Thursday, March 21, 2013
Above is a daily chart of gold (GLD) over the past 20 months and as you can see this market appears to be bouncing off of major support (green line). In the lower panel is the Gold/S&P ratio which has just broken its 4 month down trendline suggesting that money is now moving into gold and out of stocks.
You'll notice red vertical lines on the chart which are exactly the same distance apart. As you can see there seems to be a major change of sentiment that takes place in gold every 4 1/2 months. The reason I consider this significant is because gold appears to be reacting to this time cycle once again making a turning point precisely on schedule.
The next chart is a 4 year weekly chart of gold futures with the net position of the commercials which is the red line in the lower panel. The commercials are holding their largest long position in years which in my opinion is bullish. The last time the commercials held such a net long position was back in June of last year which triggered a nice 3 month rally. I think we are going to see a similar rally so this is definetly a market to keep an eye on. As always, lets see what happens!
Wednesday, February 20, 2013
If you read my previous post you would know that I see a short trade setting up in the NASDAQ. I'd like to continue commenting on other bearish technical factors that are beginning to setup.
In the above weekly chart of the NASDAQ (QLD) you'll notice a "potential" head and shoulders top that is beginning to take shape. This pattern is far from being confirmed but I wanted to post my observations now rather than after the fact which would be useless.
There is also a very accurate cycle of 24 week highs which seems to be dominating the price action over the past 2 years. Approximately every 24 weeks (give or take a week) the NASDAQ has put in a significant top. We are 22 weeks from the previous high which is slightly early but close enough to get my attention.
Over the years I've seen similar setups such as this and the endiings have usually not been good for the bulls. The most recent example is the Yen.
Above is a weekly chart of the Yen. Notice the accurate cycle of tops ( down arrows) as well as the head and shoulders top formation. Look familiar? By the way, the Yen has reached its measured objective.
As always anything can happen and it is quite possible the market may rally from here. I'd be kidding myself if I said the market has to go down. The purpose of this post is to simply show a trade that I see setting up...a road map if you will of what might take place as the pieces of the puzzle come together. In my opinion I see the NASDAQ as being extremely vulnerable to a downside correction. As always, we'll see what happens.
Above we have a weekly chart of the NASDAQ and in the lower panel the S&P500. You'll notice over the past couple of years that both markets have been moving together making highs and lows at the same time until now. Notice at point D how the S&P has made a new swing high but the NASDAQ has not. This is a bearish divergence and the fact that it is taking place on a weekly chart is of great significance.
The last really in the NASDAQ (points A to B) lasted for 15 weeks. This current rally (points C-D) is 14 weeks which is very similar in time to the previous rally. When you combine this timing factor with what price is telling us it makes me very cautious on stocks. In fact, I'm looking to short the NASDAQ if I see continued weakness as I feel the Q's can trade down to point C if this market does indeed rollover.
Saturday, November 03, 2012
I know I haven't been posting as often as I did in the past and I do appreciate those of you who have stayed with me for all these years.. Now lets get right to the charts!
Above is a 5 year weekly chart of the U.S Dollar and in the lower panel is the net positions of the 3 major players in the market. I'd like to focus just on the red line which represents the net position of the commercials. As you can see the red line is now positive which indicates a net long potion by the commercials. You'll notice back in 2008, late 2009 and in 2011 that the net position of the commercials was positive just prior to huge rallies in the dollar. Now just because the commercials are bullish does not mean we should run out and start buying dollars. We need a trigger to suggest that the bottom is in and that is what I'd like to show in the next chart.
Above is a daily chart of UUP which is an ETF for the U.S. Dollar. In my opinion it appears that the dollar has put in a significant bottom. We see a clear break of the downtrend line as well as a 1-2-3 bottom formation. When you combine this with the net long position of the commercials, my view has to be for much higher prices.
The Euro (FXE) has a similar setup but to the downside. I'm looking for the foreign currencies (FXE, FXF and FXB) to move lower. A rising dollar should also put pressure on gold and silver as well as oil. As always lets see what happens!
Saturday, September 22, 2012
Back in June I posted about the upcoming rally I was expecting in the gold market based on a combination of things such as commercial activity, seasonals and technicals. You can read that post by clicking here. Since then we've had a significant rally and I thought now would be a good time for an update.
Above is a weekly chart of GLD (Gold) and as you can see we've had a nice rally over the past 5 weeks. You'll notice that GLD is now forming a doji at key resistance. This is usually a sign that the market is growing a little tired and we can expect 1 of 3 things to follow:
1- The market reverses to a downtrend
2- The market ignores the doji and continues higher
3- The market consolidates for awhile
Rather than guess what will happen I'll let the market tell me what it wants to do by placing a protective stop right below the low of the doji bar. If that low is taken out I would suggest taking profits on at least half of your long position. If the market continues to rally next week without taking out the low of the doji bar, then simply hold on and let the market go where it wants to go. As always, lets see what happens.
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