Gold: How High Is High

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This must be a hot topic today and to leave it uncovered would be foolish even though we suspect everyone has asked everyone what sparked the gold rally of Tuesday November 3.

It is especially fetching in that it did it all on its own, meaning without the aid of a drop in the U.S. Dollar. The prime reason we have found cited for the move is the Central Bank of India’s reported purchase of 200 tons of Gold from the IMF. Analysts consider this a clear sign of demand as central banks around the world replace some portion of U.S currency holdings with Gold.

Other incidentals included talk that the Gold companies such as Anglo American would be liquidating their hedge books, but likely over a period of time lasting well into 2010 according to what we have read.

Our chart included above shows the next Fibonacci extension targets. The .750 level is approximately 109150.

Final note on this is to be cautious with new or additional purchases at lofty levels such as these. We have seen it before where when things look most bullish the high price is made.

Good trading to all

Jeff
CB&S Division
MF Global Inc.

312 281-7380

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

How to Take Advantage Of The Short Side Of Gold

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We haven’t talked about Gold for quite some time. It has achieved all time all time highs as probably everyone who reads this is aware. Over the past year, since October 24 of 2008, it has gone from the low of 69900 (basis the December Comex/Globex contract) to its October 14 2009 high of 107200.

We have been watching Gold as well as many other markets and market groups, for signs of exhaustion to their bull market rallies. Much of it has to do with the value of the US Dollar, which we have talked about at times in our Trade Focus. We noticed, in the case of Gold, a top heavy look developing on intermediate time frame charts. If there was to be a correction or perhaps the start of something larger, we wanted to be prepared particularly if the risk reward was warranted.

We have included a chart of the 120 minute December Gold for illustration and the Section on December Gold from our most recent Trade Focus prepared October 22.

Gold (Dec.) – As in the Silver we will stay with our suggested long entry approach from last week which is to initiate long entries with intraday penetration of 107550 or with a close at or above 107330. Stop protection for this long entry approach we believe should be intraday penetration of 104170 or a close at or below 104270.

We also believe now that we can suggest a short entry approach with intraday penetration of 104170 or a close at or below 104270. Stop protection for this short entry we believe should be intraday penetration of 107550 or with a close at or above 107330. Retracement levels of support are approx.: 103820; 102770; 101720. The next series below this is approx.: 101680; 99980; 98280.

Today's action (Monday 10/26/09) in the December Gold contract elected the suggested short entry approach in our weekly Trade Focus. Stay posted.

Good trading to all

Jeff and Diego

CB&S Division

MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Gold and Dollar Potential

click charts to enlarge

Here is a quick look at two markets gaining a lot of attention today. The charts included are a weekly of the Dollar Index and a weekly of Gold. We have included the Fibonacci Extension overlay as we interpret them.

The Dollar chart shows it has reached what we refer to as the first target which is approximately 76170. The second target that is displayed is at approximately 75000.

In the Gold chart the extension targets shown the way we have constructed this are approximately 106400 and 110650.

We are not saying that these will or must be hit but believe they provide reasonable guidelines and may help in managing positions in these markets. As always, we are open to discussion on such matters.

A scenario under consideration is that if the stock market continues to rise to projections off approximately 112500 and 122500 basis the S&P 500 then this could likely improve the chances of the Dollar Index and Gold reaching these targets. These S&P 500 projections mentioned are approximate levels representing the .500 and Fibonacci .618 ratio retracement using the October 2007 high and the March 2009 low.



Good trading to all

Jeff and Diego

www.jmajer@mfglobal.com
www.dpilar@mfglobal.com

312 261-7380
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Gold and Crude

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The above charts are daily charts of December Gold and October Crude Oil. Both are trading considerably higher on the day as we are preparing this blog at 10:30 AM Chicago time (CDT); Tuesday Sept. 8. There has been a breakout in the gold as illustrated here which occurred during last week’s trading. Using what we believe to be a standard measuring technique using the base of the triangle added to the point of breakout the potential price objective comes to approximately $1105.

The Crude Oil chart shows that it is attempting to break over a near term down trend line but with a significant Fibonacci resistance at approximately 7195.

Many are asking what has gotten in to these markets today. We have seen a few factors that are providing influence. First is that the US Dollar is trading sharply lower. This typically has been supportive to commodities such as precious metals and crude oil.

We have heard that The UN is now talking about a new global currency. Also the G20 communique stated that monetary and fiscal stimulus would continue and this may help maintain at least the perception of a less risky environment therefore reducing the safe haven status of the US Dollar.

Goldman Sachs forecasts $85.00 per barrel crude oil and also, we understand that that a popular oil ETF is due to liquidate its crude assets which may be reallocating investment capital into gold. There has also been some chatter of Chinese interest in accumulating gold as an inflationary hedge.

We believe this will make for interesting price action particularly over the next few days. We are not suggesting here to either buy or sell either commodity but certainly noting that there could well be opportunities for trading ideas being presented.

As always this is something we discuss more in depth with our clients but we encourage any questions, comments or better still, any answers directed to us at:

jmajer@mfglobal.com

312 261-7380

800 321-5810

Jeff Majer

Diego Pilar

CB&S Division

MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Weekly Silver Chart

This might be of interest to you as either an additional tool for an existing trade strategy you may be uisng or it may help toward the devlopment of a new startegy for you.

We notice that today's high in the silver futures touched just slightly above the .618 fibonacci retracment level of the recent high to low (downwave). On this chart we have also includeded the retracement levels from the larger downward move that lasted from March of 2008 to late October of 2008 where the retracement high of that large downwave stopped at or near the .618 retracement level. Perhaps the "golden ratio" holds some significance in this market.

Many traders utilize fibonacci numbers and ratios as part of their trading program.

If you should have a question, comment or an answer we'd love to hear from you.
jmajer@mfglobal.com

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.