The Right Way To Trade

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  • Category Archives Commentary
  • Stocks, Gold & Dollar Commentary February 3, 2020

    Stocks
    On news the coronavirus outbreak was spreading, Monday’s huge gap-down opening (SPY 322.66) resulted in a 3% decline from the high (332.95) – extended to 3.7% by Friday – meeting our minimum downside target of 3% to 5%.
    The bounce-back rally almost touched a perfect .618 Fib retracement 329.02. (Actual high 328.63). With the Fed announcing continued repo fresh money injections until April, along with $60 billion of monthly “not QE”, its hard to envision more than a 5% correction off the highs. The New Economy sector continued to lead the market, registering a new high vs the Old Economy on Wednesday – finally falling off on Friday’s trade. The bearish technicals remain intact: Upside/Downside Volume, weakening Breadth (6 month low in NYSE 52 week lows), Daily negative Momentum (4 month low). The net result is a severely bifurcated market you can “rent” but not “own”. The bounce-back rally should end February 6/7, followed by another assault on the lows. SPY support 312.77. SPY resistance 328.,77.
    Gold
    After trading down to 1564.70 on Wednesday, spot gold rallied to close near the high for the week, 1586.50. The gold shares lagged bullion, and are consolidating 4% off the highs (XAU 103.94) established 8 weeks ago (108.35).  Bullion is in a mid-cycle consolidation, heading for an important target 1670, which it should hit end February/early March, after which an important correction is due. Intermediate term targets: GDX 34.58, GDXJ 50.51, SLV 19.22.
    Dollar
    The greenback bounced early in the week, approaching Fib resistance UUP 26.51. (Actual high 26.49). Then closed the week on the lows (26.28), as interest rates fell on surprise news of a weakening economy, with the Chicago PMI massively missing expectations, plunging to lowest level in 5 years – 42.9 vs 48.9 expected.

  • Stocks, Gold & Dollar Commentary January 27, 2020

    Stocks
    Despite SPY correcting 1.7% from the high (332.95), the New Economy sector outpaced the Old Economy every day last week, strongly suggesting the maximum downside, at this point, is in the 3% to 5% range, before another attempt at new highs. With the Fed expanding its balance sheet to the tune of $100 billion per month, (yes, at the rate of over one trillion a year) it appears to overmatch our bearish technicals, which continue to show weak underpinnings to the bull. To illustrate: Stocks registered 5 month highs in NYSE 52 week lows, as stocks traded to all-time highs. SPY Fib support 323.80, 321.97. SPY Fib resistance 330.85.
    Gold
    It is now over 3 weeks since GLD gapped higher – with the gap never closed -  and spot gold reaching 1610 on January 8. Despite attempts to suppress the price with massive paper shorting on COMEX (open interest at an astonishing all-time high 800,104), spot gold closed Friday at a multi-year high 1571.50. The gold shares (XAU) have regained leadership among the precious metals, recording a 3 week high. Spot gold’s short-term target remains 1670. Intermediate term targets for GDX 34.58, GDXJ 50.51, SLV 19.22. Very near term support GLD 145.75, SLV 16.36, GDX 28.17, GDXJ 40.47.
    Dollar
    The greenback continued its dead-cat bounce, within its trading range (UUP 26.56 – 25.81) after its massive sell-off that started one month ago. UUP resistance 26.51 – 26.65 (strong). Fib support 25.81 (strong).

  • Stocks, Gold & Dollar Commentary January 20, 2020

    Stocks
    It’s all about liquidity which trumps the technicals — until it doesn’t! Stocks continued their melt-up, gaining another 1.9% to close out the week with all-time highs in both the Old and New Economy sectors. In the last 5 months the Fed has printed money at the fastest pace in history — $414 billion –  increasing its balance sheet 11%, to relieve stress in the overnight repo market. With less than 10% of NYSE listed companies, making 52 week highs, the rally is “thin”, and any abrupt slowdown of fresh liquidity, will result in a steep selloff. For now, the party continues, except for brief corrections. SPY Fib support 323.80, 321.97.
    Gold
    Spot gold was driven down $29 to 1533.60 on Tuesday, as all-time highs in “paper gold” open interest on the Comex, was used to contain prices. Persistent physical buying of the metal brought prices back to 1557 to close out the week. The open interest in gold contracts is nearly 10 times the amount of physical gold reportedly held in Comex vaults. It’s 60 times the amount of “registered” gold, designated as available for delivery. A force majeure, (a run on the bank) for physical metal that sends prices explosively higher is coming, at some point. The gold shares (XAU) was down slightly for the week, (101.84) after holding support levels, but lagged the metal. Both GLD and SLV show breakaway gaps that remain unfilled (bullish). Intermediate term targets for GDX 34.58, GDXJ 50.51, SLV 19.22. The 55 week mvg avg for bullion is 1365.01 and has been above the mvg avg for 56 weeks.
    Dollar
    The greenback bounced, within the trading range (26.56 – 25.81) challenging the initial breakdown point (UUP 26.30) closing 26.32. Strong Fib resistance 26.53. A Weekly close over 26.67 turns trends back up.

