?Turnaround Tuesday? Troubles Trend-following Traders
Today’s Spotlight Market
A ?risk-off? mentality has entered the psyche of traders of late, which has triggered some rather significant ?corrections? in several key markets with bull trends in the U.S. Dollar and U.S. equities now showing some signs of weakness, despite a much better than expected employment reading in the November Non-farm payrolls report. In addition, the Crude Oil and Copper markets have rallied in the face of global data that would normally be deemed bearish for these commodities.
Fundamentals
Tuesday was a tough day for trend-following traders as many market prices ran counter to existing trends. The catalyst for this position covering was word that China was implementing rules to help tighten lending standards to curtail a troubling rise in borrowing by local governments and entities. While the ultimate goal of government officials is to help improve the status of Chinese municipal bond market in the short-term, these new policies will curtail the ability of local entities to borrow, which may weigh on spending to be used for infrastructure and place further headwinds on growth in the world?s most populous nation.
In addition, traders are once again turning their attention to Greece, where the nation?s stock and bond markets fell sharply as Prime Minister Antonis Samaras called for early presidential elections which could lead to an anti-austerity party, Syriza, in power. So with signs of China slowing down spending and potential European turmoil, it is a bit ironic that commodities such as copper rallied sharply and the Euro extended gains against the U.S. Dollar, despite fundamentals that would support an opposite reaction. However, commodity funds have been heavily short both Copper and the Euro and the move towards a ?risk off? mentality has thrown fundamentals to the curb for the near-future as positions are liquidated. ?
Technical Notes? -? View Today’s Chart
Taking a look at the weekly continuation chart for Gold futures we notice the market in the midst of a 5-week upward correction as prices are now testing the 20-week moving average. The past 2-weeks have been particularly volatile for Gold, which could be a signal of a potential change in trend from multi year lows or a sign of position liquidation ahead of the year-end holiday season. What is nice about looking at weekly charts is that it takes out some of the ?noise? that can be seen on shorter duration charts and allows one to focus on the overall trend of the market. 1346.80 is seen as the next significant resistance level for front-month Gold futures with support remaining at the 2014 low of 1130.40.?
———————————————————————————————–
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.