Archive for month: October, 2019
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Chris Vermeulen
Technical Traders Ltd.
Our research team has been attempting to answer the question that seems to be on everyone’s minds right now – are we setting up another Black Monday type of event in the global markets and what should traders/investors know before the event potentially takes place. Our research team has spent the past few weeks trying to better understand the global economic events that took place 8 to 20+ years before the Black Monday event happened and have been particularly interested in the 10+ years just before the Black Monday event. Additionally, we’ll focus on the recovery event that took place after the Black Monday collapse completed.
In Part I of this article, we attempted to highlight some of the similarities of today’s global economic world to the scenario in the early 1980s. Many of you may not be old enough to remember the 1960s or 1970s, but at least one individual on our research team is old enough and was actively trading in 1985. His interpretation of the economic events prior to the 1987 Black Monday collapse and how they may be similar to today highlight some very interesting facets for our readers.
The late 1970s was a period where most Americans worked hard, tried to play by the rules and struggled to attempt to get ahead in a world that seemed to be a little out of order. The 1960s was a period of awakening in America where music, culture, and people shifted away from the WWII era and post-WWII era thinking. Vietnam, Korea and a host of other issues, as well as rising US interest rates, presented very real problems for many Americans. By the time the US entered the 1980s, Americans had already experienced the assassination of John F. Kennedy, the race to the moon, multiple wars, victories and defeats, a cultural shift to near the extremes and another shift moving our culture back closer to center, Oil/energy crisis events, a moderate malaise of economic prosperity, and continually higher US interest rates. Then the US elected Ronald Reagan.
It seemed to everyone that Ronald Reagan had unlocked secrets to the American opportunity that had been somewhat lost over the previous few decades. In reality, the first 2 to 3 years of the Reagan Presidency resulted in very mixed economic results – almost identical to President Carter’s. The biggest identifying factor that our research team found was that the US Federal Reserve altered its rate policy in the early Reagan years from a “raising stance” to a “declining stance”. Throughout Carter’s term, the FFR rate change averaged +2.08. Throughout the first four years under Reagan’s term, the FFR rate change averaged -0.7825. By 1984, the US Federal Reserve had lowered rates, twice, by an average of over 7% after raising rates every year since 1977.
(source: https://einvestingforbeginners.com/us-gdp-growth-history/)
Is this similar to what is happening today? The US Federal Reserve began raising rates in December 2015 and continued to raise rates until August 2019 – nearly 3.7 years of rate increases after nearly a decade of near-zero interest rates prior to 2016.
Another interesting facet is what our research team calls the “capital shift” that has taken place since just before 2015 – where foreign capital has poured into the US stock market and asset markets for safety, security, and returns. Prior to the point where capital controls were instigated in China (in 2015), a moderate capital shift event was already taking place. Once China installed these new capital controls, attempting to prevent capital from fleeing their local economy, a broader shift took place where the US markets began to rally and where foreign capital was more actively attracted to the US stock/asset markets because of the strength of the US Dollar and the continued rally in the US stock market. This is similar to what happened in 1983 through 1987.
These comparison charts of the 1980s and the current 8+ years of the S&P 500 charts highlight some very interesting facets of both peaks.
_ Support set up nearly 24 months prior to the collapse in 1987. This support channel became the ultimate price channel level to break as Black Monday hit.
_ Price was able to rally above the upper price channel three times before the breakdown event began. This upper price channel mirrors the lower price channel slope and is anchored near the tops after the initial support bottom is setup.
_ The final rally attempt before Black Monday initiated near early January 1987 – nearly 9 months before the peak and 10 months before the price breakdown began.
Within the current S&P 500 chart, some slight variations are present.
_ Support set up nearly 44 months prior to the peak in 2019. This support channel is the ultimate price channel level that acts as ultimate support for the price trend.
_ Price has been able to rally above the upper price channel four times since the ultimate support level was set up in 2016
_ The most recent rally attempt initiated near early January 2019 and has lasted nearly 9 months before the current peak. As of today, we are nearly a full 10 months into this new price rally.
Although there are subtle differences in the price setup, rotation, and trend lengths, we can certainly see a similarity in between these two chart and we believe the recent price advance in the US stock market, along with the fact that capital has continued to pour into the US markets over the past 3+ years, sets up a similar type of event where current price levels, valuation, and risks may have been under-weighted dramatically.
