Retail Traders & Investors Squeezed to Buy High-Risk Assets Again

Yes, we certainly live in interesting times.  This, the last segment of our multi-part article on the current Q2 and Q3 2020 US and global economic expectations, as well as current data points, referencing very real ongoing concerns, we urge you to continue using common sense to help protect your assets and families from what we believe will be a very volatile end to 2020.  If you missed the first two segments of this research article, please take a moment to review them before continuing.

On May 24th, 2020, we published this research article related to our super-cycle research. It is critical that you understand what is really happening in the world as we move through these major 21 to 85+ year super-cycles and apply that knowledge to the data we have presented in the first two segments of this research post.  Within that article, we quoted Ray Dalio from a recent article published related to his cycle research.

“In brief, after the creation of a new set of rules establishes the new world order, there is typically a peaceful and prosperous period. As people get used to this they increasingly bet on the prosperity continuing, and they increasingly borrow money to do that, which eventually leads to a bubble.

As prosperity increases the wealth gap grows. Eventually, the debt bubble bursts, which leads to the printing of money and credit and increased internal conflict, which leads to some sort of wealth redistribution revolution that can be peaceful or violent. Typically at that time late in the cycle, the leading empire that won the last economic and geopolitical war is less powerful relative to rival powers that prospered during the prosperous period, and with the bad economic conditions and the disagreements between powers, there is typically some kind of war. Out of this debt, economic, domestic, and world-order breakdowns that take the forms of revolutions and wars come new winners and losers. Then the winners get together to create the new domestic and world orders.”

That rather chilling statement suggests one thing that we all need to be aware of at this time: what the current and future economic cycles will likely present and how the world will navigate through this process of a cycle transition.

In our opinion, the massive cycle event that is taking place may not disrupt world order as Mr. Dalio suggests.  There is a very strong likelihood that credit/debt processes may become the “collateral damage” of this cycle transition, but not much else changes.  The world order and powerful nations across the globe are keenly aware that starting WWIII because of a credit/debt crisis is not in anyone’s interest.  The world has enough capability to address these concerns without blowing the planet to pieces in the process.

Our super-cycle research suggests we have entered a period that is very similar to 1919~1920 – a “roaring good time” most likely has already extended beyond reasonable levels.  Our research suggests a massive peak in cycle events near 2023~24 after an already substantial support cycle from 2007~08 to 2023~24.  This span of time, roughly 17 years, is very likely to be a blend of the Unraveling & Crisis phases of the super-cycle. We believe the broader Crisis phase will continue to transition throughout a span of time lasting well into 2031~2034.  This suggests we may have another 11 to 15+ years of a massive unwinding cycle throughout the globe.

SUPER-CYCLE RESEARCHER DATA FROM OUR RESEARCH TEAM

Our research team believes the COVID-19 virus event sent these super-cycles into Warp-Speed recently.  The US stock market was poised to rally early in 2020 and may have experienced a multi-year rally had it not been for the COVID-19 disruption that took place in Mid-February.  The destruction of the economy related to the COVID-19 shutdown is still playing out.  Recent news suggests 41% of businesses that closed on Yelp have shut down permanently.  Now, consider that this means for consumers and local governments related to earning and revenue capabilities?  Workers have been fired and have completely lost earnings capabilities.  Business owners now face credit/debt issues and possible bankruptcies.  Local governments have lost revenue from taxes, payroll, sales, and fees and permits.  This destructive cycle continues until the economy has shed the “excess” within all segments of core economic function.

MORE DATA & MORE PREDICTIONS

Within the first two segments of this article, we’ve highlighted numerous data points and charts to more clearly illustrate the current global market environment.  We have to consider the reality of what is happening on the ground throughout the world and, in particular, what is happening in the US and most major economies right now.  If 30 to 40%, or more, of local businesses, are closing permanently, this suggests that 30 to 50% of tax revenues for local governments will also vanish.  It also suggests that these displaced workers and business owners will need to find new sources of income/revenue over the next 12+ months.

As much as we would like to think a “V-shaped” recovery is highly likely, it’s not going to happen is 30 to 50% of the US economy is suffering at levels being reported currently.  Yes, you could have investors pile into the US stock market because they believe the US economy is the most likely to develop a strong recovery in the future, but that will likely happen after the excess has been processed out of the economy through a business/credit contraction phase.  The current stock market valuation levels seem to ignore the fact that consumer and business activity has likely collapsed by a minimum of 25 to 45% (or more) over the past 90+ days – and may not recover to levels anywhere near the early 2020 economic activity levels.

Still, if you listen to the news and watch the data related to the real estate market, you would think there has been no disruption in the US economy.  Supposedly, homes are still selling quickly and the market is very robust.  The Case-Shiller 20 city home price index is well above 220, the highest levels ever reached for this index.  This suggests home prices have risen to levels that are likely 15% to 30% higher than the peak levels in 2006-2007 – yet we’ve just experienced a massive economic disruption across the globe where 25% to 45% (or more) of our economic earning and income capability has vanished.  Read between the lines if you must – something doesn’t seem to be reporting valid data at the moment.

The Consumer Price Index has recently started falling.  The only times in history where the CPI level has initiated substantial downward trends are throughout major recessionary or contraction economic phases.  It is very likely that the decrease in the CPI level is reflecting a supply glut pricing effect as a result of the COVID-19 shutdown process.  When consumer activity drops dramatically while supply channels continue as normal, a supply glut happens.  When this happens, price levels must adjust and address the over-supply of goods and raw materials stacking up in warehouses, containers, and ships.

If the consumers earning and spending capabilities are disrupted long enough, the manufacturing and supply side of the equation can’t react fast enough to the immediate decline in demand.  Therefore, the supply glut continues for a period of time as manufacturers attempt to scale-down the production levels to address for proper demand levels.  Obviously, lower demand equates to lower sales volumes and lower-income levels for manufacturers and sales outlets.  This translates into layoffs at the factories, sales outlets, and all levels in between.  The cycle continues like this until an equilibrium is reached between supply and demand.