  • Stocks, Gold & Dollar Commentary January 13, 2020

    Stocks
    Stocks continued their relentless “melt-up”, as the Fed continued to pump liquidity for RP operations totaling $258.9* billion, tacking on 1.7% for the week, led by the New Economy sector vs the Old Economy, which recorded new all-time highs 5 consecutive days last week. However, “under the hood”, volume was the lightest in 7 weeks (excl holiday weeks), resulting in Upside/Downside volume turning bearish. NYSE 52 week lows was the highest in 6 weeks, highlighting the markets weakening Breadth. Momentum is starting to turn, with the strongest Daily momentum now 5 weeks old. Stocks are severely overbought and a correction is imminent. Initial SPY support 321.88 followed by 317.30 (unsat SPY level).
    *Curvature Securities
    Gold
    As news of the Iranian missile attack in Irag hit the wires, spot gold spiked overnight to 1610. As hostilities eased, the metal fell the next day to 1539.50. Gold reclaimed support 1552 – 1557, closing Friday 1562.30, up nearly $10 for the week. The gold shares (XAU) surrendered leadership, falling 3% (102.25), but bounced off support levels, with an up-close Friday to close out the week. GLD near term resistance 147.42. GDX resistance 29.26. GDXJ resistance 42.232. SIL resistance 32.81. SLV resistance 17.76.
    Dollar
    After almost reaching important support UUP 25.81 (actual low 25.93), the greenback bounced to the initial breakdown level (26.30), settling 26.22 . More range-bound action is likely, bound by 26.56 and 25.81. A Weekly close over 26.70 turns trends back up.

  • Stocks, Gold & Dollar Commentary January 6, 2020

    Stocks
    A wild week of volatility characterized the market, with new all time highs in both the Old and New Economy sectors registered on January 2nd, followed by nearly a 2% sell-off — based on the overnight low — on news of the drone killing of a top Iranian general, followed by a market recovery, which netted out to a fractional decline on the week. The Fed’s QE to infinity mode is behind the stock rally, but it can’t go on forever, and is masking the weakness in market Breadth, which recorded 13 week lows in NYSE 52 week highs. Over the next 10 days, the SPY should be bound by 325.32 to 318.59, before a deeper correction sets in, taking SPY to 312.66 – 309.67. New highs are still likely, based on the performance of the New Economy sector, which has led the market up until now.
    Gold
    Gold gained $41.50, closing 1552.80, a multi-year closing high. The XAU closed at a 40 month high, (105.41) but lagged the metal. With bullion having reached, for the second time, the breakdown point of resistance (1555) in April 2013, it’s likely some additional time may be needed for the market to clear, in light of the lack of leadership in the shares last week. Spot gold target 1670. Spot gold important support 1517. GLD support 142.54, SLV support 16.07, GDX support 28.04, GDXJ support 39.57, SIL support 30.70.
    Dollar
    The greenback closed unchanged (UUP 26.09) for the week, after gapping lower, not quite reaching major Fib support UUP 25.81 (low 25.93). It will take a Weekly Close over 26.74 to turn our trends back up.

