Gold
Gold was yet again the standout market gainer of last week, after trading at long-term lows very close to an area of support confluent with the round number at $1800 only four weeks ago.
If you look at the price chart below, you can see how strong and impulsively bullish the past three weeks have been, as the rise cuts quite easily through a long-term area where the price has spent a lot of time within.
The price rose firmly, and after reaching its highest level since May earlier this year, pulled back a bit. However, it still made its highest weekly close in 5 months.
Another reason why the rise in Gold is notable is that stock markets, with which Gold is usually highly positively correlated, ended last week firmly lower, so it seems that Gold is acting as a safe haven and a hedge against the middle east war widening. I think the markets are underestimating the chance of the war widening, so Gold could be a good hedge against that.
The problem with going long of Gold now is that the move feels very over-extended. A key metric used to measure trends by hedge funds, the 50-day and 100-day simple moving average crossover, has not yet happened to the bullish side in Gold.
Gold ended the week above $2,000 which has been a crucial area of resistance, but a look at the long-term price chart below shows that the three times since 2020 that Gold has got near its all-time high price at $2,070 it tends to begin a new bearish trend.
As a trend trader I would consider going long of Gold but only once the moving averages are aligned correctly. Otherwise, if the price touches $2,070 and makes a strong bearish reversal, a short trade could look like an exciting opportunity.
WTI Crude Oil (US Oil)
The crude oil market has fallen a bit during the course of the week, but we continue to be held hostage to the noise in the Middle East. With that being the case, the market is likely going to continue to see the $90 level above as a major resistance barrier. If we can break above the $90 level, then it’s possible that the market could go look into the $95 level. Underneath, the 50-Week EMA of course is something that could offer support.
NASDAQ 100
The NASDAQ 100 has rallied initially during the course of the trading week but finds the area above the 14,500 level as a bit too much to overcome. Because of this, I think the market is now going to threaten the 50-Week EMA, and then perhaps the 13,750 level, an area that previously was resistance. All things being equal, this is a market that is continuing to accelerate to the downside, so we could see quite a bit of negative pressure as we are navigating the Q3 earnings season, and of course all of the war going on around the world at the moment.
USD/MXN
The US dollar has gone back and forth against the Mexican peso again during the course of the week, testing the 18.50 MXN level. If we were to break above that area, the US dollar is ready to fly. At that point, I would anticipate that the greenback goes looking to the 200-Day EMA, closer to the 19.20 MXN region. On the other hand, if we turn around and break down below the low from 2 weeks ago at the 17.80 MXN level, then we would see the market drop.
Cocoa Futures
Cocoa futures have been in a strong bullish trend for over a year now. The price chart below applies a linear regression analysis to the past year and shows graphically what a great opportunity this has been on the long side.
It is always a bit aggressive to enter without a pullback, but this is a strong trend that shows no sign of stopping on ever-increasing global demand for the superfood cocoa.
Trading commodities long on breakouts to new 6-month highs has been a very profitable strategy over recent years.
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