This translates into lower-earning expectations for much of the US and foreign markets compared to previous expectations.  While the S&P 500 stock price levels have recovered to nearly the early 2020 price levels, it seems rather obvious to us that Q2 earnings data will likely shock the markets with dramatically lower results and forward expectations – in some cases these numbers may be disastrous.

When Nike released their Q4 (May 2020) earnings and showed a nearly $800 loss because of the early COVID-19 shutdown, this should have presented a very real understanding of how all levels of retail, manufacturing, and consumer services would also likely show a dramatic economic contraction taking place.  Currently, we are watching for news of new US businesses entering the bankruptcy process.  This recent article suggests business bankruptcies are skyrocketing higher – yet are still below the 2008~09 levels.  Please keep in mind that we are only 90+ days into this COVID-19 virus event – so this data is still very early reporting.

Still, the numbers are very telling…

“US filings totaled 3,427 on June 24, according to data from Epiq seen by the Times. The reading also closes in on the financial-crisis reading of 3,491 companies entering bankruptcy in the first half of 2008. “

If you are reading the same data I read from that statement, the difference between the 2008 levels and current levels is only 64 additional bankruptcies in the US – less than a 2% difference in total bankruptcies.

The reality of the current market conditions is that we are only 90+ days into this processing of all this new data and attempting to understand what is likely to become a new operating norm for global economies.  In 2008-09, the unwinding process took place over a full 12 to 16-month process.  The recovery process too much longer – more than 5+ years.  Currently, the unwinding process of the COVID-19 collapse took less than 30 days and the recovery process took a little over 90 days.

If our research team is correct, the speed at which the current recovery took place is nothing more than a reactionary recovery to a problem that was sudden and full of uncertainty.  The Q2 data will likely solidify the uncertainty and unknowns into very real economic values (losses) and may shock the US stock market into a downward price reversion phase.

We believe one of the best hedging tools any skilled technical trader can use right now is Gold and Silver (Precious Metals).  We continue to urge our friends and followers to maintain a portion of our portfolio in precious metals as a hedge against risk and unknowns throughout most of 2020 and beyond.  If the Q2 data does what we believe it will do, shock the markets, then a moderately violent and volatile downside price move is pending.  Simply put, you can’t destroy 25 to 45% of an active economy and displace millions of workers while sustaining high price valuations – unless you have a bubble-like euphoric investor mentality.  That, ladies and gentlemen, is exactly what we believe is happening right now.

The super-cycle event that took place between 1920 and 1929 was nothing more than a euphoric bubble-like event where investors and traders had “no fear”.  Everyone was leveraging everything they could to try to jump into the markets because they believed nothing could stop the rally.  Keeping this in mind, you may want to read this recent research post about parabolic bubbles we published on June 23, 2020.

When bubbles burst, most commonly done when investors suddenly come to their senses in terms of real valuation expectations, the downside price moves can be extremely distressing.  We urge you to properly understand that may happen with Q2 earnings data and new announcements.  We also urge you to understand the COVID-19 virus event may have moved the super-cycles into some type of “warp-speed”.  If our research is correct, we could be speeding towards a massive unwinding/crisis cycle phase very similar to 1929~1945.

Please read all the previous segments of this article and please properly position your portfolio to protect your assets.  There will be lots of other trades in the future for all of us.  These bigger price moves are not suddenly going to end because of Q2 or Q3 data.  Be patient and stay protected.  Q2 data is almost here and we are about to see some realization of the COVID-19 economic destruction process.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

 

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.

 

Credit/Investments Turned Into End-User Risk Again

Continuing our research from Part I, into what to expect in Q2 and Q3 of 2020, we’ll start by discussing our Adaptive Dynamic Learning predictive modeling system and our belief that the US stock market is rallied beyond proper expectation levels.  The Adaptive Dynamic Learning (ADL) modeling systems attempts to identify price and technical indicator DNA markers and attempts to map our these unique price setups.  Then, it attempts to learn from the past DNA markers and apply that learned price behavior to future price DNA markers.  In this manner, it learns from the past and applies that knowledge to the future.

ES ADL PREDICTIVE MODELING

On June 15, 2020, we published this article referencing the ADL predictive modeling system and how the US stock markets were, at that time, 12% to 15% overvalued based on this analysis.  Continuing this research, our researchers still believe the ES (S&P500) is very likely to fall to levels near $2500 before finding support just below that level.  These predicted ADL price levels strongly suggest that the true valuation levels for the ES are near $2500 – not near the overvalued levels closer to $3000.

NQ ADL PREDICTIVE MODELING

Additionally, an update NQ ADL Weekly chart suggests the NQ has rallied to levels that appear to be extremely overvalued.  The current ADL prediction levels suggest the NQ ADL valuation levels should be near $6600 – not near $10,325 as they are now.  This suggests a massive -36% price disparity between the current overvalued rally level of the NQ and the expected ADL price level based on our advanced predictive modeling system.

Now that we’ve attempted to explain one of the core elements of our research estimates, let’s get further into the data that is likely to present a very real opportunity for skilled technical traders.

ECONOMIC CYCLES

As you are likely well aware of by now, a series of catastrophic economic events continue to unfold throughout the globe.  Most importantly, the ability to earn revenues for consumers and corporations while dealing with hard fixed costs.  In previous articles, we’ve suggested our belief that a unique event in localized economies is not much of a concern because global central banks can support the market well enough to allow economic activity to resume near fairly normal levels.  We’ve suggested that the bigger problem is when an extended economic contraction takes place that is a global or more wide-spread economic event.  This type of economic crisis is much more dangerous because of two factors:

_ A.  The continued lack of revenue generation increases the pressure on the individual or corporation to cut costs, employees, or other assets.  Without the ability to earn, these individuals or corporations begin to eat up cash reserves very quickly and will quickly begin to identify their longer-term sustainability objectives. Unless the economy starts to recover quickly, this crisis for the individual or corporation could be a moderately slow and dangerous “bleed-out” event leading to bankruptcy.