  • Stocks, Gold & Dollar Commentary December 30, 2019

    Stocks
    After 4 days of the lightest trading in over a year, stocks tacked on another small fraction, closing at all-time highs, confirmed by the New Economy sector which closed at a record high on Thursday, before falling back on Friday. However, the dramatic shrinkage in market Breadth was the real takeaway, and should pave the way, finally, for a decent correction. With the Fed still injecting massive amounts of new liquidity in the repo markets, this rally is likely far from over. However, the gains will be harder to come by, as stocks will have to compete with higher yields in the bond market. High yield rates closed at the highest level since October 2017, suggesting a strong dose of inflation is around the corner, and rates may have a lot further to go, with the ADX on HYG only in the mid 20′s, — not a great environment for stocks once the money spigot gets turned off. HYG support 87.41. SPY support 312.66, 309.67.
    Gold
    Gold rallied to an 8 week closing high (1511.30) up 32.40 for the holiday week, aided by a sharply falling Dollar. The weak Dollar had a salutary effect on the metal and the miners which negated a Bearish Squat and rallied a stunning 8%. The shares in typical bull market fashion, led the metal, recording another  multi-year high. GLD, SLV, GDX, GDXJ, and SIL have now cleared their breakout levels, and after a consolidation, are poised to go sharply higher. GLD support 138.94, SLV support 16.05, GDX support 27.68, GDXJ support 38.75, SIL support 30.69.
    Dollar
    Without any fanfare, and muted silence by the media — despite higher interest rates — the Dollar (UUP) gapped under our trendlines, breaking support 26.30, leaving a 5 month island, and heading for important Fib suppoort 25.81. It will take a Weekly close over UUP 26.77 to turn trends back up.

  • Stocks, Gold & Dollar Commentary December 23, 2019

    Stocks
    Stocks were up 4 out of 5 days, tacking on another 1.5% — recording new all-time highs — led by the New Economy sector. All with “a little help from my friends” , to the tune of $634 billion Fed money, in the last 4 months, (part of the monthly $60B “Not QE”) as emergency funding to prevent crashing the systemically important repo market. This run-up in the market has turned our technicals to neutral. Zoltan Pozsar, formerly with the NY Fed and the US Treasury, by year-end, warned that as a result of collapsing systemic liquidity and a drought of (bank) excess reserves, the market could see a seizure of the FX swap markets, which could send the US Dollar and bond yields soaring and a stock market collapse. Way above my pay grade, so we’ll stay with a maximum correction in the 3 -5% range, and then another thrust to new highs. SPY support 312.01, 309.67.
    Gold
    Gold had a quiet week with only a $12.50 range, closing Friday 1478.90, up $2.70. The metal has been consolidating for nearly 4 months, which contains a series of lower highs, and higher lows, since gold reached this year’s spot high on September 4 of $1557.70, creating a bullish flag formation. With the trend positive, GLD needs a Weekly close over 140.55 for a strong break to the upside. After closing at a multi-year high last week, the shares surrendered leadership, falling to a 3 week, low vs the metal. A Bearish Weekly Squat formed, so expect some downside. GDX Fib support 26.61. It should be silvers time to shine, breaking above an enormous bullish falling wedge, and above our exponential 89 line. A strong Weekly close over SLV 16.37, should start a move to Fib resistance 17.76, after clearing 16.68. Every precious metals investor needs to remember the fraudulent pricing mechanism on the Comex, (where there’s virtually no metal for delivery) where the real control of Gold and Silver pricing is the paper Open Interest, now standing at 209,101 for silver and 730,040 for gold, an all-time record high.
    Dollar
    The greenback confounded us by staging an umpteenth bounce, gaining half of 1%, closing UUP 26.80. Strong resistance 26.88. A third time under our 89 lines (26.79 – 26.71) should be good to start ball rolling to downside, UUP 26.30, 25.81.

  • Stocks, Gold & Dollar Commentary December 16, 2019

    Stocks
    Stocks gained less than 1% last week, (317.32) holding firm near all time highs (SPY 318.67). as Phase One of the trade deal was signed. In recent weeks, stocks have gained 7% on expectations the deal would be completed. With no immediate tariff relief, for the economy to accelerate, capital spending needs to improve, but there’s too much uncertainty for that to happen, so the only game in town, to keep the market levitating, is the daily, massive injection of Fed liquidity. Volume ballooned to a 9 week high creating a Bearish Weekly Squat, while an important cycle high was due (Dec 13). However, the important takeaway was an all time high, both, in the New Economy sector — and also, vs the Old Economy, which means, we only expect a correction in the 3% range, before another attempt at new highs. Fib support 312.01, 309.67.
    Gold
    As the trade deal was announced, the cartel slammed gold with paper, taking the metal down $22.50 (1487.70 to 1465.20) before closing Friday 1476.20. Nevertheless, at a 6 week closing high. However, the takeaway was the strength in the shares which gained 4.5% to a multi-year closing high. (XAU 100.28), led by the juniors GDXJ and SIL, which crossed over breakout levels. Breakout levels remain for GDX 27.84, GLD 140.60, and SLV 16.50.
    Dollar
    The greenback (UUP) closed under our 89 line trendlines (26.65), turning trends bearish, and are headed for 26.30 and 25.81.

