Every week when I sit down to write these notes, I have this great dilemma – where to start. This week it is very much the case again. So many charts vying for attention. Gold found its way to the top of the pile so here we go.
I have mentioned a number of times that I was of the opinion that gold might well be forming a large A B C correction. Despite such wide swings over the past couple of weeks, the chart still looks to be suggesting that this could be the case – as we can see from the daily high/lows here. Now I am going to make a statement – gold is going higher.
When I recently included this point and figure chart of silver, I was lamenting the fact that it didn’t come back into the little target box I had marked on the chart. At that time, it had turned around and ran back up to its high. So of course, what does it end up doing - comes back perfectly into this support box after all. Sometimes it is so frustrating being a chartist. If I am right on gold, this is going higher as well.
Now we come to the big picture in the US stock market. Starting with the daily S&P Index – I have previously drawn attention to the growing divergences. The red line in the middle of the chart is the Advance/Decline of the NYSE. Note that this line has not kept up with the index and in fact has formed a slight downtrend. What is important though is that the major uptrend is nearly upon us. Divergences can be unpredictable in how much time they may take to finally have a major effect – but rest assured, there is a limit, and we are very close to the absolute limit here.
And now for another major divergence that I have highlighted previously – the running total of the 52-week high/lows of the NASDAQ. Here again we see that the bulk of the stocks have not been following the few majors that have attracted so much attention. As with the previous chart, there comes a time when such divergence cannot be carried by the market any further.
And one more – this time the NYA with the running total of the money going into rising stocks and the money going into falling stocks. As we can see here, we actually broke a lovely uptrend at the end of the week as did the NYA. When you study this indicator closely, you can see just how accurate it has been.
In my opinion there is a definite limit to how long the market can ignore such blatant divergences and I think that time is upon us.
Now for something different. The DAX. This is dreadful. Look at the break of that uptrend. We have so many problems in Europe, and I think that sentiment is bound to affect markets elsewhere.
And something different again – US Ten Year Bond yields. I had mentioned previously that longer term I thought we might see rates in the US move between a level of roughly 4.20 and 4.60. I think people need to be careful what they wish for here as I might have been overly optimistic with my previous prediction.
For another change of pace – copper. At the top, the daily close of cash and on the lower level COPX.If I am right about gold – it would certainly help the picture here – and I must say it could do with some help. COPX is back to its first support and below the current level there is a further important band of support that goes back a couple of years. Short term it does look as though it should break this first downtrend and if it does, we should have another close look at this market.
Steel – thankfully, the lower support came into view just in time. Hate “just in times”. This level down here has marked all the lows for nearly two years. I do not want to see this broken, or we are in big trouble.
The local picture is just as worrying. Starting with MVW – VanEck Equal Weight. Holding support – just. I do not like the look of this chart.
Next, I have lined up XMM (mining) and XGD (gold). When we look at the mining index, we can understand why stocks such as BHP have been locked in a wide trading band for so long. I had been hoping (?) that this index would gather up enough strength to attack the upper boundary. However, by the close of last week it was looking more like testing the lower support on this chart – which is still quite substantial.
When we look at XGD we see that stocks here certainly look to be trying a bit harder to break topside.
Obviously, the outcome on the actual commodities will hold the key here.
Finishing up with Nvidia. Weekly semi-log chart. This has been such a darling for some time. Just look at that perfect up slanting wedge. God help us when it turns as it will probably come back to at least 800. Dare not even mention what it could do LONG TERM.
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