Wednesday, 11 January 2012

S&P and precious metals outlook

Last year ended in a rather odd way: it seems that the bounce-back effect of the stock market faded away and, as a result, the S&P500 and the DOW ended almost flat for the year, albeit on the negative side. The precious metals plunged in December below the 200 daily moving average, which has been a support level since 2008, a rather bearish move, and since unsuccessfully tested the 200 EMA once. The picture is still blurry, but this Friday closing prices should provide a better image.


Gold is starting its 14th year as a bull market and my opinion is that the streak will not end here. The recent drop managed to stop at the same level as the other one, near the $1550 level, and then sharply bounced back to the former support (200d EMA). The precious metal is not testing this line, and in case of a successful break-out, we may see a continuation of the long term up-trend. Before plunging in, I would like to see a consistent close above the 200EMA, or a sharp move through it before this Friday. Until that happens, it is safer to stay out.

The S&P

Needless to say, I was stop-lossed out of my S&P shorts, in the December Santa-Claus's rally. Too be honest the magnitude of increase, on a pretty high volume for final year window-dressing trading sessions, surprised me. Not that the effects of the year end rally may fade away, it would be a good opportunity to short the index at its current level of $1288, especially until we see a sign from chairman Bernanke on further monetary stimulus. I`ll purchase a couple of contracts with a tight stop loss at $1305, just above an yearly support level.

It is still early into the year and it is not advisable to plunge with too much enthusiasm into full time trading. Especially if I think about the last year's mistakes.

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