Could another Black Monday type of event happen in today’s global markets? Certainly, it could. All it would take is for global traders/investors to suddenly realize there is a new degree of risk or excessive price valuation that currently exists in the markets and to begin liquidating assets in a mass event.
What would it take for something like this to happen? Quite possibly, China or Hong Kong could, again, present a very real risk for the global markets if a threat to the lower price support channel becomes threatened. A collapse in true value would relate as a potential “true price exploration” event (a reversion event) where global traders may attempt to retest substantial historical support.
Our belief is that true historical support currently resides near 1860 on the S&P 500 – which aligns with the same type of price reversion that occurred in 1987.
Time will tell if we are currently set up for another Black Monday event. In fact, we may know as early as Monday, October, 21. Until the lower support channel is seriously threatened by any new downside price move, the chances of this type of event happening are fairly low. As you are well aware.. things can change very quickly. Pay attention to near originating out of Hong Kong, China or Asia over the weekends as any type of real risk could spill over into the UK and US markets very early on Mondays.
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Today to Get a Free 1oz Silver Bar with a subscription – Offer Ends This Week!
Chris Vermeulen
www.TheTechnicalTraders.com
Back in the day, for those of you that are old enough to remember and have experienced one of the most incredible trader psychology driven stock market decline in recent history.
The difference between “Black Monday” and most of the other recent stock market declines is that October 19, 1987, was driven by a true psychological panic, what we consider true price exploration, after an incredible price rally.
It is different than the DOT COM (2001) decline and vastly different than the Credit Market Crisis (2008-09) because both of those events were related to true fundamental and technical evaluations. In both of those instances, prices have been rising for quite some time, but the underlying fundamentals of the economics of the markets collapsed and the markets collapsed with future expectations. Before we get too deep, be sure to opt-in to our free market trend signals newsletter.
Our researchers believe the setup prior to the Black Monday collapse is strangely similar to the current setup across the global markets. In 1982, Ronald Reagan was elected into his second term as the US President. Since his election in 1980, the US stock market has risen over 300% by August 1987.
Reagan, much like President Trump, was elected after a long period of US economic malaise and ushered in an economic boom-cycle that really began to accelerate near August 1983 – near the end of his first term. The expansion from the lows of 1982, near 102.20, to the highs of 1987, near 337.90, in the S&P 500 prompted an incredible rally in the US markets for all global investors.
This is very similar to what has happened since 2015/16 in the markets and particularly after the November 2016 elections when the S&P500 bottomed near 1807.5 and has recently set hew highs near 3026.20 – a 67.4% price rally in just over 3 years.
One can simply make the assumption that global investors poured capital in the US markets in 1983 to 1986 as the US markets entered a rally mode just like we suspect global investors have poured capital into the US markets after the 2016 US elections and have continued to seek value, safety, and returns in the US markets since. These incredible price rallies setup a very real potential for “true price exploration” when investors suddenly realize valuations may be out of control.
So, what actually happened on October 19th, 1987 that was different than the last few market collapse events and why is it so similar to what is happening today?
On October 19, 1987, a different set of circumstances took place. This was almost a perfect storm of sorts for the markets. The US markets had risen nearly 44% by August 1987 from the previous yearly close – a huge rally had taken place. Computer trading, which some people suspected may have been a reason for the price decline on October 19, was largely in its infancy.
Floor traders were running the show in New York and Chicago. The London markets closed early the Friday, October 16, because of a weather event that was taking place. The “setup” of these events may have played a roll in the liquidity issues that became evident on Black Monday and pushed the US markets down 22.61% by the end of trading.
The US markets had set up a top near 2,722 in early August 1987 after rising nearly 44% from the 1986 end of year closing price level of 1,895. The SPX rotated lower from this peak to set up a sideways price channel near 315 throughout the end of August and through most of September. On October 5, 1987, the SPX started a downward price move that attempted to test the lower support channel near 312. On October 12, one week later, the SPX broke below this support channel and closed at 298.10 (below the psychological 300 level). The very next weekend was October 17 & 18 – the weekend before Black Monday.
Sunday night, October 18, in the US, the Asian markets opened for trading and a price sell-off began taking place in Hong Kong. Because the London markets has closed early on the 16th due to the storm, by the time they opened the UK markets began tanking almost immediately. Early in the day on Monday, October 19, the FTSE100 had collapsed over 136 points.
