In this morning’s update of Swing Trader’s Insight, I highlighted several markets with breakout setups for today. The breakout setups were largely a result of consolidation and limited market participation ahead of the scheduled speech by Fed Chair Powell at Noon CT.
The timing of the speech gave two distinct periods to take breakout trade signals – this morning, before the speech and then again after Powell got started as traders could get any clues as to likely FOMC moves at the meeting on July 30-31. There was a morning breakout trade in the EMini S&P, which sold off after President Trump’s tweeted threat to impose new tariffs on China if trade talks didn’t show movement.
I prefer to not hold trades into events like Powell’s speech or major data releases. It’s very difficult to determine a priori how a market will react plus the fact that traders are likely to be more decisive after the news, which can result in a strong directional breakout move.
As Powell started speaking, I watched the stock indices to see if there was another trade however all they managed was an anemic rally that never triggered a trade. Because of this I looked through the rest of the markets to see if there was anything else to do. I saw the US Dollar was rallying, which tends to be bearish for the metals.
Gold futures had a breakout setup for today. It had rallied this morning and saw some additional upside after Noon. This meant we could see a downside reversal and breakout sale if the USD -gold occupation. For August gold, our downside trigger level was the Monday low of 1409.30.
By 12:15 the gold rally ran out of momentum and it started moving lower. It broke below Monday’s low first around 12:40, and then again 15 minutes later. Either of these moves could be used to trigger a short sale.
Gold then sold off sharply. About an hour later it made a session low of 1402.10, a move of $7.20 from the Monday low. This proved to be a climax move and tightening up stops was in order if not taking profits.
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