Chart View - Gold & S&P Futures by Jeff Gilfillan
The last “Chart View” focused on gold futures was back in August 2019. I discussed the transitional zone (1420-1530) the market was just penetrating that should result in volatile swings with little value along the way to stabilize. I noted hedgers net short positions as nowhere close to historical extremes which hinted more upside maybe in store. I concluded a $100-$120 washout would not be unusual in these low value ranges.
Since August 15th post, the COMEX (GC) front month gold futures hit a high of 1553.20 on 09/05 and by 11/12 had washed out the trade over $100 lower to an intraday print of 1447.10. Compared to pullbacks in 2016 ($251) and 2018 ($204) this was more of a pause. As you can see the market traded sidewise to higher until geopolitical events created massive monthly volume and open interest extremes. While monthly volume is subsidizing open interest continues to build as net longs are nearing but not yet hitting historical highs. The pullback in volume is a combination of stabilizing events and the fact the first wave of high volume combined short-covering with new positions entering the market based on momentum.
The CME ES futures is also ironically in an unseen type of parabolic transition towards Pluto. My hindsight analysis can easily see the monthly head and shoulders pattern that targets 3587 in front month ES futures. Fib time sequence pattern that I project times this out to April 2021, however, at the current pace we could be there by “Opening Day.” Tough to predict what lies ahead. The 12-month moving average is just above the neckline at 2995 and the 3-year moving average is 2744. We were trading close to this level just 8 months ago.
Both the CME ES and COMEX GC contracts are coming out of long periods of consolidation that built considerable value. These new ranges can last several years once the underlying price value support has created a cement floor of support. This is more present in GC vs. the ES but as you can see there was a long line of value built in the ES over a 2-year period from 2014 to 2016. (see charts below)
If you like volatility, you are in the right market. If futures is a suitable endeavor for you, consider the wide variety of mini and micro contracts to help reduce your leverage and increase your flexibility whether you are speculating or hedging.
Be patient as a spec and liquid as a hedger.
Trade Gold, E-mini S&P and Micro Futures Globally with Phillip Capital.
The bulk of our US FCM’s gold futures volume is through the CME Group. We are a full clearing member of the CME Group. Our US FCM and affiliates of Phillip Capital Group also offer traders access via memberships to other global exchanges offering gold futures including TOCOM, SGX, DGCX, ICE and HKEX. The CME E-Micro futures contract unit is $5 x the S&P 500 Index.
CME Group – CME Gold Futures Continuation Monthly
Chart – Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
CME Group – CME S&P Futures Continuation Monthly
Chart: Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Source: CME Group – Commitment of Traders powered by QuikStrike
Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.