Last time a possible set of outcomes were drafted dates back from almost a week ago.- With Cyprus we are back into headline risk mode.- Also, this week brings FOMC (tomorrow), Spanish and German 10yr. Bond Auctions and a couple of European PMI´s, which should add to the menu.-
Following is an excerpt of where I left off.
b.1) Buyers keep control of the situation and seek to bring price into higher value areas (clusters) – $1600 is particular appealing rounded number, which is right in the middle of the bigger area contained between $1601-$1599 – Specifically, I´m keying $1603, followed by $1608-$1610 & $1611-$1612.
Above, $1615, $1618 & $1620 are the levels I´ll be paying attention to.
b.2) I will tend to favor more upside, unless I see a reactive an intense response by part of sellers. In that event, I will be looking at $1586, which happens to be the top of the balance area developed during last week. If sellers decide to act, we could be in presence of an analogue move to what we had back on Friday (after NFP), but in a different direction.
…which was further develop during March 13 post…
So far, b.1 hasn´t played out. Buyers were not able to surpass the $1600, which is an important number. The break of it, would (eventually) attract more buyers.
Now, gold is currently trading between b.2 and b.3.- Price went as far as $1599 (too close, but not enough), only to retrace into the top of the balance area developed over the first week of Feb.-
What I am looking here is if this area will attract buyers, or not and how many (in terms of buying pressure) of them will participate, if any.-
I will develop further in a later post, since currently gold is the middle of both scenarios and I would like to see how price action follows up and have a clearer picture.-
At last, $1592 is a key price point.- I am working with the idea of buyers pressuring in this level might open the possibility of challenging $1600.-
In that sense, $1583-$1580 might provide some buying response (I´ll be much more inclined into the short side if it doesn´t happen), followed by $1579-$1576
Buyers showed up into $1576 with aggressive commitment, rallying to $1596 into Friday.-
Open on Sunday was heavily influenced by the issue in Cyprus. Price reached a high of $1607.7, only to retrace (again) into $1590.- The tame response left me with a slight lower bias, which was cancelled (at least for now) when the $1600 mark was able to attract interested buyers, which still happens to be my gauge for a possible change of scenario, alongside with other points which I will further develop.-
I am currently seeing important levels of short inventories being held into the the market, both in longer and shorter time frames. This issue translates into two main scenarios that I am working with.-
a-) The fact that a high level of shorts in the market are not only currently withstanding, but have increased against $35 move is a behaviour that should be taken into account.- Add to that there are not many longs left and you get the recipe for an important sell-off.-
In that event, I would be looking for $1600 not only to be challenged, but breached, followed by $1596 and $1592, $1590, $1584 $1580-$1576, $1573 & $1568.- There are more areas marked on the chart below, but those are the main price points I will be watching.- This scenario might bring a rather accelerated move.-
b-) Alternatively, those shorts could provide some important fuel for an eventual rally, in the event longs start pressuring and testing the commitment of those.- Thus, shorts covering will create the opposite effect morphing into a short cover rally.-
In that event, I will be watching $1620 as key price point, followed by $1625, $1629-$1627.-
c-) consolidation into the current area of value contained by $1615 above and $ 1608 -or $1603 to a bigger extent.-