Recent news that Theresa May was unable to convince members of Parliament to even consider her current deal as well as the future political and societal consequences of any failure to move ahead with an orderly Brexit deal. The question before traders and investors is how will this reflect in the global markets and how will currencies react to this new?
The GBP (British Pound) appears to be poised to a breakdown move aligning with our Fibonacci Arc structures. These arc structures help us to understand where “inflection points” are likely in the markets and where bigger moves may initiate. The current Arc level, near current price, is indicating that any failure of an upside move will likely prompt a downside move to near 0.739 – or lower.
The overwhelming vote to deny Theresa May’s Brexit deal came down to 391 Against and 242 For the current Brexit deal. It is likely that the British Parliament will continue to break down into warring factions as a contentious future political outcome will play out. The people of Britain are still wanting to complete the Brexit while it appears Parliament has yet to come to terms with the process.
We believe this current event will be somewhat isolated to Britain and European nations, yet be believe there could be a larger contagion even if other nations attempt to push their desires to leave the EU as well. Overall, time will tell how this plays out with global investors. Our first impressions are that the global markets will move lower on this news and that currencies could find new weakness as this chaos continues.
Please take a minute to visit www.TheTechnicalTraders.com/FreeResearch/ to read all of our most recent research – including our very details 5-part global economic research post. This post is very important because it shows you predicted price levels going all the way into 2021 and highlights why this “new bull market” may just be getting started. Find out why www.TheTechnicalTraders.com is dedicated to helping you find and execute better trades and stay ahead of these market moves.
Chris Vermeulen
https://thegoldandoilguy.com/wp-content/uploads/2019/03/USDGBP_F.png409700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-12 21:24:042019-03-12 21:24:04Is Britain At The Edge Of A Political Cliff?
As we continue to explore the fragility and future implications of a Chinese economic contraction from PART I as well as the broad extent such a contraction may have on global markets. Our continued premise is that a renewed capital shift is taking place that focuses on US Blue Chips and Mid-Cap stocks. We believe this is currently facilitating a renewed valuation exploration process in the US and global markets and, as such, may result in expanded price exploration for many global markets.
Credit, debt and equity crisis events typically unfold in one of two forms; orderly or disorderly. Our belief that an orderly credit/debt crisis event is currently unfolding in China/Asia and Europe is based on the premise that the Chinese economic data may have been grossly inflated over the past 9+ years and that the extended credit boom in China/Asia may be similar to the 2008-09 credit crisis experienced in the USA. When a credit boom takes place, a vast majority of this new credit enters the global market as private, corporate and government debt. When a credit contraction event takes place, this credit/debt become a massive liability which can ultimately destroy future capabilities.
One aspect of the total Chinese credit/debt ratio to consider would be the GDP Deflator values. These ratios compare non-inflation adjusted GDP to inflation-adjusted GDP. As inflation increases, the difference between Nominal GDP and Real GDP are related in the GDP Deflator values. Currently, the Chinese GDP Deflator values are reporting at 656% for 2017 – which indicates the year over year inflation is running at 656% from the base year. We believe this inflation measure may actually be much higher in 2018 and would indicate that consumer inflation continues to skyrocket in China while credit/debt issues are becoming more prominent.
Consider the implications for consumers, corporations and the Chinese government if inflation continues to increase while consumers, corporations and government are becoming more and more distressed with debt issues. The most logical outcome would be a devaluing of the Chinese currency or the forgiveness of certain debt issues, yet we believe the problem is much more systemic in China/Asia. We believe the core issues China is facing is the reality of their own making. The reality that the manipulated growth and expansion they have been reporting for nearly a decade is a “paper tiger” and that true growth of income and wealth was really nonexistent. It is easy to assume you have new growth, wealth, appreciation when one is able to hide behind false numbers and appear to be in control of risks. But when risks begin to shift into disorderly unwinding, the blinders come off and real problems exist.
Now, factor into this equation the incredible risks initiated by the Belt Road Initiative (BRI).