_B.  The efforts of localized governments and global banking institutions initially attempt to mitigate the risks of such an event.  This is usually done by providing greater capital resources to certain industries, the general banking system, and in other ways/sources.  Currently, within the US, a number of forbearance programs have been initiated to take away certain pressures for homeowners and others.  Still, the economy must continue to operate within normal boundaries and bills must be paid.  With an extended economic collapse, such as we may be experiencing with the COVID-19 virus event, the problems for consumers and corporations grow bigger and more dangerous the longer the economic contraction event continues.

When you really start to understand the cycle of these events and then begin to understand the domino-effect process that may already be playing out in some form, skilled technical investors should already be preparing for extended price volatility and unknowns over the next 6+ months or longer.  Allow us to explain, in simple terms, how this cycle plays out…

_ Local consumers/workers are laid-off or fired from jobs.  This puts immediate earnings pressure on local families and individuals and it pushes them into a protective mode where they suddenly must decide between essential items (food, medicine, personal care, transportation, and other essentials) vs. non-essential items (movies, dining out, travel, discretionary purchases, and others).  Currently, there are more than 35 million unemployed people in the US (roughly 10% of the total population.

_ The COVID-19 shutdown within the US has disrupted the earning capabilities of many businesses over the past 3+ months.  As consumers slow down their purchases and businesses close because of government shutdown orders, the problems amplify for many business owners and employees.  If you have ever owned your own business, you understand the risks involved and the ongoing hard costs associated with owning a business.  Just because the governor orders a “shutdown” doesn’t mean that your hard monthly costs are going away too.  This ongoing problem sets up another crisis event in the making – the Business Owner risk factor.  How long before these individual business owners simply can’t sustain their operations any longer and are forced into bankruptcy?

_ Local governments derive their operating budgets from taxes and revenues generated within their communities.  With the COVID-19 shutdown crippling these revenues, we estimate that Q3 and Q4 2020 will become a point of “bleed-out” for many local governments.  They may be able to manage their budgets for a few months within the economic contraction period, but we believe the longer this economic contraction event continues, more and more pressure will be put on local and regional (city/state) governments where revenues have likely collapsed 25% to 45%+ recently.

_ The bigger cycle start to take place.  (A) With consumers laid-off and/or fired from their jobs, their income levels drop dramatically and their spending decreases dramatically.  (B) With business owners struggling to survive with hard costs and payroll in a depressed economic environment, these businesses will either find a way to survive or fail – laying off more people and creating further disruption in earnings/revenues for workers and local governments.  (C) With local governments slow to react to the economic contraction (and mostly hiring under contract), the decreases in revenue over time may present a very real issue for government agencies and become a real problem 4 to 6+ months into the economic contraction.

_ When businesses and governments suddenly realize the scale and scope of the economic contraction, they will attempt to balance their books by adapting (developing new sources of revenue: products, services, taxes, fees) and/or begin to contract themselves.  Either of these two options is fraught with risk and could potentially increase the risks of a more extended economic contraction event. Raising taxes or fees on consumers/businesses within a massive economic contraction event will likely push more individuals/businesses into bankruptcy – further decreasing the government revenues.  Developing new products/services and marketing them to consumers requires capital and resources.  If the product is not a success, the business takes a huge risk making these aggressive transitional moves – which may lead to increased economic concerns.  As long as the consumer is struggling and not earning sufficiently, the foundation of the economic structure is at risk of collapsing even further.

This cycle is sometimes called the “death cycle” in economic terms.  It is a cycle where economic contraction leads to further economic contraction.  The process of breaking this cycle is simple, the entire economic engine must “unwind” sufficiently to remove/reduce the overextended valuation and “fluff” within the system.  Once this has happened, then a new economic foundation will begin to establish where growth and opportunity will resume within local and regional economies.

IMPORTANT ECONOMIC DATA

Now, let’s look at some of the data that supports our research.

The World Uncertainty Index has recently skyrocketed above 50, the highest level over the past 60+ years. Since the low point, in 1985, the World Uncertainty Index has continued to rise with higher peaks and higher troughs over the past 30+ years.  Currently, this index suggests there is a massive amount of uncertainty throughout the globe related to economic function, central banks, geopolitical issues, and humanitarian issues.

Bay very close attention to the peaks in this index and the dates of these peaks (2004, 2013, 2020).  The 2004 and 2013 peaks occurred roughly 3 to 4 years after a major stock market bottom setup.  The current index high would suggest a market bottom may have set up in 2016 and a peak in this Uncertainty index may still be 12 to 24 months away.  This suggests we may still experience a moderately high degree of uncertainty and a number of unknown global and economic crisis events over the next 12 to 24 months.

The US Federal Reserve has recently begun another massive quantitative easing phase and actively begun to purchase various forms of debt, bonds, and equity within the financial markets.  Paying attention to the rallies in the Fed buying activity and the World Uncertainty Index, you’ll see the peaks in the Uncertainty index align with the midpoints of the Fed activities.  Generally, the uncertainty levels rise as the US Fed intervenes and executes QE policies to support the global markets.

This Global Commodity Price Index chart highlights the recent collapse in raw commodity prices and illustrates the incredibly depressed level of commodities related to global economic activities. Over the past 20 years, the only time when commodity prices were lower was in early 2000~2005 – just after the 9/11 economic contraction. The current Commodity Price Index level suggests we have entered a new deflationary price cycle with the peak setup near August/September 2018 – just before the big downside price contraction started in October 2018. Our researchers have continued to highlight that point on multiple charts as the true peak in the US and global markets

At this point in time, developing a safe and protected strategy to ride out these uncertain times is essential.  We’ve been advising our clients to stay safely away from the global stock market trends and we issued a Black Swan warning on February 21, 2020, telling all of our clients to “get into cash immediately”.  Since then, we’ve advised our clients to move their capital into selected sectors to take advantage of hedging opportunities and targeted trading opportunities over the past 3+ months.