Our researchers believe the declines in the US markets in early October 1987 set up a breakdown event that, once support was broken, prompted a collapse event where liquidity issues accelerated the price decline volatility – much like the “flash crash”. Global investors were unprepared for the scale and scope of the price decline event and panicked at the speed of the price collapse.
In fact, at the height of the 1987 crash, systemic problems (mostly solvency and brokerage house operations) continued to threaten a much larger financial market collapse. Within days of Black Monday, it became evident that margin accounts and solvency issues related to operating capital, large scale risks and continued fear that the markets may continue to collapse presented a very real problem for the US and for the world. Have we reentered another Black Monday type of setup across the global markets?
As new economic data continues to suggest the global markets are economically contracting and stagnating, the US Federal Reserve has started buying assets again while the foreign central banks continue to push negative interest rates while attempting to spark any signs of real economic growth. The US stock market has continued to push higher – almost attempting new all-time highs again just recently. The US stock market is up nearly 68% over the past 3.5 years since Trump was elected and as of Friday, October 18, 2019, the US stock markets fell nearly 0.75% on economic fears.
In Part II of this article, we’ll explore the potential of another Black Monday type of setup that may be playing out before our very eyes right now in the US stock market.
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Today to Get a Free 1oz Silver Bar with a subscription – Offer Ends This Week!
Chris Vermeulen
www.TheTechnicalTraders.com
Our research team believes the US Treasuries and the US Dollar will continue to strengthen over the next 2 to 6+ weeks as foreign market and emerging market credit and debt concerns outweigh any concerns originating from the US economy or political theater. Overall, the major global economies will likely continue to see strength related to their currencies and debt instruments simply because the foreign market and emerging markets are dramatically more fragile than the more mature major global economies.
We believe the US Treasuries may surprise investors by rallying from current levels, near price resistance, to levels above $151 on the TLT chart.
Our belief is that further economic concerns related to trade, foreign economic metrics and data and the forward perspective of many emerging and foreign markets will continue to weaken much more dramatically than the US or other major global economies. Thus, we believe capital will continue to pour into the US and more mature major global economic markets (Canada, Japan, Great Britain, Swiss) as a move to safety just as capital is moving into the precious metals markets.
When fear enters the global markets, capital seeks out the safest and most secure environments for investment. If the rest of the world’s economies are becoming weaker and more fragile as trade and economic factors continue to hit the news wires, the more mature major economic countries are naturally going to benefit from their more robust and secure economic power and strength. The flight to safety will result in capital moving away from risk and into the safety of these more mature economies simply because they provide a level of security and risk aversion that can’t be found elsewhere. Make sure to opt-in to our free market trend signals newsletter.
DAILY TLT CHART
This Daily TLT chart highlights the resistance level that we believe is current constricting the current price advance from breaking higher. We believe this resistance channel is causing the TLT price to pause below $147 and will continue to keep prices within this channel until some economic news event or positive US economic news item pushes the price higher. The US and global markets are waiting for some type of news event before attempting to make another move. We believe the future news will result in an upside technical breakout and a new rally towards the $152 to $155 level in TLT.
WEEKLY TLT CHART
This Weekly TLT chart highlights the extended bullish price rally that started back in late October 2018. This upside price move has already rallied more than 40%, but we don’t believe it is over yet. Our Fibonacci price modeling system is suggesting $154 to $155 is the next upside price target. To be a bit more conservative, we’ve targeted the $152 level for skilled traders to work with. Once price achieves the $152 target level, look to cover any open long trades you may have.
If you are an active trader of gold, gold stocks, bonds, or the SP500 and would like to hear a trading style that reduces the amount of trades you take while making the same or better returns listen to this conversion with Adam Johnson who is an x-Bloomberg anchor, and now active trader.
Understanding how pricing and global market dynamics work throughout the stock market and the global market can be confusing at times. How can one attempt to understand what will move in a certain direction, why it will move that way and how one can profit from these opportunities and be difficult for many people to grasp. We do our best to try to help you by highlighting trade setups, explaining our thinking and research, sharing some of the charts with our proprietary trading tools and to help you identify strong opportunities for success.
Bonds are likely to continue to trade in a sideways price range before breaking higher near the end of 2019. This aligns with our expectations that foreign markets may come under intense economic pressure while the US economy continues to provide safety for investors for the long term. The support level above 157 is critical going forward.