The risks of extended debt distress to many foreign nations is complicated by the potential for an extended economic downturn in China. A negative 5~10% economic growth factor in China will create immense pressures on not only China, but most of SE Asia. In addition to this extended pricing and economic pressure, the extension of credit for infrastructure projects within the BRI are already exerting debt repayment pressures on a host of foreign nations. We recently reviewed outside research that confirms our suspicions : https://www.cgdev.org/sites/default/files/examining-debt-implications-belt-and-road-initiative-policy-perspective.pdf.
Should inflation continue to rise in China while a credit/debt contraction event unfolds, it would likely result in a Venezuela or Zimbabwe type of outcome which would be difficult to contain. It may result in an incredible humanitarian crisis event where hundreds of millions of people suddenly find themselves unable to maintain any wealth, service their debt and restore any order to their lives. An interesting article focusing on how Venezuela positioned themselves for a perfect storm of hyper-inflation can be found here : https://www.forbes.com/sites/garthfriesen/2018/08/07/the-path-to-hyperinflation-what-happened-to-venezuela/#21a29d3e15e4. The take away from this should be that protectionist mechanisms (a currency peg, import/trade controls, nationalization of industries and state subsidized commodities and industries) setup a perfect storm environment when global supply/demand factors implode.
Once we consider the Chinese Consumer Price Index as well as all of these additional factors, traders must be prepared for what may become a 24 to 72 month process of unwinding Chinese credit/debt risks within the global markets. Should CPI continue to fall, but not fall in line with a decrease in the GDP Deflator levels, then we should consider a moderate level of hyper-inflation is taking place in China. Should exports, employment and GDP begin to collapse while the Chinese government attempts to minimize these factors for the consumers/corporations, then we should consider the Chinese government is following the path of Venezuela in attempting to control risks that are disorderly.
The Chinese CPI chart, above, fails to explore the continued consumer pricing level increases that have been in place since well before 1995. Mild contractions do occur throughout this data. We would be concerned with a moderate CPI contraction that lasts longer than 24 months. In particular, we would be concerned with a dramatic shift in the economic growth capabilities of China and their consumer base as that could become a catalyst for a larger contraction event.
In the next segment of this research post, we’ll explore how all of this relates to opportunities for traders and show you what we expect to happen over the next 12~24 months.
If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month. We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members. We recently close some nice positions UGAZ 30%, NIO 21.6%, ROKU 13%, GDXJ 10.5%. In fact, we are about to launch our newest technology solution to better assist our members in creating future success. In fact, we are about to launch our newest technology solution to better assist our members in creating future success.
Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/2019-03-09_ChinaCPI.png426767adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-12 10:39:542019-03-12 10:39:54Chinese Economic Data Will Move Equities Markets – Part II
The US stock market opened today with mixed opening prices. The crash of the Ethiopian Boeing passenger jet prompted selling in the Blue Chips, particularly in Boeing (BA). As of right now, the US stock markets have recovered quite well and have pushed higher by mid-day.
We believe this upward rotation may be short-lived and want to highlight the two Engulfing Bearish candlestick patterns that have formed recently. The first, near the October 2018 highs, prompted a very deep price correction that ended on December 24, 2018. The more recent, completed just on March 8, 2019, is setting up resistance just above recent highs ($175.95) and is still a very valid sell signal for the QQQ. Unless the price is able to breach the $175.95 level over the next few weeks, this Engulfing Bearish candlestick pattern is technically the key pattern driving future expectations for the price.
Our February 17th research, “Get Ready For A Breakout Pattern Setup”: https://www.thetechnicaltraders.com/get-ready-for-the-breakout-pattern-setup-part-ii/, highlighted our expectations that the US Stock market would set up a larger Pennant formation with downward rotation near current levels. This setup has, historically, been prominent in the markets and has setup larger upside breakout moves in the past. We still believe this pattern is setting up and that downside price MUST take place before any new upside momentum breakout can begin to unfold.
Our belief is that today’s upside price move will falter throughout this week and prices will continue to decrease as the price trend continues. The two Engulfing Bearish patterns are very strong indicators of potential downside price trends forming. Again, unless the $175.95 level is breached, we strongly believe the downside price trend will continue. Plan and prepare for a deeper price rotation before any upside momentum breakout pattern unfolds.