We continue to believe the best way to profit from these market trends is to develop a super conservative investment model where Cash is King and proper hedging is essential.  There are plenty of great trades to select from – assuming we want to take on the additional risks associated with these trades.

We believe the next 3+ months will result in a massive volatility spike, likely seeing the VIX move above 50~60 again, as Q2and Q3 earnings and expectations continue to shock the investment community.  We do not believe this potential “V-Shaped” recovery is sustainable and continues to advise our clients to be prepared downside price reversion.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

 

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.

 

The Big Short #2 – World Pushes Credit/Investments Into Risk Again, Part I

One thing is very certain right now – we live in very interesting times.  As the world rushes head-first into the 21st Century, it appears one of the most pressing issues before all of us is to navigate the risks and opportunities that continue to stack up ahead of us.  Within the first 20 years of this century, the global markets have experienced many shifts and big price rotations.  Emerging markets, Oil, Technology, Bio-Tech, Miners, Metals, Currencies, Cryptos – we can look at all of these on a longer-term basis and see a boom cycle and a moderate bust cycle event.

The current trends suggest global investors are pouring capital into the US technology stocks which is what is driving the NASDAQ to new all-time highs.  We published this article in late June suggesting a parabolic top pattern may be setting up in the global markets – which may be very similar to the DOT COM peak in 1999~2000 explained here.

Our researchers believe the global shift away from risk and into hot sectors are driving capital investments into a frenzy right now.  It reminds us of the frenzy in the US in the late 1990s when housing, technology stocks, and credit expansion rolled into a frothing expansion phase – then burst suddenly in 1999.  There were plenty of signs in 1997 and 1998 that the frenzy buying was a huge risk – but traders and consumers simply ignored the risks and kept buying.

Similarly, this same type of bubble mentality happened in 2017 with Bitcoin.  In less than 24 months, Bitcoin rallied from $370 in early 2016 to $19,666 near the end of 2017 – a massive 8000%+ rally.

The similarities of the Bitcoin rally and the rally of the US stock market in the late 1990s is the mentality of the investors throughout these bubbles – the “no fear” mentality that it will keep going higher and higher.  The same type of mentality appears to be happening in the US stock markets right now and the data suggests something vastly different is really taking place.

Unlike what happened throughout recent history, the globe has recently experienced a massive disruption event – the COVID-19 virus.  This disruption has displaced economic output and consumer earnings on a massive scale – and we are just starting to learn how disruptive these economic factors may be.

One item we believe is severely under-estimated is “consumer earning capabilities”.  The number of jobless in America has risen to well over 35 million (over 10% of the population). If the COVID-19 virus continues to disrupt consumer’s ability to earn income and engage in the economy over the next 6+ months or longer, there is a very real possibility that the V-shaped recovery everyone believes is happening will simply not happen at all.

One of the most ominous signs of a broader consumer and commercial contraction happening in the US markets is the skyrocketing delinquency rates for commercial real estate. Trepp recently published new data suggesting the commercial real estate market is experiencing a massive increase in delinquencies of 30+ days which may lead to a wave of high-value defaults.  Other research suggests US Banks may face $48+ Billion in commercial real estate loan losses.

The Q2:2020 earning estimates have decreased by such a large amount that all investors should prepare for a shocking series of data over the next 30+ days.  Nike surprised everyone with a nearly $800 million loss for their Q4 ending May 31, 2020.  We just read that PizzaHut parent, NPC, filed for bankruptcy recently.  This recent Bloomberg article suggests a massive wave of US corporate bankruptcies could continue throughout 2020 and well into 2021 and extended economic pressures erode the foundations and operations of hundreds or thousands of US businesses ().

What is happening in the US markets right now is that foreign and US investors are piling into this deep price rotation expecting the US Fed to do whatever is necessary to support the markets throughout the COVID-19 virus event.  We believe the risks for investors have never been higher as the global markets teeter on the edge of a partial recovery while the COVID-19 virus surges again throughout the US.

We’ve kept our clients actively protected from the risks within the markets and continue to advise them on how to identify profitable trades within the current market trends.

In the next part of this article, we’ll explore more data facets related to the Q2:2020 and the future expectations of the US and global markets. Our biggest concern is the destructive capabilities of the general consumer.  At some point, we have to understand the consumer drives 85% of the US GDP and future expectations.  If this event destroys the consumer, then it will destroy future expectations.

Keep in mind, we do not trade or invest on fundamentals or economic cycles because we know they can lead or lag stock prices by several months at times. Our focus as technical traders is to follow the price trend and trade accordingly. Stay tuned for part II.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.

 

Wild Volatility Continues As US Markets Attempt To Establish New Trend

We’ve continued to attempt to warn investors of the risks ahead for the US and global markets by generating these research posts and by providing very clear data supporting our conclusions.  Throughout the entire months of May and June, we’ve seen various economic data points report very mixed results – and in some cases, surprise numbers as a result of the deep economic collapse related to the COVID-19 virus event.  This research post should help to clear things up going forward for most traders/investors.

As technical traders, we attempt to digest these economic data factors into technical and price analysis while determining where and what to trade.  We attempt to identify the “Best Asset Now” (BAN) for trading based on our proprietary technical analysis and predictive modeling tools.  We also attempt to stay away from excessive risks in the markets.  The reason we adopt this strategy is to help protect assets and to attempt to assist our clients and followers in avoiding sometimes foolish trading decisions that can destroy your account and future.

