Nightly Email for Sunday June 13
Going into the summer I thought I would donate tonight's Email to give an overview of the longer term picture of the markets we are following. With the exception of the dollar chart I have loaded 5 year charts for better perspective. Writing a nightly email I tend to focus on the day to day changes but make no mistake, I always look at the long term picture first every night, it does not change much from day to day, sometimes from week to week but when it does, I see it.
The Commitment of traders data remains bearish with gold getting close to the old lows in a slow drift down. So no help for the metals bulls there.
No news early in the week so we will trade based on options expiry.
US$...We should see some more sideways, the trend is clearly up long term so any good size sell off should bring in bids. For now I am picking at the short side but it is probably too early to try to pick a long term top. Clearly the high price of the dollar is counter to the interests of the US Govt and there will be an attempt to stop this run, this may be it, but so far saying this is the top would be pure speculation.
SPY...Two up days in a row, ye-haw. I have loaded a 5 year chart below.. The obvious trade is a rally to the 115.00 level to form the right shoulder of a head and shoulder top at a minimum but that is so popular with the technical traders that we also have to look at two other options. I think if we get to 115 we may keep going up. I will be holding for that possibility. There is a less positive outcome which is that we struggle here for a while longer, then fall back surprising everyone, if we fall back then it could signal a solvency panic in the regular economy. Leading to a clunk down to 90.00.
XIU...You can see that we are coiling into an apex of a tight triangle. There is a gap down in the 15.25 area which correlates with the 90.00 level in the spy. Over the last few days we have under performed the spy, I am watching closely for clues as to whether it tips spy's hand. I also noticed that there is less of a head and shoulders pattern here, shoulder wise. For now I am trading as if the trend is still up and buying dips. You can also see how this market tracks the US markets, so when the Canadian $ is in a weak phase it is sometimes worth using this etf as a currency hedge.
GLD...If you combine the gld chart with the gdx chart below it gives a good perspective of where we are right now. We have a couple of targets, one just above 125 and the other at 130.00 ish. Whether we get there on this drive remains to be seen but the trend is still up, that is why I remain long the metals in my buy and hold positions and continue to buy dips in my trading account.
SLV...Again with silver, comparison with the gdx chart is helpful. Clearly the trend is up but we are struggling here as the big cycle exerts it's pull. I remain bully long term but can see a short term shakeout that could go all the way back to under 15.00, although for now I am being more conservative and using the 16.00 area as my target. Notice the head and shoulders pattern that is building, keep in mind it is not confirmed yet. That is why I am nervous in the metals and using tight stops because we may be able to buy 10% cheaper soon which for traders is a nice profit. I am staying long for now but my eyes are wide open here.
GDX... I thought I would revisit the junior vs the senior gold stocks situation for three reasons. One is to show the reason that I remain cautious on the metals. As you can see the next few months is not usually kind to gold stock holders, we could see GDX back down to the Feb lows given the right news, ie deflation. Two is to show how a small explorer can be a good leading indicator, which is why I watch them. Three, to show what a great opportunity is coming in some of the juniors, 100 percent returns, but don't pull the trigger yet, wait until the deflation news is front and center in the media. Of course one look at the tlt bond chart below shows that even the best cyclical plan can go off track.
TLT...This is a good example of why it is hard to trade using cycles alone, the 1 year cycle was coming in like clock work, then a crisis hits and things go out of whack. The blue circle represents the 3 year cycle which has been working for 30 years, so we have a major low due right now! If things are still on track cyclically in the bond market then you can see we have a couple of confusing sign posts. Bonds are saying that the whiff of deflation will be more than just a whiff and long rates will be low for a few years yet, that could mean low stock prices and a less aggressive move up in Gold. It is a possibility that we still see a swift swipe back down to the 92 level I have talked of in the past. It could happen as the spy pops up to 115.00 but it looks like there will be ongoing weakness in world economies for quite some time yet.
As I send this there does not seem to be any bad news coming out of Europe, at least not yet. I am bullish all markets except bonds for now. Bonds look good longer term.
A note to readers: This is a sanitized copy of my nightly Email advisory which I thought may be helpful due to tonight's longer term view, my regular Emails have specific trade recommendations, entry trigger points, stop loss locations and names of stocks etc. If you want more information please contact me at the locations below.
