Updated: Aug 24, 2018
When examining the markets to determine what the institutions might be doing with their positions in the coming weeks, i find it is always so important to take other markets into consideration. For instance, just this past week something big happened with Gold. Now I have been mentioning that I believe the #usdollar will drop in the coming weeks and I've also been saying that over the long run I expect #gold to become much weaker. So how can this be, doesn't the US Dollar and Gold move opposite of each other? Yes, they typically do and for that reason we have to look at the following analysis and determine if indeed a reversal is about to take place.
First of all, when after looking at the latest #CFTC data which you can find here https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm, I can see that institutional short positions are extremely aggressive and at the largest number they have ever been at 173k. Realizing this, I wondered what happened every time the institutions were very aggressive and at new record number positions with their short positions and what I found was very interesting.
What I was able to find was that every single time the institutions were very aggressive with their short positions, a reversal in price took place and momentum shifted to the upside. In fact, the last time positions were near the highs we are at right now was back in July of 2013 when positions were at 143k short and looking at the weekly chart you can see what happened was price reversed and headed upwards. This move up was caused by profit taking on the instance because afterwards more lows were to come.
So taking this into consideration, we now bring out attention to the #USDollar and as I was mentioning earlier, I believe we will see the dollar drop in the coming weeks as the US Dollar has hit a weekly supply zone and momentum can be seen slowly shifting on the daily chart.
Combining both what we see on Gold and what we can see with the US Dollar, it becomes evident that the reversal is a very high probability and considering the fact that the monthly demand has recently been taken out on the gold chart, a reversal to the monthly supply higher could very well be what is in play next. In fact, after examining where the institutions first started accumulating their short positions we can see that it was at the monthly supply zone higher so they just might want to start taking profits on their shorts now and then add more short again in preparation for the much larger drop that's to come.
I'll be keeping my eyes on these two charts in the coming weeks as I think there will be great opportunity to take advantage of the potential reversal about to unfold, but the greater opportunity will be to take part of the much larger moves that I believe will be coming later in the year if not next year.
Be prepared traders. Till next time!