S&P 400 MIDCAP E-Mini Futures – Weekly

We are focusing on the MC, S&P 400 MIDCAP E-Mini Futures, charts today while attempting to illustrate the technical factors that are currently present in the longer-term Weekly and Monthly charts.  Our researchers believe the month of June presented a very clear “high price peak” that suggests the US stock markets may have established a “recovery price high” in June 2020.  This high price level reached just above the midpoint of the YELLOW price channel level that originated from the market bottom in 2009.  This price channel is very important for technical traders because it relates the high-low price range that was established over the past 8+ years as a “trend barrier” for price.

When that channel was broken in March 2020, this became the first time since the low (bottom) was established in 2009 that we witnessed any significant breach of the lower YELLOW price channel.  It also indicated a substantial disruption in the markets was taking place – the COVID-19 virus event that disrupted the entire globe.  Currently, the price has rallied back into this YELLOW price channel and stalled near the midpoint of the YELLOW price channel.

There is very strong support between 1775~1815 on the MC chart originating from the 2018 and 2019 low price levels (see the LIGHT BLUE Rectangle on this chart).  Additionally, our Adaptive Fibonacci price modeling system is suggesting a “Price Trend Void” exists between 1525 and 1780 (between the two Fibonacci “Trigger Levels” – highlighted by the LIGHT YELLOW Rectangle on this chart.  This price void represents a wide range between the Bullish and Bearish trigger levels on this weekly chart.  Currently, the price is very near the Bearish Fibonacci Trigger level @ $1780 (the RED line on this chart near the right edge).  Once price falls below this level (again), it will confirm a potential Bearish price trend is likely.

The lower Bullish Fibonacci price trigger level, near $1524, was confirmed in late April by price.  Technically, this level now becomes “support” for the market as we wait for the price to confirm or deny the new Bearish Trigger level.  If the price fails to confirm the new Bearish Trigger level (close below that level), then the previous Bullish trend is intact.

Our researchers believe the wild rotation in price near the middle/end of June, where the markets reached a peak level, then experienced a deeper downside price correction, suggests the markets have reached a strong resistance point near the middle of the YELLOW trend channel – and rebounded lower.  If our research is correct, this suggests price has already reached an upper resistance level and rotated into a new Bearish trend.  We would now want to see how price reacts to the lower YELLOW channel and the new Bearish Fibonacci Trigger Level – these act as an intermediate support.  The price must fall below these levels to confirm the Bearish price trend – where the price will enter the “void” between the Fibonacci trigger levels.

S&P 400 MIDCAP E-Mini Futures – Monthly

This Monthly MC chart highlights the broader market technical research supporting our analysis (below).  The same type of Fibonacci Trigger levels exists on this Monthly chart as we see on the Weekly chart.  In fact, they are almost exactly the same levels (1545 and 1780). The alignment of these levels on both the Weekly and Monthly charts suggest these trigger levels are critical for future price activity/trends.

If the MC price level fails to establish a new upward price trend and close above $1780, then the Bearish Fibonacci trigger level has been “confirmed” and we can determine that the current price trend is Bearish.  This would likely lead to a breakdown in price levels targeting the midpoint of the LIGHT BLUE price channel midpoint level, near $1525 – possibly much lower.

Recently, we posted a number of research posts suggesting this market setup is somewhat similar to previous market peaks throughout history.

June 25, 2020: US Stock Market Enters Parabolic Price Move – Be Prepared, Part II

June 21, 2020:  A Stealth Double Dip or Bear Market Has Started

June 14, 2020: Revisiting Our ADL Predictions For S&P 500

A variety of our technical analysis models have continued to warn of future price weakness and the very real potential for a deeper downside price move in the near future.  As the US continues to battle the COVID-19 virus, social unrest and riots, the pending US Presidential Elections and Q2/Q3 economic data – the one thing we are certain of is “uncertainty”.  We believe the current price levels of the US stock markets are overextended to the upside and our technical modeling systems continue to suggest a downside price move is setting up.  It is likely that after July 4th, the Q2 data will shock the markets into a sense of reality as the world struggles to regain some sense of where we bottom and what’s next.

Please heed our suggestions related to the risks in the markets and prepare for more extreme volatility going forward.  As you are likely well aware, Gold and Silver continue to move higher which is a very clear indication that global traders believe extreme risks are growing in the global markets.  Now is not the time to become overly confident related to future bullish or bearish price trends.  The markets will decide where it will trend in the near future.  Our technical models suggest a breakdown in price is setting up after this massive recovery peak.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Russell 2000 Gaps Present Real Targets

Recent Gaps in price action in the IWM (Russell 2000 ETF) presents a clear picture of future price targets and support/resistances.  Gaps are one of the most common forms of Technical Analysis techniques.  They represent “voids” where price activity has skipped a range of price as it advances or declines aggressively.

Gaps are commonly used as targets for future price activity – where price attempts to “fill the gap”. In Technical Analysis theory, any gap that appears should eventually be “filled” by price in the future.  Thus, any open gap that does not fill is still considered an “open target range”.

IWM PROVIDES A UNIQUE PERSPECTIVE

We’re focusing on the Russell 2000 because we believe it provides a unique perspective on the markets related to the recent COVID-19 downside price swing and the recent recovery.  The Mid-Cap market sector tends to trend more quickly than the US major indexes and can sometimes provide a clear picture of more true price trends.

In this case, we’ve highlighted the downside price Gaps in YELLOW and the upside price Gaps in BLUE.  Two of the downside price Gaps have been filled recently as price advanced higher after March 21, 2020.  Additionally, the two highest downside price Gaps have also been filled – leaving the lower two still open (unfilled).

This presents a very easy to understand the method of identifying future price targets for both bullish and bearish price trends.  Either price will rally to fill the upper Gap, near $163~166, or price will breakdown into a bearish trend attempting to fill the $125~130 Gap or the $108~109 Gap.

