What a Difference a Day Makes: Gold, Oil, Dollar, NASDAQ

Wow!  Today’s price action was fascinating from a number of angles.  The US Equity Indexes surged higher at the open, only to give back all gains and more.  Oil, Gold and other commodities plunged sharply today, only to recover slightly by the close.  Bonds rose and yields fell.  Let’s take a quick chart glance at Gold, Crude Oil, the US Dollar Index, and the NASDAQ Index.

I’ll fly through the charts and let them speak for themselves, with minimal annotation.  Let’s get started!

Gold Prices (per ounce):

Gold prices suddenly and violently failed at a test of the falling 20 day EMA. This was an “Impulse Sell” trade as I define it, and also a semi-flag pattern.  Today’s failure was harsh and notable.  Thursday and Friday gave us candle pattern sell signals (shooting star and then semi-doji) at resistance, but the harsh failure today (and range expansion) was likely unforeseen.

Crude Oil Prices (per barrel):

Crude Oil showed a similar failure test of the 20 day EMA as gold.  Notice the two “long upper shadow” days and the evening star-style doji (gravestone doji) at resistance.  I figured oil would find support at the 200 day SMA (red line) and begin to curve higher, so today’s action was quite the shock to me - I didn’t expect such a dramatic failure at this level - it causes me to reasses the technical picture.  Clearly, technical (chart) damage has been done to the price structure.  How much damage is yet to be seen.

The US Dollar Index:

It’s hard to deny the strength of the US Dollar via the rally price has mounted against other currences since July.  The strength of the Dollar is likely the culprit driving all these shifting inter-market relationships, so be sure to keep a very, very keen eye to developments on this chart.  The Dollar trades inverse to most commodities - especially crude oil - and has implications far beyond the commodity markets.

By the way, today’s breakout from consolidation takes price above the 20 month EMA - a significant breakout (take a look at your monthly Dollar Index charts).

The NASDAQ Index:

I chose to show the NASDAQ index because of the massive range in today’s action.  We call this an “Outside Bar” or “outside day” in terms of the market gapping above the high of yesterday and then falling all day to close beneath the low of yesterday’s (Friday’s) bar.  That’s a significant development showing range expansion and indecision in the marketplace, as well as a pick-up in volatility.  Notice volume rose today as well.

I also chose to show this because the 200 day SMA proved as intraday resistance and the 50 day SMA (blue) served as support - it’s sometimes remarkable how two moving averages can be successfully tested in one day.  We consider the market “trapped” at the current moment between support and resistance - and an inability to say conclusively which direction price will break.

Before concluding, let’s take a look at the nine AMEX Sectors to see if there were any clues or bright spots in today’s action.

Two observations stand out in this chart.

First, downtrodden Financials and Consumer Discretionary/Retail (as well as Staples) showed strength today, which is a rather bullish sign underneath the market’s hood.

Second, Energy was the most battered sector today, losing 5.5%!  That is remarkable and its reality must be heeded.  These are the exact ‘best case’ scenarios for the bulls - financial/retail recovery while inflationary pressures/energy prices fall.

A lot happened today - annotate your charts, save/file your observations, and get ready for more action ahead!