A-B-C Correction At Key Level
After a brief hiatus from posting, I am just now getting back into the swing of things. On a personal note, my wife and I moved the family cross country from Texas to Idaho this past month, and that is an adventure I hope to never again repeat! But life is settling down a bit now . . .
The bond market is a good place to dust off the charts. I closely follow the iShares 20-Year Treasury Bond ETF, $TLT, and my analysis continues to confirm the the correct application of the Fibonacci levels should begin with the secondary high from the 2016 peak, not the primary high. I share some prior thoughts here.
In doing so, we see $TLT honoring multiple Fibonacci levels of support and resistance throughout the last three years.
The breakout from the secondary high occurred in August and failed to close above the 1.236 Fibonacci extension. It has since had an A-B-C correction and is retesting the break of that secondary high, which also coincides with rising channel support. The move from here will dictate the direction for the next few weeks/month. If support does not hold we should expect a retest of 134.50. Otherwise, a move back towards 150 seems very likely. My bias is to the bullish side.
A more granular look on the daily chart from the September high shows a measured move higher, with price retracing to the .618 level, pulling back to .382, pushing higher to .786, and now sitting at .236 (higher low from the September bottom).
Lastly, for anyone interested in learning more about how to apply Fibonacci levels, please join me this Sunday, October 13th, 2019 at 6pm EST for a webinar with my friends at Trendspider. A link to the webinar is here.
Ratio Poised to Break to the Upside?
I have focused much of my time on the gold market recently because of the significance of the May breakout above $1365/oz, which had acted as key resistance for six years, and what the breakout is communicating about the forward trajectory of global markets. Gold is a risk-off asset; a flight to safety. Its tight correlation recently to the bond market reinforces how investors have been positioning away from risk assets. (more…)
Flight to safety
Since 2015, the gold market and bond market (I use the $TLT 20-Year Bond ETF as a proxy for bond market performance) has been highly correlated. Both asset classes are viewed as a risk-off flight to safety. While past performance does not predict future performance, it is worth noting that many are viewing the bond market as a “bubble,” while simultaneously extolling the opinion that gold has entered a long-term secular bull market. I am personally allowing for the possibility that both have much higher long term upside, particularly when considering that US bonds offer the highest yields in the world. The best yielding sovereign bonds should continue to fetch a global bid. (more…)
Price a bit overextended
Gold has been on an epic run since early May, breaking out of a six-year base and launching almost $300 per ounce in the span of three months. Momentum favors the bulls, and the technicals look very strong over the long term. The backdrop of lower global yields and potential monetary stimulus are key fundamental drivers for the recent breakout. (more…)
Platinum Testing Downtrend Line With Potential Upside Breakout?
Platinum has underperformed gold since the ratio double bottomed in 2014. This has been especially frustrating for bulls as platinum’s cousin in the PGM group – palladium – has burst to all-time highs through the same period. (more…)
Test of 30-year highs rejected this week
After a quick mid-summer vacation I am finally getting back into the swing of things here. I’d like to kick off a few posts this week by highlighting the move in silver and specifically the gold/silver ratio.
As we have discussed at length in previous posts, the story this summer has been gold breaking out of a six-year base at $1365 and finally showing signs of strength after may false starts. What has made many gold bulls lingering skeptics has been the performance of silver, which is a smaller market with higher beta. Generally, when gold goes up, silver goes up much faster. When gold goes down, silver goes down much faster. (more…)
Interest Rate Cuts In Question?
The robust jobs report (224,000 new jobs vs. 160,000 projected) immediately changed the narrative of forthcoming Fed rate cuts, which had been the wind beneath the sales of the recent bull action in gold and bonds, and the weight pushing the dollar lower. The Bloomberg article referenced above summed it up: “Though the economy still faces trade tensions and below-target inflation, signs that economic growth remains intact may challenge calls for the Fed to cut rates this month — especially those for a half-point reduction.” (more…)
Gold Entering Seasonally Strong Period At 6-Year Highs
The gold price close will be significant today, as gold will print end of day, end of week, end of month, and end of quarter closing prices. Gold bulls really want to see a close above $1400 (the 2014 peak). If gold holds here, the next target is a weekly close above $1435 (the high from the 2013 dead cat bounce), which should drive further buying activity into the gold market. A strong close today will be significant. (more…)
Gold Bugs Return from Exile
The long suffering (and diminishing) army of gold bugs, distraught over gold’s underperformance in the wake of asset inflation, government spending, and historically low (sometimes negative) interest rates over the last seven years, received a resounding message of hope yesterday when gold broke through long term resistance to top tick at 1397.70. Silver also broke through near term resistance of $15.15, and this morning gold miners also jumped higher and confirmed the breakout and retest of the long term down trend line from the 2011 highs. It all seems to be working at the moment for the precious metals sector. Let’s look at the charts. (more…)
Gold hits $1362 in Overnight Trading
The long term daily chart above highlights two potential falling (slightly) resistance lines from the peaks of the last six years. These lines are represented in black and red. Of particular note is how gold has reacted to these lines in the last few weeks – honoring both to the tick. This trading action is more evident on the 4 hr chart (below). (more…)
The palladium price broke up from its first test of resistance (blue trend line) and is now in the process of testing its second resistance line (red trend line). This action comes on the heels of a successful test of the 61.8% Fibonacci retracement from the August lows to the March peak, as shown in the chart below. (more…)
Gold looks bullish; Platinum, not so much
Here is a quick snapshot of the metals sector. The silver chart above is constructive, as silver broke out of a falling wedge and confirmed the bullish action in gold. It also successfully hit its initial target of $15.15-$15.20. The support levels to watch now are $14.30-$14.50, where silver may retest falling wedge support (formerly resistance) and the trend line from the August lows. A break above $15.20 should target a move to $16.20. (more…)