A Precursor

Last week, the SP500 went from the top of the trading range to the bottom of the trading range, a move of more than 100 points. At the same time, the gold and silver market also took a dive. Gold drop more than $175 and silver loss more than $10. These moves could be a precursor to an extended downward move.

In the coming week, the key thing to watch is will the SP500 bounce back to the top of the trading range near the 1220 or will it break below the lower range and dip below the 8/9/2011 low of 1101.54. If the SP500 fails to hold above 1101, then a new downward move will take this index to the 1040 level.

SP500:



SP500 (30 minutes intraday):



Gold could also get a bounce. Looking at the gold ETF, GLD could get a bounce between the 50 & 100 SMA. The key level to monitor is the 100 SMA. If it breaks below the 100 SMA, look for next likely support near 151.50.

GLD:



Silver ETF, SLV next likely support level is near 27.25. It broke below the previous support level near 32.50 and made a feeble attempt to try to get back above it without any success.

SLV:



All three markets had a down week and a dead cat bounce from these markets next week will not be surprising. But the trend remains to be down, and the current environment is most suitable for the day/short term traders.

Disclosure: No position in GLD, SLV.