The markets appear to be very nervous in general and particularly nervous about the EU stress test results, which have pressed the euro lower versus the U.S. dollar, which makes sense, but also has been accompanied by a sell-off in spot gold from $1204 to $1190. The gold sell-off does not make sense in relation to the flight away from euros, but is understandable if some investors continue to use any strength in gold to liquidate long positions to raise cash.

Instead of buying gold because of "nervous uncertainty," they are exiting that market. In any case, a break of 1.2730 in the euro/dollar will indicate that the recovery rally period from 1.1875 to 1.3030 is complete, and that another loop down is in progress. Meanwhile, spot gold prices need to hold support in the $1175-$1165 area to remain in a relatively healthy technical condition.

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.