Gold And The Investor’s Buy Point

After gold’s incredible surge last week, it is now facing a critical test that will either prove or negate a new bull market in the yellow metal.  The gold ETF GLD crashed through the 30-week moving average  two weeks ago on 2-times average  weekly volume, then followed up that move with a surge last week on 4-times average weekly volume.  This explosive increase in buying pressure accompanied with a move above the 30-week moving average is the first ingredient to a new Stage 2 bull market.

gld

The second and more important test for the transition from a bear market to bull market is a retest of the 30-week moving average that holds as support.  This confirms that prices are now trending higher and that the rally was not merely another bear market rally that failed at resistance.  The chart below marks this second ideal buy point B and notice that it occurs above the 30-week moving average.

Ideal_buy_investor

Source:  Secrets For Profiting In Bull And Bear Markets

The best thing about buy point B is that it offers a lower risk, higher reward opportunity in establishing a position in a potential new uptrend.  By waiting for the pullback to the 30-week moving average, risk is reduced because the the moving average can be used as the line in the sand for taking a loss if the pullback fails to hold.

Contributing factors to a possible new bull market in gold include the fact that GDX also had a massive increase in volume over the previous two weeks.  This confirms broader based participation in the gold miners which will outperform gold when it moves back into a bull market.

gdx

The U.S. dollar is also threatening to break down into a Stage 4 decline from its current Stage 3 topping pattern.  Simultaneously the Euro is still holding in a Stage 1 basing formation and the Japanese Yen is in a new Stage 2 advance.

Despite this evidence the most important factor is the ability of gold to hold above the key long term moving average to confirm change in trend.

Checkout my new Stage Analysis Screening Tool at: http://screener.nextbigtrade.com

Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

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Big Trend Changes And Gold

The stock market, the U.S. dollar, and gold are all undergoing important changes in trend that will impact millions of investors around the globe for the next several months to years.  Sadly, a large percentage of investors are completely oblivious to this fact.  Many are in denial that a new bear market in stocks has started.  They lack the ability to both identify the major trend, and understand that markets are cyclical and oscillate from bull to bear market and back again.

stageanalysischart

Stock market investors have enjoyed a bull market from 2012 until 2015 where the S&P 500 surged from roughly 1250 to 2100.  After breaking down for multiple months in 2011, the S&P 500 was able to retake the 30-week moving average in 2012.  Once this retest was completed successfully the S&P 500 continued higher in a stage 2 uptrend into 2015.

spx1

This new stage 2 uptrend in stocks was propelled by the healthcare sector which broke out from a multi-year base into a powerful stage 2 uptrend.  The biotech sub-sector of healthcare in particular staged an amazing run where biotech stocks were up double digits for 7 years in a row.

ibb

But stocks underwent a stage 3 topping process in 2015 where breadth deteriorated rapidly across the stock market and no new leadership formed.  In particular key indices like the transports and small caps diverged from the other major indices and started trending lower.  Finally the plunge in January confirmed the stage 3 transition into a stage 4 bear market in stocks.

spx2

The U.S. dollar followed a slightly different path than U.S. stocks, rallying into 2012 but then trading sideways into 2014.  Then after a tight consolidation formed over multiple months the dollar exploded higher in a parabolic stage 2 rocket launch that enthralled the media.  But just as this epic dollar rally was loved by the masses it topped out in March 2015 and has traded sideways in a topping formation since.

dollar

Both of these markets put pressure on gold over the last 4 years as gold moved counter-cyclical to both stocks and the U.S. dollar over that time period.  Gold broke into a stage 4 downtrend in 2012 and kept plunging into a major bottom in mid-2013.   Although the majority of gold’s stage 4 bear market was over in 2013 it continued to drift lower into the end of 2015 as stocks were making a major top.

gold

The cyclical nature of the markets has started to reassert itself in a major way to start 2016.  With stocks getting pummeled in a new stage 4 bear market, you would think investors would flock to the U.S. dollar as a safe haven.  But since the dollar has undergone a multi-year rally of its own it’s not the safe haven that it’s been in the past.  As long as the dollar stays below its 30-week moving average it’s no safer than stocks and could cause severe losses for currency investors if it enters a new stage 4 bear market.

Gold on the other hand is threatening once again to enter a new bull market.  Given that it has produced at least 7 failed rallies in its bear market since 2011, most people are skeptical gold can ever enter a bull phase again.  But that’s the kind of skepticism and utter disdain for an asset class that creates the conditions necessary for a new bull market to begin.

Checkout my new Stage Analysis Screening Tool at: http://screener.nextbigtrade.com

Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

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