A snapshot of current daily technicals…
GLD is in no man’s land between support (SMA 200) and resistance (SMA 50 and above).
SLV has dropped further than the preferred equiv. of Silver 19.50 to 19.75 (now a resistance zone (SLV 19 +/-). The situation is now abnormal to the preferred bullish case, with critical support above the 2013 lows. Note that NFTRH 304 noted that a 4th test of critical support was not desirable because this support has already been tested enough.
SLV-GLD shows a story of an improved risk vs. reward for the precious metals sector, however. We were flat out cautious to short-term bearish as silver vs. gold got very over bought. It then formed a mirror image of the bottoming pattern from the spring and has dropped since. The ratio – and indeed the entire inflation argument – needs to find support here. We have noted that the gold sector can rally with silver under performing, but it usually rallies with silver out performing.
GDX, like GLD is in a resistance/support no man’s land. Risk to be managed as needed on a loss of support. Conversely, a higher high to March sets a bull cycle uptrend.
GDXJ has been trying to hold the 50 day averages.
SIL has the same status as GDX as it remains unconvinced that silver is going to crash long-term support.
DBC has tanked back to critical long-term support (ref: CCI 500 +/-). Despite ongoing talk of inflation by many analysts, commodities remain a mixed bag of speculations with the bag getting heavier by the week. If commodities are to bottom, it needs to happen soon.
USO is very bearish barring some kind of flash reversal. Yesterday’s downside put the weekly chart reviewed in NFTRH 304 below the lower triangle line, i.e. in breakdown mode.
GLD vs. DBC and USO has done nothing but improve lately and this gives us an opportunity for review.
Important: With gold rising vs. silver, general commodities and crude oil, we have noted that the ride could be bumpy even for the gold sector. But this is the environment in which the business of gold mining improves. There would be no investment merit if gold were declining vs. commodities as it did in the run up to 2008 because fixed cost pressure would be in play. Hence, if the miners lose supports noted above, people should manage risk as suits their needs, but realize that the macro environment is becoming favorable and such a failure would result in a buying opportunity.
GLD-SPY remains in a tentative series of higher highs and higher lows. Thus far the US stock market is avoiding any negative implications of the lack of inflation signals. In other words, Goldilocks remains in play. A lower low in gold vs. SPX would hurt the gold mining case. A hold here would be positive, obviously.
Back on commodities, UNG is flat out broken below the long-term breakout line.
DBA is in a firm downtrend.
URA looks relatively interesting above the support zone. A break above 15.75 would set a higher high in what would then be a new short-term bull trend.
TLT has been bullish for all of 2014, as projected and in defiance of the Great Rotation hype job. Recently long-term yields have broken down (with the surge in TLT above 118) and that is being tested now on this little flag down 116.
TIP-TLT agrees with commodities that there is no sign of inflation anxiety. The question remains, how long can Goldilocks keep going the further this ratio breaks down?
SPY looks to fill yet another gap and test the all time highs. Who is surprised?
QQQ is at recovery highs and looking mighty gappy as it jumps higher. It almost seems as though all those fund managers (and black boxes) with all that caution (ref: recent NAAIM sentiment survey) realized that July was just another bump (as opposed to ‘the big one’) and are flying back in. This chart opens up the possibility that Scenario #2 could be engaging, which is an upside market blow off, if Scenario #1 (a summer correction) ends up being the mini variety, per July’s downside. This declining volume gappy thing could also be an ‘overthrow’ prelude to downside reversal.
SMH is filling gaps and creating gaps. Yesterday’s gap was on suspect volume. We’ll continue to watch this market leader.
KBE-SPY (banks vs. SPX), another market leader, continues to be weak.
EZU has bounced to the first resistance level. There is more at the SMA 200.
FXI offers a great lesson in market psychology. When we first considered the Inverted H&S bottom, it came amidst pervasive bearishness. Indeed, I could not even figure out why it was there. But that is why we have charts, so we don’t out figure ourselves. It was an IH&S, it was bullish and it hit (and exceeded) target at 40. Support is noted.
EEM is a similar theme. With a strong USD, the EM’s have rallied. The big picture breakout line was key. Recall that the weeklies and monthlies we review in NFTRH show additional big picture trend line resistance above.
Speaking of Uncle Buck, let’s add UUP this week since we have been on a USD bull case for many weeks now. We had noted a bullish bottoming pattern at the public site and have been managing a bullish weekly chart in NFTRH for months now. An eventual target is noted, with the neckline acting as support if there is a correction first.
Add the bullish USD/bullish Emerging Markets to a list of things that don’t seem to make traditional sense in the markets at this time. But what does make complete sense to our analysis is that the USD and the Gold-Silver ratio are rising together. This implies liquidity is becoming constrained even as the US stock market recovers and in some cases makes new highs. This could be a negative divergence to the stock market, or perhaps Goldilocks is pluckier than we might give her credit for.
The environment is improving for the gold mining sector in many ratio indicators, with Gold vs. the US stock market still a concern. The sector is technically above support levels with silver making a lower test than has been desirable.
Remain a very heavy mixed bag of speculations and of no current interest. Not until we see signs of a bottom and a bump up in inflationary signals.
The bounce continues, so much so that it could threaten to no longer be a bounce pretty soon, at least in the US. Europe is relatively bearish and Asia/EM’s relatively strong.