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Commodities Brief: Gold rally runs out of steam as S&P finishes sharply higher

FXstreet.com (Barcelona) - After trading higher the five previous sessions, gold failed to achieve further gains closing down 0.91% at 1412.70. The equity market again seemed to be the beneficiary of lackluster economic data after both China and European PMI data came in weaker than expected. The S&P 500 closed up +1.02% to finish at 1578. It appears the “bad news is good news” theme is back in play for stocks with market participants again pinning hopes on central banks to provide more liquidity.

According to David Solin of FXA, “With yesterday's high at $1439 potentially completing the upside correction over the last week, want to be short and would sell here (currently at $1412) for the Apr 16th low at $1322 and below. Initially stop on a close above $1444 (just above the recent $1439 high), but switching to a more aggressive, trailing stop on nearby weakness and especially a break below the $1322 low (further downside may be limited/short lived, see longer term below). Note too that closing above the $1444 high would not abort the view of eventual new lows, but would suggest a deeper bounce first (would be looking to resell higher if that occurs).“

He then went on to add, "As discussed above, another downleg below the Apr 16th low at $1322 is favored. However, such a move below $1322 would be the final leg in the fall from at least the Feb high at $1620 (wave 5), lots of longer term support lies just below at $1280/05 (both the 50% retracement from the Oct 2008 low at $681, as well as a 38% retracement from the Jul 1999 low at $253), and the seasonal chart firms into May (see 3rd chart below). This in turn raises the risk that such a move below $1322 may be short-lived, and versus the start of more major declines (see in red on weekly chart/2nd chart below)."

Short term moving averages on the daily chart remain bearish, with price below both of the downward sloping 9 and 20 dma’s. Initial support is at 1404 (short term uptrend line on daily chart), followed by 1384 (support on 1 hour chart). First resistance is at 1419 (the 9dma), followed by 1435 (high from April 22nd).

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