DAILY PRICE CYCLE PREDICTED PRICE TREND
While cycle analysis helps us paint a clear picture of what to expect looking forward up to 45 days I still rely on my market trend charts to know when I should be buying or selling positions.
THE TECHNICAL TRADERS CONCLUDING THOUGHTS:
Right now, we believe the markets are waiting for some news events to make their next move. This is the time to take very measured positions when trading. This is NOT the time to go “all-in” on some trade. Be prepared for a spike in volatility and a new price trend to establish within the next 3 to 10 trading days.
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Today to Get a Free 1oz Silver Bar with a subscription – Offer Ends This Week!
Chris Vermeulen
www.TheTechnicalTraders.com
Chris Vermeulen, founder of The Technical Traders kicks off today by looking at the recent downtrends in the safe-haven assets. We look at the speed of the breakout and what the long term outlook is. To wrap it up Chris shares a trading strategy for natural gas.
If you would like to receive my daily market analysis and forecasts along with my ETF trade alerts subscribe here.
Chris Vermeulen
Technical Traders Ltd.
Recent rotation in multiple foreign currencies hints at the fact that a new stage of the “Capital Shift” process is taking place and that skilled technical investors need to pay very close attention to how these currencies continue to react over the next 3 to 6+ months. In the recent past, most of the world’s foreign currencies were declining in value while the US Dollar continued to strengthen. In fact, we authored many research articles about these trends and how weakness in foreign currencies will drive new foreign investment into the US stock markets for two simple reasons; strength and security.
Now that a few of the world’s most mature economies, and some that may surprise you, are starting to change directions, we may be beginning a new stage of the “capital shift” process that may open up multiple new opportunities for skilled technical traders. As the old saying goes, “follow the money”. At this point, if our research team is correct about these price trend changes, following the money may mean opening our eyes to new investment opportunities across the Pacific and Atlantic – as well as very near to the US.
Before we continue, we suggest reading the following research post to understand a bit about the history of our research and be sure to opt-in to our free market trend signals newsletter.
September 10, 2019: METALS & THE US DOLLAR: HOW IT ALL RELATES – PART I
The first thing we want to highlight is our belief that the US Dollar and US stock market should continue to provide price strength and upward price opportunity – even throughout any price correction or contraction that our researchers may identify. Our predictive modeling systems have shown us what we believe to be an incredibly accurate prediction of future price activity over the next 3 to 5+ years.
Even though we are not going to share that research with you today, the one thing we want all of our followers to understand is that the US stock market, and likely the US Dollar, are poised to continue to see longer-term upward price growth over the next 3+ years. Yes, there may be a few price rotations/declines throughout this process and we need to be aware that price naturally attempts these types of rotations in an effort to provide future price support, price exploration and future price trends. The price must always attempt to establish new highs or lows throughout a trending process.
US DOLLAR
The US Dollar has been trending higher since early 2018. We believe the US Dollar will continue to push higher within the price channels we’ve drawn on this chart and, eventually, attempt to move to levels above 100 near the end of 2020 (or slightly after this date). We don’t believe anything will disrupt the continued strength of the US Dollar unless some major economic/credit crisis completely destroys the support of the global economic markets and takes everything down with it.
Our researchers believe the new shift in the “capital shift” process of global investing is centered around the concept that certain global currencies, as well as their associated stock markets and strategic stock sectors, may have reached a point where price is exceedingly below fair value and when one considers the fundamental economic strengths related to maturity, economic capabilities, geopolitical or proximity economic factors and future leadership/opportunity factors – investors are suddenly viewing these currencies and stock markets as “uniquely positioned for potential upside growth”. Thus, this change in perspective could drive a new upside price trend throughout a number of undervalued currencies as well as present a very real possibility that skilled technical traders may find real value and real opportunity by expanding their search criteria into assets related to these currencies.
One of the most basic elements of investing is understanding how supply-demand economic functions work and where the current “equilibrium” is at. The easiest way for us to try to explain this concept is to think of a very sought-after product (let us assume one ounce of gold) and the price of that gold as a measure of the price level in relation to demand. When the price of gold is very low, buyers rush into the market to buy up as much as they can afford because the perception is that gold prices should be higher (thus gold is undervalued). This means the equilibrium level is higher than the current price level of gold. When the price of gold is very high, buyers stay away from purchasing (or can’t purchase because it is too high) and the price will eventually begin to fall lower because demand is very low. This means the equilibrium level is lower than the current high price of gold.