The recent low price level near $133.28 broke previous Fibonacci low price levels from May 29. Because of this, we believe the current trend is moderately Bearish.  We would like to see a new lower low setup to confirm this new trend.  When we consider the next price move in the Russell 2000 ETF, two very clear targets become evident, either the recent upper BLUE Gap range between $145~149 or the lower BLUE Gap range between $125~129.

IWM Weekly Chart

The IWM Weekly chart does not illustrate the shorter term Gap patterns as price volatility has consolidated into longer-term price bars.  Still, we have to very clear Gaps on the Weekly IWM chart- the upper Gap, near $163~166, and the lower Gap, near $136~141.  This lower price Gap is currently acting as a support/resistance channel for the price as the IWM price consolidates within this range.  A breakout/breakdown move is very likely as the future price trend will likely exit this Gap range with an aggressive price move.

The lower Gaps that are evident on the Daily chart are still valid price levels on this chart – we’re just not seeing them on this Weekly chart because of the compressed interval.

As we near the end of June 2020 (Q2), it is fitting that the IWM price level has stalled near this 50% Fibonacci retracement level and within the middle Gap level.  This level will likely continue to attract price as it consolidates before entering the breakout or breakdown trend.  Again, based on the Fibonacci price theory, the recent low suggests the current trend is Bearish.

The 4th of July holiday weekend is nearing and prices tend to consolidate, absent any major news or earnings data, before any major holiday.  Therefore, we may see price levels stay rather narrow this week as we await Q2 earnings and prior to the 4th of July holiday.  Stay properly protected in this market.  Any breakdown/breakout move will likely happen very quickly in the near future.

In short, I hope you glean something useful from this article. If this is the start of a double-dip, it’s going to be huge, and if it’s the start of a bear market, it is going to be life-changing.

If you are new to trading, technical analysis, or are a long term passive investor worried about what to do, you can follow my lead. I share both my investing signals and more active swing trade signals using simple ETFs at www.TheTechncialTraders.com

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Gold Completes Another Washout Rotation – Here We Go

It seems as though every time Gold completes one of the moderate-low price rotations, as we call it a “washout low rotation”, it sets up for a new momentum rally to a new momentum price base.

We believe July and August 2020 could prompt a series of these types of rotations as Gold attempts a move above $2100 or higher.  Allow us to explain our thinking as we explore this price pattern a bit further.

The first thing we need to realize is that Gold is nearing the $1900 level as it continues to push higher.  This is a very significant level for Gold because it would be very close to breaking the 2011 all-time high level near $1917.90.  As gold creeps higher because of perceived risk factors in the global markets, once Gold price levels break above $1850, then the rally to levels above $1900 is almost certain to drive investors into the precious metals markets at a much faster pace.

Psychologically, once Gold rallies above $1850 with the US stock market trading near all-time highs – something has to break. The disconnect between Gold (risk protection) and the valuation of equities (the stock market) are not aligned.

GOING ALL THE WAY BACK TO 1973

If you understand how the US Fed and global central banks are pumped “ether” into the markets (in the form of capital and QE functions) in an effort to support the capital markets and financial sector, then you understand the current market environment is very unique.

The only other time we’ve seen anything like this is in early 1976 through 1981 when the capital markets were suddenly awash in credit and precious metals rallied more than 700%.  This was a period when global traders realized the risk factors in the markets while credit was expanding and the US stock market was just starting to recover from a deep -50% collapse (1973~1974).

What happened in 1973 & 1974 was the US economy went from a booming stock market (+15% in 1972) and booming GDP (+7.2%) to a grinding halt with GDP clocking in a -2.1% and the DJIA collapsing over 45%.  Additionally, inflation skyrocketed from 3.4% in 1972 to 12.3% in 1974.  How does this compare to today’s markets?

UNDERSTANDING STOCK MARKET VALUATIONS TO GDP LEVELS

Last year, 2019, the SPX rallied over 27% and US GDP levels were clocking in a 2~3%+ (expected).  One measure we like to use in trying to make comparisons to the past is the stock market valuation level compared to GDP.  Even though this St. Louis Federal Reserve Chart does not show data beyond 2017, just imagine what the peak level of this chart would look like for 2018, 2019, and early 2020.  The current level was very likely well above 155 to 165+ before the February 2020 COVID-19 collapse.

These past correlations become very important for skilled technical traders because it helps us to understand the future potential price rally in Gold and Silver if a similar set of circumstances play out.  If the COVID-19 pandemic collapses global GDP while the US Fed and other global central banks continue to pour capital into the credit/banking markets, resulting in an inflated global equities/stock market bubble, and the global stock markets enter an earnings/income contraction phase (much like 1973 & 1974) while inflation grows moderately, we could expect to see Gold continue to rally for the next 3 to 4+ years and attempt a 500% rally from current levels.

LEARNING TO SPOT THE WASHOUT LOW PATTERNS

Our researchers believe these “washout low” patterns are technically efficient buying opportunities for skilled technical traders.  Believing that our research is accurate, these washout low patterns may continue to set up throughout the remainder of the rally in Gold and Silver – allowing skilled technical traders ample opportunity to catch big profits.

The next rally in Gold will likely target the $1850 level.  Beyond that, the subsequent rally will likely target the $1950 to $2100 level – well beyond the previous all-time high level.  We believe the Q2and Q3 data could be very reminiscent of 1973 through 1975 market action – with GDP contraction, earnings/revenue contraction, and a slower recovery process. If this is the case, then Gold will likely rally to levels far above $5000 as traders rush to safety.

This is really just the start of the potential rally in Gold and Silver.  We’re trying to use historical examples to more clearly illustrate why it is so important for you to understand what is happening in the markets right now.  We’ve been warning our clients and followers not to get sucked up into the current rally in the US stock market.  We’ve been trying to scream at the top of our lungs that “risks are still excessive”.  Today, the stock market is collapsing and we want to warn you that the dust is far from settled in our opinion.