If you like our research and our level of insight into the markets, then take a minute to visit www.TheTechnicalTraders.com to learn how we help our clients find and execute for success. We’ve been calling these market moves almost perfectly over the past 18+ months. Learn how our research team can help you stay ahead of these swings in price and find new opportunities for skilled traders. Take a minute to see how we can help you find and execute better trades by visiting www.TheTechnicalTraders.com today.
RECENT CLOSED TRADES
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart_19-03-11_EngulfingBearishQQQ.png387700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-11 14:51:582019-03-11 14:51:58This Stock Market Pop Could Fizzle Fast
March 8th, 2019 may gain some level of infamy over the next few decades. There were two big numbers released on this day, the current Chinese economic data and the US Jobs data for February 2019. Both numbers fell drastically lower than analysts expected and the global stock markets dropped in pre-market trading by more than 1%. Yet, something very interesting transpired through the trading day – a recovery rally.
The Chinese economic data was particularly devastating. It leads our researchers to ask a very critical question, “is this going to be an orderly contraction or is this contraction going to extend into more chaos?” Our research team believes the economic contraction in China will extend out into much of Asia and nations participating in the Belt Road Initiative (BRI) over the next 3~6+ months. We believe a natural progression of “protectionist processes” will begin to take place throughout many of these nations as the money spigot from China dries up. We believe this credit contraction and economic downturn will result in an extended repositioning of priorities, assets, and valuations throughout most of SE Asia and India. It could extend into certain areas in Europe and Arabic nations.
(Source: Bloomberg Finance L.P.)
The economic data released by China points to a very real and excessive economic contraction. YoY Exports reported as -16.6% vs. expected +6.6%. YoY imports reported at -0.3% vs. +6.2%. Trade Balance reported as $4.12B vs expected +26.20B. Think about these numbers. In some cases, these values represent a -300 to -700% decrease from expected levels. A recent Bloomberg article suggests the China GDP levels were inflated for the past 9 years or more (https://www.bloomberg.com/news/articles/2019-03-08/china-s-gdp-growth-pace-was-inflated-for-nine-years-study-finds)
As these new economic numbers work through the news cycle, we’re confident that a fairly large group of global investors are going to catch quite a few investors/traders off guard. The recent rally in the Asian/Chinese equity markets has prompted a bit of complacency and upward price expectations by investors. The rally, shown below, from early 2019 till now resulted in a +17.7% increase over a period of about 60 days. We are confident this upside move attracted the attention of many global investors who likely piled into the trade expecting a US/China trade deal over the past 2 weeks to relieve any upside pricing pressures. Now that the data is showing greater risk in the Chinese markets and how that may extend out to other regional markets becomes the top consideration for these investors.
The fact that the Chinese markets may contract by at least 8~15% over the next few weeks must concern larger investment firms and traders. Depending on their leverage, this could be a complete disaster for some. Any extended protectionist move by China and/or additional pressures on the credit/debt balance could push a new wave of defaults and extended downward pricing pressures. Our researchers believe a move targeting recent October/December 2018 lows is not out of the question.
As we’ve been suggesting in our recent research posts, we believe a new capital shift is taking place. We believe investors were willing to take a risk to jump back into certain market segments where new valuation levels presented some clear opportunities (China, Europe, and others). Yet, we also know that extended risks could quickly change this stance. As renewed fear enters the global markets, it is very likely that a renewed “revaluation event” will take place and investors will start to scramble for safety. This is the capital shift that we have been warning about – a dramatic shift of investment capital away from emerging markets and foreign opportunities move into US Blue Chips and Mid-Caps because of the true US Dollar based safe-haven investments.
Should our expectations of this dramatic capital shift accelerate over the next few months, we’ll likely see the current downward price rotation in the US stock market end sometime in early April as global capital resettles into the US equities.
In the next segment of this research post, we’ll share some critical data that may become a catalyst for the capital shift that we believe is currently taking place.