Price always moves from above or below the equilibrium level to price levels on the opposite side of the equilibrium level. Think of the equilibrium level as the optimal price level where demand meets supply and where future expectations of price are minimized. This equilibrium level is where the price would be if we removed all the hype, fear, greed and speculation out of the market. The equilibrium level fluctuates as true fundamentals and true price exploration takes place across the supply-demand curve. Almost like the average temperature fluctuates throughout the seasons of the year.
When a shift in investor sentiment happens, much like a shift in seasons, price changes direction begins to rally of decline and this shift in trend changes the supply-demand equilibrium level as investors pile into or pull out of a market. Thus, if our researchers are correct and this change in the longer-term opportunity for selected currencies is a true longer-term capital shift, it may be a very early opportunity for investors to begin focusing on the opportunities that will become present in the near future.
AUSTRALIAN DOLLAR
The first currency we want to focus on is the Australian Dollar. Historically, the Australian Dollar has continued to trend lower over the past 18+ months and currently shows very little strength or opportunity to form a bottom. The lows near 0.67 may prove to become a future bottom in price, but the trend has not confirmed this yet and because of that, we believe weakness is still prevalent in price.
CANADIAN DOLLAR
The Canadian Dollar, on the other hand, has set up an intermediate price bottom in early 2019 and has continued to strengthen moderately over the past 10+ months. One thing that we want to point out about our research is that we believe currencies and nations that have strong economic ties and proximity advantages (being close to the US and having strong economic ties with the US) are very likely to perform well or begin to strengthen in the near future. Canada has a number of factors that may prove to be advantageous going forward. Strong economic ties with the US, a booming cannabis and resource market, strong agriculture exports and a very mature economy compared to other nations.
EURO
The Euro price chart continues to illustrate price weakness as future expectations of economic strength is very far off. The interesting facet related to the Euro is that a weakening Euro will eventually present a very clear opportunity for investors the instant the European-union enters any type of economic recovery or strength. Until that happens, we believe the continued price weakness will potentially drive the Euro lower – eventually attempting true parity with the US Dollar.
BRITISH POUND
The British Pound has recently rebounded to the upside with some level of ferocity. Of course, this 6+ week upside price rally does not make a new longer-term price trend yet – but we believe this upside price move may be related to the future BREXIT deal and renewed economic ties/trade with the US. In other words, investors may be shifting expectations and price levels into acceptance that the British Pound may become a very solid future investment assuming the BREXIT deal creates a renewed economic cooperation between Great Britain and the US.
MEXICAN PESO
Lastly, the Mexican Peso has recently started to base near 0.049 and may possibly attempt to move above longer-term resistance near 0.053 on renewed expectations of a stronger economy, stronger economic ties with the US and a post-US 2020 Presidential election rally. Currently, the bottom in the Peso occurred in 2017 near 0.04785. We believe the Peso could rally above 0.061 over the next 18+ months – resulting in an 18%+ upside price rally related to stronger US economic growth and stronger economic ties between the US and Mexico.
CONCLUDING THOUGHTS:
These changed in direction in the Mexican Peso, Canadian Dollar and British Pound suggest that global investors may begin shifting capital into the strongest sectors and/or the value sectors of these countries attempting to capture a late 2020 price rally that may carry forward into the 2021 and beyond economic recovery that we expect to take place after the 2020 US Presidential elections.
Please keep in mind that quite a bit hinges of the outcome of the US Presidential elections in 2020. Just like we saw on election night in November 2016, global investors and global corporate leaders will react to any fear or opportunity related to who is expected to win the US elections in 2020. More taxes, more regulation, more uncertainty will immediately derail any attempted economic recovery that sets up over the next 10+ months. We need to watch how these currencies strengthen before the election, then become very cautious 2 to 3 weeks before the election takes place in 2020.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed. Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.
Recently I met an incredible trader and x-Bloomberg television anchor. His name is Adam Johnson and if you have not listened to his podcasts or followed his stock trading portfolio be sure to visit his website BullsEyeBrief.com
Adam reached out to me a few weeks ago wanting to have me on his podcast show to talk markets because he focuses on individual stocks and their fundamentals, while I am a pure chartist that dissects price charts layer by later to find out what they are telling us will happen next.
Listen to this fantastic show Adam put together!
If you would like to receive my daily market analysis and forecasts along with my ETF trade alerts subscribe here.
