We will cover the wider spectrum in the weekly reports, but here I want to boil it down to the US stock market and the gold sector and keep it simple, as we are currently managing opposing views in these two items.
S&P 500: Bearish but on a bounce, as anticipated.
Gold sector: Bullish and so far resisting taking any sort of substantial pullback.
SPX finally turned the resistance at 1947 (middle point of the ‘W’) to support and now proceeds on its way toward target (2000 +/-, expanded to 2030).
Here we dial out to the weekly chart for perspective on the EMA 50, which is rolling over and the Dome that has capped SPX for the last year.
Another view of the weekly adding the EMA 20 to the EMA 50, showing a moving average cross that preceded bear markets in 2000 and 2008 (failing to do so in 2011). As you know, I often note how we should tune out talk of the bull or bearish “cross” when some chartist tries to titillate or scare us with it. That is with respect to the daily MA’s 50 and 200. A weekly chart like this is a different story and its signal is to be taken seriously. This condition proved very bearish in 2 out of the last 3 instances.
The current view remains that the US stock market, as represented by the S&P 500, is bouncing short-term but bearish on its bigger picture. Considering this chart and the one directly below, I think it is time to consider leaking out of the ‘bounce’ trade.
There could be a little more upside, but risk vs. reward is going away for the bulls, who are now firming up their backbones as expected. From Sentimentrader…
As for gold, we have been on 2 themes; one that it is probably time for a cool down (which could come from the recent highs or the 2015 high of 1308. So far, all it has done is consolidate while the stock market bounce has proceeded. This despite a bearish CoT, which is the 2nd theme in that there are parallels to the start of the bull market in 2000. In this scenario, bull market rules are in play and the CoT, while causing some short-term issues, may not be feared to the degree it is in a bear market.
Here is the daily chart of gold, still dealing with what has alternated as tentative support and resistance over the last few weeks.
The weekly continues to show the high was 4 weeks ago but gold remains in consolidation as opposed to correction. They key support levels are 1) 1175-1180 and 2) 1125-1140.
Silver took the hit last Friday all the way down to the projected support level around 14.50. It is hard to believe that the CoT could have been fixed in one swoop like that, but again we should respect that we may be on bull market rules as opposed to the bear rules of the last few years. So I am open to lower probability that the metals have put in their lows with consolidation in gold and the significant drop in silver, but…
There is the potential that silver is making a little bear flag here below the SMA 200.
So it would pay to remain in caution mode. I continue to lean toward lower levels in the short-term but also toward the view that the odds a bull market is beginning have increased. Here’s the view of gold vs. the S&P 500 (it is similarly bullish vs. other stock markets, commodities and currencies, generally speaking). The chart is making an orderly consolidation during SPX’s bounce, which is what I prefer to see.
Gold vs. long-term Treasury bonds is even holding up above the first moving average.
One item gold has been weak vs. is the gold miners, and that’s a good thing. This indicator is still below very long-term resistance but change has to start somewhere and this has been very positive. We’d want to see the miners remain firm vs. gold on any sector pullback. That would be optimal and in line with a theme of ‘bull market rules’.
HUI continues to dwell at the channel top and the EMA 55 has risen to 143. The October high of 140 is the key support level.
Stock Market: The bounce may have higher to go, but it is maturing. It is and has been counter-trend.
Gold Sector: The expected reaction has so far only taken place in silver, which still appears vulnerable. At the channel top for HUI, we can continue to watch for a potential pullback and view key support in the low/mid 1100’s for gold, the low mid 14’s for silver and 140 for HUI.
The stock market is on a bearish intermediate trend and the gold sector is establishing a bullish intermediate trend.