If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month. We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members. We recently close some nice positions UGAZ 30%, NIO 21.6%, ROKU 13%, GDXJ 10.5%. In fact, we are about to launch our newest technology solution to better assist our members in creating future success. In fact, we are about to launch our newest technology solution to better assist our members in creating future success.
Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
RECENT CLOSED TRADES
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Bloomberg_data.jpg325700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-10 11:46:262019-03-10 11:46:26Chinese Economic Data Shakes the Global Equities Markets
Our researchers have been working overtime trying to help you stay ahead of these market moves. You may recall that we called this current downward price rotation in the US stock market over 25 days ago? You may recall that we called the downside price move in Gold over 40 days ago? Now, we’re going to help you understand how to find profits from these movements and how to look for opportunities throughout this rotation.
Our expectations for this move are that the NQ will see the biggest price rotation compared to the ES and YM. We expect the ES and YM to rotate downward by about -4~8% while we expect the NQ to rotate downward by -6~12%. The reason for this is that we believe investors are already in the midst of a capital shift moving capital away from technology and into Blue Chips and Mid-Caps. We believe this transition away from technology will continue and we believe this price weakness may result in the NQ/Technology establishing much lower price levels than many expect.
Currently, our expectations are for support near $6860 to hold with a potential for prices to reach a lower support level near $6740. We do expect this downside move to last at least 2~3 weeks before setting up a “momentum base” and starting to move higher again.
Opportunities currently exist for skilled traders to play this downside move in technology as well as to play an upside pop in the Inverse ETFs related to technology and the NASDAQ. Additionally, a similar trade could be made in the ES & YM, although we must warn you that price moves in the ES & YM are expected to be much more shallow in nature.
Our research suggests a bottom may form from this move sometime near April 10~17, 2019. We believe this rotation may last at least 3~4 weeks as expectations of global markets may continue until Brexit, US/China Trade and or Q1 Earnings start to hit the markets near the April 10~17 dates.
Once we enter April and get past April 5th or so, we should switch gears and start to look for Buying opportunities in the ES, YM, and NQ with a bias towards the Blue Chips and Mid-Caps. We believe these will be the bigger upside winners over the next 3~6+ months and could show an incredible upside price move after this new “momentum base” completes.
It is very important to take a minute to view our 5 PART Series because it shows you predicted price levels going all the way into 2021 and highlights why this “new bull market” may just be getting started.
If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month. We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members. In fact, we are about to launch our newest technology solution to better assist our members in creating future success.
Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
RECENT CLOSED TRADES
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart_19-03-07_NQ_Downside.png387700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-09 22:15:422019-03-09 22:15:42The Next Big Market Correction
If you were following our research, you would have known that Gold had reached a short-term peak in February. On Feb 19th the day gold posted a huge gain for the day and everyone was bullish and feeling like million bucks I did a radio show with HoweStreet’s Jim Goddard and said that strong day and overly positive sentiment was the going to be the top, which it was – Listen Here.
We had been advising our members that Gold would likely retrace below $1300 possibly beeper by and mid-April. Our advanced Adaptive Learning price modeling systems had warned us that Gold would likely setup a price rotation before the next move higher back in January 2019. This is what you need to know about the next 4+ weeks in Gold.
First, this downside price move is not over yet. It will likely continue through early April – attempting to establish a price base and new momentum bottom. Our opinion is that $1260 is currently the ultimate low price objective – although this is a soft target. Meaning, the price could retrace below this level (possibly towards $1240) before establishing a true price bottom. Be prepared for a low price near or below $1265 at some point in the near future.
Second, this downside price move in Gold will likely create opportunities for skilled traders over the next 3~6+ months. Our longer-term predictive modeling systems suggest that Gold will rally towards $1500 or higher near May/June of 2019. Thus, this downside move in an opportunity for skilled traders.
Third, we believe global economic and political news cycles are prompting a shifting capital across the planet at the moment. Global capital is likely shifting into safety in the US Stock market and away from high-flying technology and biotech stocks. Because of this, the fear that would typically drive a rally in Gold has been partially abated. The strength of the US dollar and the willingness of investors to shift capital into larger Blue Chips and Mid-Caps helps to reduce the true “fear hedge” that would drive Gold prices higher.
