resistance over the last five days. This chart shows a wedge breakout followed by a trading range on either side of 107.5 the last five weeks. With three bounces off support in this area, reports of a downtrend have been greatly exaggerated. More importantly, these bounces reinforce the validity of this support zone. A break below the March lows would be bearish for bullion. Chart 6 shows GLD with a different perspective. The March decline looks like a bull flag, which slopes down. It is also possible that a larger falling channel is taking shape. Failure to break through 110 would keep this channel alive and argue for a move towards the lower trendline. A move above 110 would break flag resistance and the channel trendline. It looks like gold is nearing its moment-of-truth.
Chart 5
Chart 6
GOLD HOLDING UP BETTER THAN THE EURO... The performance of gold is tied to the Dollar, which is in turn tied to the Euro. By extension, we can suggest that gold is tied to the Euro. A negative correlation between the Dollar and gold reverses into a positive correlation between the Euro and gold. A negative correlation implies opposite movements: gold up/Dollar down or gold down/Dollar up. Chart 7 shows the Euro ETF (FXE) in red and the Gold ETF (GLD) in black. Both advanced into November and declined into February. A divergence started brewing the last six weeks as the Euro moved to a new low and GLD held above its prior low. Gold is showing some relative strength here. The price relative shows the GLD:FXE ratio, which compares the performance of gold relative to the Euro. GLD has been outperforming the last eight months. The price relative broke triangle resistance in February and is holding near its highs in March.
Chart 7
PLATINUM, SILVER AND COPPER MAINTAIN UPTRENDS... Gold wasnt the only metal moving higher on Wednesday. Chart 8 shows the Platinum ETN (PTM) breaking triangle resistance earlier this month and moving above its mid March high this week. A channel has evolved over the last seven weeks and the mid March low marks support at 18.5. Chart 9 shows the Silver ETF (SLV) also surging off the February low. The ETF established support with a reaction low just above 16 last week. Chart 10 shows the Copper ETN (JJC) recording a new 52-week high this week. The ETN broke pennant resistance with a surge over the last five days. The indicator window shows this copper ETN tracking the S&P 500 (red) quite closely over the last eight months. A strong stock market points to a strong economy and this bodes well for copper demand.
Chart 8
Chart 9
Chart 10
GONE FISHING... I will be taking a two week vacation with my family from April 5th to April 16th. My next Market Message will be on Monday, April 19th. John Murphy will do all the honors until then.
