This week, the general markets shifted gears in most areas and perhaps opened up some trading opportunities (and then maybe not as we will see!).
The last FSO article I wrote suggested a temporary shift from precious metals into the broader markets (or stocks you like that compose them). Now that Friday's data is in and integrated in the data, let's take another look and see if what I suggested is really true. Plotting weekly data with MRO on days other than Friday after market close uses the latest data within the week plotted and is subject to change depending on Friday's data. Daily plots, of course, are current to the close of market the day previous to publication.
SPY Daily Chart
Since June, the S&P 500 proxy has been problematic, kicking off whipsaw buy/sells in a trading range from 2 to 2. This is too narrow a range to invest for the intermediate time frame but profitable long/short trading can be done if you are fast on your feet. I was long as of the first week of July, briefly sold and repurchased later in the month and am currently long with a modest position. The MRO is currently starting to roll under, the %R and 5 DMA is flattening out and I may be back out of it next Monday or Tuesday.
SPY Weekly
The weekly chart of SPY is on a BUY signal as of close of markets Friday and I must take that into consideration in how much confidence I place in the long position. So far, so good, but I will watching things very closely next Monday and as the week progresses. It may turn out to be a month of profit on the long side but we have to let the MRO tell us what's happening, not guess at it.
GDX Daily Chart
Gold on the other hand is, without doubt, in a correction. Long or short, deep or shallow, who know? The MRO is locked in above zero (bearish) and with every little wiggle, the gold bug index rocks from up to down a point or two, wiping out traders right and left. The %R is bouncing along at the bottom of the chart, showing an oversold condition that will likely be a trigger for a rally but that's only a supposition on my part and certainly not a prediction.
The weekly chart of GDX leaves no doubt that the long term uptrend in gold has been broken and the support levels of of - are likely to be tested in the intermediate term. Unlike so many technical indicators, support and resistance level do indeed exist and are worth watching, although with the program trading that now dominates the markets, computer selling or buying may drive the price of a security beyond the resistance or support levels sufficiently to scare off some traders.
DXY Chart Weekly
Not a usual picture for DXY versus gold. The dollar index is on a valid sell with no indication of a turn around. Everything is in gear on the downside and for now, the dollar is going to get weaker. How long? Let's let the MRO tell us when the tide turns.
What's unusual is that normally when the dollar weakens, the metals strengthen. Not so this time, at least right now. At the moment, in response to this conundrum I'd be long in a currency that is appreciating versus the dollar such as AUS$, Canada or any one of several others that are currently on a buy.
Please remember, the MRO does not forecast what will happen tomorrow or next week as you can see from the whip-saws one suffers now and then in the above charts but it does provide a guide as to what everyone else in the market is doing and when the trend is extended, allows you to hop on board for the ride (in either direction).
When the situation is like it is now, the more conservative investor might choose to simply stand aside and allow the trends to become established before taking a position of any sort. Our markets are currently in a turmoil trying to figure out whether or now we're going to get a second downleg or not. They are unstable to say the least and cash might be your best bet until things get in gear in any one direction. Either way, caution is advised and keep a close watch on the powder container so it doesn't get rained on!