  • Stocks, Gold & Dollar Commentary December 9, 2019

    Stocks
    Stocks started the week in corrective mode, declining nearly 2.7% over 3 days, then gaining it all back (but NO new high) as a result of a massive injection of Fed liquidity – through repurchase agreements – totaling nearly $98 billion. The week was finally topped off by a much better than expected employment report. All against a back-drop of a slowing economy and trade war uncertainty. The “fly in the ointment” in the rally, at this time, is the vast under-performance by the transportation index (IYT), which appear to be setting up a Head & Shoulders top. A Weekly close under 187.50 should send all markets following lower. Another high day is due December 12/13. SPY resistance 315.74. SPY support 312.01. Strong support 303.88.
    Gold
    Gold fell 4.30 on the week (1460.20), but failed to reflect volatility, which saw almost a $32 range from 1453.40 to 1484.70. The gold shares (XAU) continued to outperform bullion, closing fractionally higher on the week, and new high for the year vs the metal. In stealth-like fashion, and totally unreported by the financial media, gold has nearly doubled the performance of stocks, – despite fraudulent, massive paper shorting on the Comex* – measuring from December 3, 2018 to December 3, 2019. GLD up 19.5% vs SPY up 10.8%. *“THE COMEX IS NOW EFFECTIVELY DEAD as a mechanism for delivery of physical gold. My sample period started on 12th July 2019, so now encompasses 142 days. NO GOLD IS EVER DELIVERED FROM THE REGISTERED GOLD INVENTORY AT THE COMEX”  – Nicholas from GATA Weekly closes for the following will constitute breakouts: GDX 27.84; GDXJ 38.60; SIL 30.42; GLD 140.60; SLV 16.50. Bullion has now been above its 55 week mvg avg (1346.50) for 50 straight weeks.
    Dollar
    The greenback (UUP) fell the first 4 days, (UUP low 26.68) then bounced on Friday postponing the inevitable. A Weekly close under 26.71 will turn our 89 line trends bearish, looking for 26.30, then 25.81.
     
     

  • Stocks, Gold & Dollar Commentary December 2, 2019

    Stocks
    With investor complacency literally off the charts (the VIX coming off a 20 year low) stocks did what it’s supposed to do: rally into the Thanksgiving Day holiday, (up 1.4%) then giving up some in Friday’s shortened session. (SPY close 314.31 new closing high). Helped by “the gift that keeps on giving”, (leaks that a US/China trade deal is getting close), the New Economy stocks regained momentum, but failed to exceed the all time high vs the Old Economy. Close, but no cigar! While our technicals continue to flash bearish signals, they can’t compete (at this point) to the more than $250 billion in fresh liquidity that’s been added to the Fed’s balance sheet, and found its way into greasing the upward spiral of stocks. With an important cycle high around December 4, a correction of some significance is way over due. SPY Fib support 310.40. Strong support 303.88.
    Gold
    In subdued, pre-holiday trading, spot gold was sold to a 10 day low (1449.80) on Tuesday, then reversed course on Friday to close higher on the week (1464.50), but the real takeaway for the precious metals was the vast out-performance by the miners — particularly the juniors in both gold and silver — gaining around 4% for the week, and a yearly high when measured vs the metal. Weekly closes for the following will constitute breakouts: GDX 27.84; GDXJ 38.60; SIL 30.42; GLD 140.60; SLV 16.50. Gold’s price objective between now and end of the first quarter 2020 is 1670. However, we expect silver to lead rally, as open interest in silver futures has grown to over 224,000 to keep prices in check. Shorts will start to cover, as prices rise, with a price objective of 26.59, as the gold silver ratio drops to the mid 60′s next year.
    Dollar
    The greenback ran into overhead resistance near UUP 27.00 (actual high 26.98), closing 26.91 unchanged for the week. A weekly close under 26.70 will turn Dollar trends bearish, looking for 26.30 and eventually 25.81.