Chris Vermeulen
Technical Traders Ltd.
Today I want to talk to you about the SP500 because it’s on the verge of making a very significant move. We could experience a 15% rally or a 15% decline and it could be just around the corner.
Let me recap on both the short-term top this month, and then a look at the bigger picture of what happened last October through December and if we are going to see that happen again. There is the possibility we get a massive rally if the market breaks to new highs. The market is loaded and ready for action. Whichever way it breaks will have a strong impact on precious metals and bonds. Make sure to opt-in to our free market trend signals newsletter.
21 DAYS THEN A BREAKDOWN?
Let’s look at the SP500 for the last 6 months in the chart below. If we were to just draw support trendlines across the lows and a resistance trend line across the highs, you can see we still have some room for the SP500 to work itself higher and still be within the pattern.
Do you see the blue line that is on the chart? You will notice it follows price very closely and you’ll notice the purple line on the hard-right edge as well. This purple line is the forecasted projected cycle price that we are anticipating for the SP500 over the next 45 days.
I should note that as the market evolves and moves this price cycle forecast will change, but it gives us a good idea of current cycles in the market and where the price should go next.
Overall, we’re all you’re looking for SP500 to struggle to move higher because it acts as resistance. If resistance holds then it is likely the market breaks down and tests the August or September Low.
S&P 500 OCTOBER – DECEMBER MARKET CRASH TO REPEAT?
Let’s step back and look at last year’s price action. You can see that the cycle analysis is pointing to potentially another market crash down to those December low. If that is the case then it could be the start of something very significant like a new bear market.
So that’s where we’re at in terms of the SP500 and at this point, we’ve got another 21 days or so before the SP500 should start breaking below our white trendline support level.
While cycle analysis helps us paint a clear picture of what to expect looking forward up to 45 days I still rely on my market trend charts to know when I should be buying or selling positions.
BONDS – THE NATURAL INVESTOR SAFE HAVEN
The first safe haven investors flock to when they become scared are bonds. By looking at the chart we can see they should start to find a bottom based on our cycles. Bond prices are stuck within a large sideways channel and should hold their ground until the SP500 starts collapse. If the SP500 breaks down then we’re going to see bonds move higher and should eventually break out and make new highs.
GOLD – THE SAFEST OF SAFE HAVENS
The true safe Haven is gold when it comes to a global store of value for all countries and individuals.
Take a look at the price of gold, as you can see it rallied in June and again in August when the cycles bottomed and started an uptrend. Right now the price is in a much larger consolidation (bull flag pattern) which is a positive sign. In fact, this multi-month pause makes gold even more bullish in my opinion. The longer a commodity trades sideway the more powerful the next move will be.
You can see based on our cycles analysis and forecasted price gold still has some potential weakness for a couple of weeks.
Understanding cycles and how to trade with them is much harder than most people think. If you do not understand cycle skew then you will struggle to turn a profit. I have been trading with cycles since 2001 and still, I find them very deceiving at times.
In laymen terms, cycle skew is when a cycle moves against the direction of the underlying asset’s trend. The chart below shows this clearly with the white lines. In short, gold is in an uptrend, and when the cycle moves down against the assets trend price will in most cases trade sideways. Do not try to short cycle tops when the trend is up, no matter how tempting it may be.
The key is to wait for cycles to bottom, then get back into position for the next upward move in the cycle and price.
I had a fantastic chat with Adam Johnson from BullsEyeBrief today and if you are interested in more juicy details on the SP500, Gold, and how I trades be sure to listen to the most recent podcast we did together at the top of his website https://bullseyebrief.com/podcast/
THE TECHNICAL TRADERS THOUGHTS:
In short, the stock market continues to keep the bull market alive, but investors have started to move into gold as a safe haven. The fear of a market downturn is growing which is why gold has rallied and started a new bull market. The money flow into gold is very strong and is warning us that US equities could enter a bear market in the next few months and that possibly something much larger globally could be at play as well.
Gold continues to just hold up well even with the current cycle forecast trending lower. Overall, we’re looking at about 20 days or so and we could see metals and equity prices make some incredible moves.
Keep reading our research because our proprietary tools have been nailing all of these price targets and move many months in advance. The next bottom in metals should set up when our cycle bottoms – then the next upside leg will begin. This time Gold should target $1800 and Silver should target $21 to $24. This will be an incredible move higher if it plays out as we suspect.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com