Lastly, we believe this trader psychology will change in late April or early May of this year. Our predictive modeling systems suggest a strong price advance in Gold will take place in May/June of 2019. Our cycle analysis suggested that April 21~24, 2019 are “key dates” for a cycle bottom or some type of news event that could change the dynamics of the precious metals markets. Pay attention.
This means that we need to be prepared for the downside price rotation in Gold and be aware that April 21~24 are likely to be a major inflection point in the precious metals markets. Skilled traders would be looking for opportunities before these dates and positioning themselves for the upside move.
Our research team, at Technical Traders Ltd., believes the $1260 level is true support – although we believe $1245 or so maybe an ultimate “washout low” price level to watch for. At this time, we are waiting for a clearer basing formation to establish new long positions and we are watching the US Dollar as well.
There is still plenty of time for this base/bottom to setup. Remember the April 21~24 date range and plan for key opportunities to setup 7~10 days before this key date. The next move higher in Gold should push prices well above $1400 with a high price target near $1540 for the longer term. If you are a “gold-bug” and/or want to find some real opportunity in the markets, then you won’t want to miss this next move.
If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month. We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members. In fact, we are about to launch our newest technology solution to better assist our members in creating future success.
Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
RECENT CLOSED TRADES
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart_19-03-07_GoldRotation.png387700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-08 15:14:192019-03-08 15:14:19Are you ready for the next big move in Gold?
Would you believe that March and April, historically, shows a 2 to 1 statistical probability of NG moving higher. Each of these months shows, historically, that NG has a strong potential for at least a $1.00 upside price move in both March and April. Only 1/3 of the historically testing time (23 years) did the price of NG actually decrease.
How do we know this? We’ve built proprietary price modeling and data modeling solutions that allow us to isolate and verify this data. This data was tested on a Monthly price basis for the statistics we’ve provided, above. When we run this same test on Weekly data, the results continue to support our conclusions.
The weekly historical data analysis for March shows a 53 to 46 positive price advantage with an average of $0.99 upside advantage over 99 tested weeks. The weekly historical data analysis for April shows a 58 to 45 positive price advantage with an average of $0.89 upside advantage over 103 tested weeks.
Although the Weekly data is not as overwhelming in terms of positive to negative weekly results, the overall results still support the Monthly data – resulting in nearly a $1.00 upside price advantage. Therefore, we believe any price rotation down in Natural Gas near recent lows, below $2.70, would be an excellent opportunity to take long positions with an upside target between $3.10 and $3.35. We are not attempting to target the full $1.00 potential upside because we want to target safer, quicker upside objectives – not the lower probability targets. In doing so, targeting a $0.40 to 0.60+ range allows us to execute very high probability objectives and trade almost like a “sniper”. Get in, get our target and GET OUT.
If you want to see recent trade we closed on natural gas take a look at this postwhich I think you will agree is nothing short of simple and awesome!
We believe the current Buy Zone in NG is below $2.70. Once price rotates a bit lower, any entry near the $2.70 level or lower would be an excellent entry level for skilled traders. Our targets would be anything north of $3.00. Ideally, we would pull half of our trade-off as soon as the price reached above $3.00 and pull the second half off when prices reached above $3.20 or $3.25.
Remember, we’re showing you that the months of March and April share this upside price advantage. This means there is a higher probability of upside price moves throughout March & April in NG and all we have to do is find the strategic entry points and “run our trades”. Get ready for some great trading opportunities this year and pay attention to NG. Remember, you can trade the ETFs for Natural Gas as well.
If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month. We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members. In fact, we are about to launch our newest technology solution to better assist our members in creating future success.
Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
Recent Closed Trades
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart_19-03-07_NQ_BullishSetup.png387700adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-07 20:24:012019-03-07 20:24:01Strong Historical Probability of NG Long Trades Setting Up
Chris Vermeulen, Founder of The Technical Traders shares his thoughts on the recent pullback in gold. There is a debate over sentiment (which remains strong) vs momentum (which is negative) and which one will carry the market in the short term. We also look at the USD and the tech sector in terms of just how much more they can run.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/korelin2.png318308adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-06 12:55:232019-03-06 12:55:23MOMENTUM VS SENTIMENT FOR GOLD
In Part I of this report we talked about and showed you what commodities and transports where doing in relation to each other. Here in Part II, we show you in detail what we expect to take place.
This final chart highlights our Custom Smart Cash Index (in BLUE) as well as the CBOE Commodity Index pricing levels (in RED). This data goes all the way back to 2012 and highlights a number of key pricing rotations. First, we can see that Commodities have been decreasing in total value from 2012 till mid-2017. We can also identify a key support level that was established in the Commodities Index near the beginning of 2016 – coinciding just a month or so before the bottom in the Smart Cash Index.
We believe this Key Bottom in both the Commodities Index and the Smart Cash Index reflect a dramatic pricing shift that took place at that point in time. Although Commodities have yet to rally beyond upper high ranges, we can see the Smart Cash Index rallied to incredible new all-time highs. The rally that started near the end of 2016 in the Smart Cash Index was likely the result of a “Capital Shift” that we have discussed extensively in the past. With commodity prices staying historically low and an increase in economic optimism, capital shifted away from “commodity-based sectors” and into “technology and biotech sectors”. Now, it appears this rally has run its course and a new capital shift is taking place.
Until Commodities begin to break out of the downward price channels we’ve highlighted on this last chart, global capital will be searching for two primary objectives; safety and hedged returns. By this, we mean to say that global capital and investment will be seeking out strong Blue Chip and Mid-Cap performers that can produce safety in growth, dividends and hedge against currency swings or further eroding commodity price levels. Think of this as a move to “key elements supporting the global economies”.
Heavy equipment, support services, and retailers, tool suppliers, and mid-level equipment suppliers, transportation services for these items and the repair parts and services to keep these tools running efficiently. Human services, labor, labor services, medical services, and entertainment services are likely to do well over the next 12~24 months. In an economy where commodity prices are relatively low and Transportation and Capital is flowing quite well, one could easily identify that Capital will seek out and identify the strongest opportunity for safety and growth as sectors continue to shift. After a massive rally in Technology and Bio-Tech, we believe a continued shift towards Blue Chips and Mid-Caps is taking place right now. Technology and Bio-Tech will likely find some support in the near future and become “opportunistic investments” eventually. But right now, we believe global investors are focusing on different targets to hedge the risks that are associated with certain technology stocks.
In closing, our research highlights that Commodities are not increasing as one would expect in an expanding global market/economy. We believe this is one core factor that will continue to drive a “capital shift” toward opportunity and performance in the Blue Chips and Mid-Caps. Global investors will re-enter the Technology and Biotech sectors when pricing levels become more opportunistic – at some point in the future. This means we have a very strong likelihood of the US and global Blue Chips, Banks, Industrial Supply, Basic Materials and Human Services (Entertainment, basic human essentials, regional human services, and utilities) will continue to perform well.
The US and the global economy is growing, just not as one would expect in a “total growth” environment. We believe the global economy has shifted to support “fundamental growth elements” that are related more closely to the types of industry and market sectors that support the fundamental growth components. We’ve discussed our theory that the global economies operate in a “growth or protection mode” many times before. We believe the current global economic stance is more in tune with “moderate growth while still being overly protective”. Watch Commodities and the Transportation Index for signs of when the global economy enters a larger growth phase and when more opportunity for a broader capital shift will take place.
This concludes this two-part series and how we identify market opportunities for us to trade. Analysis like this has allowed us to generate substantial profits in the past 30 days with UGAZ 30%, NIO 21.6%, ROKU 18%, GDXJ 10.5%.