Make sure you listen to Eric Sprott and Craig Hemke in this exciting talk about gold – CLICK TO LISTEN

Pay attention to our research and please protect your assets and family.  The process of global recovery after the COVID-19 virus is likely to take more than 3 years or longer.  There will be very big and incredible opportunities for skilled technical traders over that time.  Learn how we can help you trade and find success in these markets.

For a look at all of today’s economic events, check out our economic calendar.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

US Stock Market Enters Parabolic Price Move – Be Prepared, Part II

In the first part of this research article, we briefly discussed the recent price and global economic events related to the 2018 to 2020 US stock market volatility and the COVID-19 virus event.  The premise of this research post was to highlight the current upside parabolic price trend that initiated shortly after the 2015~16 US election cycle event.  It is almost impossible to look at the NAS100 chart, below, and not see the dramatic upside price advance that took place after the November 2016 US elections.

It is almost as if the US stock markets had been primed by Federal Reserve intervention over the previous 5+ years and someone let the monster out of the cage.  The deregulation, changes to tax structures and general perception of market opportunity changed almost immediately after the November 2016 elections and really never looked back.

BUBBLE PSYCHOLOGY & PROCESS

A close friend of mine suggested the current tax structures provide a very clear advantage for corporations which allows them to retain a minimum of 14% more revenue annually.  This is a huge advantage for any profitable US corporation when one considers all aspects of tax laws. Additionally, President Trump changed the system from a “global” to a “territorial” structure. (Source:https://en.wikipedia.org) This provided additional tax reductions for multi-national corporations and prompted US companies to stay within the US.  These new tax laws had a major impact on the bottom line after-tax revenues for thousands of US companies over the past 3+ years.

Yet, one has to earn a profit to be able to take advantage of these tax law changes and the COVID-19 virus event has put a serious dent in the earning capabilities of thousands of the US and foreign companies.  The Redbook YoY data, representing Retail and Consumer Merchandise activity, has continued to post negative levels that appear to be far greater than at any time over the past 20+ years.

How can one rationalize the upward parabolic price trend continuing while the consumer sector, the largest segment of US GDP, has collapsed to levels that are more than double those of the 2008-09 credit crisis?  The only answer in our minds is that a euphoric “bubble” has set up in the minds of speculative and foreign traders.  This “bubble psychology” takes place when certain factors have been put into place. Typically, these factors include

_Displacement: when new technology, process, innovation or product/production capabilities disrupt and displace existing technologies.  This creates an opportunity for traders and investors to “shift focus” and creates a new, untested, valuation process for the company or asset.

_Credit Creation: when central banks act in a manner to support the credit market, capital investment, and corporate enterprise.  This creates the opportunity for new enterprises, businesses, and corporations to “startup” and creates a facility for capital investment from speculators, traders, VCs, and investors.

_Euphoria: the feeling that nothing can go wrong.  You can invest in almost anything and make money.  You could stand on the corner and sell empty cardboard boxes for $400 all day long because something thought they could “flip them” for $800 to the next person that walked by.  This euphoria phase is a “self-feeding frenzy” that improperly validates very destructive behavior.  In this phase, everyone feels utterly fantastic – until…

Now, you have to start asking yourself a few questions at this point in time..  Have we seen any of these phases over the past 10+ years? If so, how far along are we into these phases? Bitcoin was a displacement component that didn’t really start to take off until 2011~2013.

After that initial rally, it launched into a euphoric phase with the historic rally to $13,880.  WeWork was another displacement component – promising a high-level remote work environment for the Gig/Millennial workers of the world.  It built a foundation, found Softbank to back it, rallied to extreme valuations – then what?  Hundreds of other displacement companies exist that have yet to deliver any proven profits.  Their valuations are incredible and their believers continue to pour more and more capital into them with the expectation that “nothing can go wrong”.  All of this reminds me of the Beanie-Baby craze years ago.

What next?

Financial Distress: when traders and investors begin to pull away from the euphoria and begin to revalue their belief in the ability of the displacement company to really engage in huge revenue creation.  When more and more traders and investors begin to move in this direction, suddenly we see a change in how people really value assets and future expectations.  The displacement company that everyone loved 5 months ago becomes the distressed company that everyone questions.

And this leads to…

_Revulsion: when trust in the markets and valuation levels is completely lost to almost everyone.  This is what I like to call the “shock-wave” of the bubble.  And this revaluation process leads everyone to run for the exits before the last bobblehead on TV suggests “this is only temporary, buy everything and you’ll be really happy in 20+ years – don’t worry”.

THE SETUP

Our research team believes we are very near to the “financial distress” phase of bubble psychology as a result of the COVID-19 virus event and the disruptions to the financial markets in 2018 and 2019.  A number of critical “blips” took place over this time that very few people really paid attention to.

_ The revised corporate tax laws created a revenue source for all existing corporations that prompted a massive push for capital to be deployed in the US stock market.  That 14%+ extra revenue suggested that everyone would see increased bottom line profits if they could make a profit.

_ The Case-Schiller US National Home Price Index has risen almost 70 points since 2013 (just over 7 years ago).  The only other time in history the Case-Schiller US National Home Price Index has risen that fast was between 2001 and 2007.  Consider that for a moment.

_ The US Fed burped up an error in August 2018.  This error prompted a change in future guidance from the US Fed from a hawkish Fed to a very dovish Fed.  Basically, the markets collapsed on Fed comments and the Fed became more accommodating – almost immediately.

_ Speculative investments (both foreign and domestic) pushed to higher and higher levels.  Homes flipped.  Cars flipped.  Everything flipped and traders/investors pour billions into the US technology markets and other sectors because “nothing could go wrong”.  Even as we knew the world was upended by geopolitical trade issues, foreign credit collapse events, BREXIT and dozens of other issues near the end of 2019, the US stock market rallied to new highs well into February 2020 – even though we knew the Corona Virus was making its way around the world and could be a complete disaster.

