Next Big Trade In Search Of Bull Markets

18Sep/140

Tweets, Headlines, and Charts for 2014-09-17

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17Sep/140

Tweets, Headlines, and Charts for 2014-09-16

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16Sep/140

Will Gold Shock The Bears?

I think we have an interesting setup in gold and silver here.  Back in May, after a 2-month decline, gold pulled a fast one on the bears and surged higher producing a fake breakdown.  But that surge petered out and gold topped in July, then went on another 2-month decline into September.  I would say that the bearishness on gold this time around feels pretty similar to the bearishness into May.

The key difference between these gold declines too has been the dollar.  In the previous decline, the dollar was muted, just drifting sideways.  I think the dollar rally from May though effectively capped the gold rally and caused gold to drift lower after it topped in July.

But now we have an FOMC statement that I believe will be dovish, and given the fact that the dollar has rallied so much, I think commodities in general are in position to rally off of Fed news.  They're simply at a sentiment extreme that could be unwound with a bullish impetus.

If you look at GDXJ below you can see some strong accumulation days on volume, 3 of them in fact in the last 4 trading sessions.  This is also following a 15 million share puke out in early September.  Plus GDXJ continues to outperform GLD, all year I might add.  And GDXJ can quickly get back above the 50 and 200 dma, causing the trend following funds to get back on board the long side.

gdxj

I'd also note that strong gold stocks like FNV, TAHO, RGLD, GG, and even NEM, continue to make higher highs, and higher lows.  Finally there were notable surges in junior miners this week including DRD, TRX, LSG, THM, ANV, GSS, and AKG, some of them on heavy volume.  I could be completely wrong but things could get interesting to the upside tomorrow.

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16Sep/140

Tweets, Headlines, and Charts for 2014-09-15

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15Sep/140

Commodities May Be Bottoming

There's been a dramatic collapse in commodities since the April/May timeframe.  The grains have gotten absolutely crushed.  Corn, wheat, and soybeans all were looking promising earlier in the year and then they got taken to the woodshed.  Copper has followed the opposite path, slammed early in the year, then recovered nicely even with the dollar rallying.  Coffee had a massive rally early in the year and has been consolidating since then.  Sugar and cotton have both been crushed since April.  Precious metals have had a volatile 2014, with two strong rallies and two grinding declines.

If you take a look at a daily chart of the CCI index you see a clean 5 wave down structure with positive divergence in momentum in the 5th wave.  That typically happens when a market gets exhausted and starts to reach a bottom.  Notice how the negative divergence in momentum helped forecast the decline.

cci1

On a weekly chart commodities look like they might be breaking support here and headed for a steep decline.  But the problem with that scenario is they are already deep in a 5 month decline heading into this support break.  Typically you would at least see a bounce before that support gives way and that's what I think we could be in for here.

cci2

Longer term I think commodities offer an interesting play here.  The sector is destroyed, sentiment is terrible, and after a 3+ year bear market no one wants to touch any of this.  So I'd look for a failed support break here as a good long entry back into this sector.  If the CCI can close back  above 500 and hold that as support things get interesting for the bulls.  However if it can't hold 500 the bears continue to win and bulls have to wait a while longer.  The first target I'd look for to the bear side is 440.

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15Sep/140

Tweets, Headlines, and Charts for 2014-09-14

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14Sep/140

U.S. Dollar Due For A Rest

The strong rally in the U.S. dollar has pushed most major foreign currencies back into a Stage 4 decline, as well as most commodities and gold and silver. Gold mining stocks have also been hurt with GDX and GDXJ now in Stage 3.  There are a collection of gold miners that are still holding up very well though, and making higher highs and higher lows all year.  This is much different than what happened during 2013 for gold stocks.

The dollar however is probably due for a rest.  It's bumping up against resistance now and has gone up for something like 9 weeks in a row, which is rare.  On top of that I am seeing a lot of chatter now about how strong the U.S. dollar is all over financial blogs and the media, which is a good sign this move is due for a pullback or consolidation.

dollar

So I wouldn't be surprised to see a bounce in gold and commodities over the next week or so.  Then we'll see if this dollar strength is going to lead to a breakout and new trend higher in the dollar, or if the dollar will breakdown again like it did off a similar move in 2013.

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