If you want to learn how we can help you find success throughout this shifting market and throughout 2019 and beyond, then visit www.TheTechnicalTraders.com
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart3.png410694adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-06 10:30:342019-03-06 10:30:34PART II – What Commodities and Transportation Telling Us
Our ongoing efforts to dissect these markets and to help educated and inform traders has led us on an exploration path into the general market activities of two leading market indicators; Commodity prices and Transportation Prices. These two core elements of any regional or global economy are usually about 3~6 months ahead of the general markets. When viewing the Transportation Index, remember that transportation is key to any growing economy and a healthy economy. When an economy is doing well, the transportation sector will be busy shipping and delivering consumer product and staples as well as manufacturing equipment and supplies. When viewing the Commodity Index, remember the Supply and Demand equation where greater demand for commodities needed to manufacture, create, deliver or sell a product will drive prices higher as supply remains relatively constant, prices will increase.
Therefore, the theory of today’s research post is “are Transportation and Commodity prices telling us anything important about the future stock market valuations?”. Let’s get into the research.
First, the NASDAQ Transportation Index is painting a very clear picture that the upside price move starting near the end of 2016 drove prices well above historical normal ranges. Even today, we are well above historical ranges originating from the lows in 1998 and including the range expansion from the highs of 2007 to the lows of 2009. Given the premise that the Transportation Index would be highlighting increased economic activities across the planet and particularly those of more mature economies, one should expect that global trade/economic activity should be near all-time highs.
We would like to point out a defined upward price slope, highlighted by the RED LINE on this chart. We believe any potential downside price swing will find clear support near the $5025 level (the first upper range level from historic deviation ranges) or near $4690 (the RED LINE support channel).
In order to further our research, we’ll take a look at our “Custom Smart Cash Index” which highlights a broad range of global market indexes and weights them in a US Dollar basis. Obviously, the results of this Smart Cash Index is designed to highlight the total global valuation levels of a variety of mature economies/markets. We can easily see the volatility range established by the concerns prior to the 2016 US Presidential Elections created a very deep volatility range. We believe this is important because it establishes a “relative high point” and a “relative low point” that reflects human psychology and expectations. In other words, we believe the high point in early 2015 reflects an optimistic investor sentiment and the low point in early 2016 reflects a pessimistic investor sentiment.
This range can help us determine if current Smart Cash valuations are reflecting optimistic or pessimistic expectations by determining if the current price is near the lower areas of this range or the upper areas of this range.
Currently, the Smart Cash Index is moving higher after reaching an ultimate low point near December 24, 2018. This would indicate that optimism is increasing in the global markets. Additionally, The Smart Cash Index has breached a downward sloping price channel, drawn in BLACK. We believe continued optimism will drive global market valuations higher over time. Yet, we believe numerous 4~7%+ price rotations will occur in the US Stock Market as the total valuations continue to rise over the next 12~24 months.
What we would expect to find to help confirm our analysis is the price levels of general commodities would be increased to match the renewed optimism we believe is growing in the global markets. Obviously, if the global economies are doing well and trade/sales are increasing, then we would expect core commodity levels to increase as demand stays strong which we have seen this happen time and time again during economic cycles.
This concludes PART I and how we identify market opportunities for us to trade. Analysis like this has allowed us to generate substantial profits in the past 30 days with UGAZ 30%, NIO 21.6%, ROKU 18%, GDXJ 10.5%. IF you want to know our conclusion on what commodities and transports are telling us then visit our website to read PART II in the next 24 hours.
If you want to learn how we can help you find success throughout this shifting market and throughout 2019 and beyond, then visit www.TheTechnicalTraders.com to learn how we help our members create success.
Chris Vermeulen
Technical Traders Ltd.
https://thegoldandoilguy.com/wp-content/uploads/2019/03/Chart2.png412696adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2019-03-05 10:03:472019-03-05 10:03:47What Commodities and Transportation Telling Us – PART I
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(Source: Bloomberg Finance L.P.)
Chris Vermeulen, Founder of The Technical Traders shares his thoughts on the recent pullback in gold. There is a debate over sentiment (which remains strong) vs momentum (which is negative) and which one will carry the market in the short term. We also look at the USD and the tech sector in terms of just how much more they can run.