Then, the first phase of the financial distress hit – February 24, 2020.  That big bad day when the markets suddenly realized “uh oh – this could be bad” and traders/investors throughout the world watched as almost the entire globe “shut down” because of the COVID-19 virus.  What does that to the earning capabilities of almost all of the global corporations and businesses?  How are they going to be able to sustain revenues to take advantage of those tax breaks when their businesses have collapsed by 40%, 60%, 80%, or more? Is everything going to go back to the euphoric party mode or not?

Right now, the Fed has again come to the rescue with more credit and the markets ate it up like cotton-candy covered in gum-drops.  Everyone wanted to get back to that euphoric feeling so badly, they jumped into the markets almost as soon as they heard that the US Fed would “intervene” – off we go into parabolic trending.

If you are starting to understand what we are attempting to illustrate for you, then you already know how this article ends. The parabolic price trends we’re seeing right now are likely the end stage of a hyper-inflated, credit-fueled price trend.  Yes, they could continue to rally much higher from current levels.  Or, it could all suddenly come to a stop as Q2 comes to a close and everyone starts to suddenly realize “uh oh – that’s not good”.

We’ve been warning our client and followers for almost 10+ months that our super-cycle research suggested the end of 2019 and all of 2020 and 2021 were going to be incredibly volatile periods in the markets.  We warned that traders needed to start investing in Gold and Silver back in 2017 and 2018 – to hedge against risks.  We issued a Black Swan warning on February 21, 2020 – just days before the markets collapsed as a result of the COVID-19 virus.  Now, we’re warning that this current parabolic upside price trend near the end of Q2:2020 could be a massive setup for one of the biggest “revaluation” events we’ve seen since 1999~2000 (the last big bubble).

Our researchers believe a shift away from the global financial speculation that has driven a total global asset bubble over the past 8+ years will suddenly shift away from wild speculative euphoria and quickly transition into the realization phase of “uh oh, what have we done”.  It is this point that we suddenly enter a financial distress phase where investors flee over-inflated assets to move into risk hedging strategies.  Why do you think Gold has rallied to levels near $1800 over the past 4+ years?  A certain segment of global investors has already had their “uh oh” moment.

The US stock market has gone parabolic because a very unique set of circumstances have come together at this particular time in history.  Now, we have to deal with the current and future phases of this cycle and prepare for what’s next.  Protect your open long trades and/or take some profits out now.  If our research is correct, we have already entered the Financial Distress phase.  Q2: 2020 may be the catalyst event and that is only a few days away.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Gold & Silver Begin The Move To New All-Time Highs

We warned about this move many months ago and just 6 days ago we issued a research post suggesting Gold had cleared major resistance and would start a rally mode to push above $2000 – possibly above $2100.  Well, guess what happened right after we made that statement? Yup – Gold started to rally higher and is currently trading near $1790 – about to break $1800 for the first time in 2020.

You can read some of our most recent Gold articles below:

June 3, 2020: Gold & Silver “Washout” – Get Ready For A Big Move Higher

June 18, 2020: Gold Has Finally Cleared Major Resistance – Time For Liftoff

June 20, 2020: All That Glitters When The World Jitters Is Probably Gold

HOW WILL GOLD REACT IN THIS PARABOLIC RALLY?

What we really want you to focus on is the fact that Gold is rallying to levels above $1800 (near all-time highs) while the US stock market has entered an upside parabolic price trend.  What does it mean when metals are rallying and the stock market is rallying at the same time?  The supply-side of precious metals has been restricted because of the COVID-19 virus event and central banks have been accumulating Gold and Silver over the past 7+ years by large amounts.  This suggests central banks and precious metals traders believe metals prices will continue to skyrocket while the risks to the equities markets, credit markets, and global economy increases.

Gold prices climbed in the early 2000s after the DOT COM bubble burst (starting to rise in 2002).  The US stock market eventually bottomed near April 2003 – yet Gold continued to rally from near the $281 level to $992 in early 2008 – a massive +665% over just 5 years.

Gold continued to rally after some wild rotation near the 2008 peak in the US stock market.  Gold bottomed in November 2008 near $710 before rallying to $1924 in September 2011.  This rally took place while the US stock market was also rallying because of the fear in the market from the 2008 (and 1999 DOT COM), market collapse events had not subsided.  Traders and Investors were still very fearful of the truth of the economic recovery and stock market recovery at that time – so they continued to hedge in precious metals.

Right now, the US stock market has entered a massive parabolic upside price move while Gold is starting a breakout upside price move targeting the 2011 all-time high near $1924.  What this is telling us is that global investors and traders are very fearful of this rally in the stock market and are actively hedging in Gold and Silver.  Traders understand the risks to the credit and banking system and are playing the rally in the stock market cautiously while “loading up” on Gold as a means to protect against unknown risks.

Read the first part of our “Markets Go Parabolic” article below:

June 23, 2020: US Stock Market Enters Parabolic Price Move – Be Prepared, Part I

HOW BIG COULD THE RALLY IN GOLD REALLY BE?

We believe the upside price move in Gold, coinciding with a potential parabolic upside price move in the US stock market, could represent a very unique scenario where the US Federal Reserve and Global Central Banks have entered the ultimate battle to attempt to regain control of the global capital and credit markets after the 2008 credit crisis and the current COVID-19 economic crisis.  The only reason Gold is climbing to near new all-time high levels is that global risk has become a major issue and the US Fed as well as central banks are doing everything possible to provide capital liquidity and support through what may become an extended global recession.

Right now, Gold is hedging global market risks and unknowns.  Once Gold clears the $2000 price level, we believe Gold will enter a parabolic upside price trend that could accelerate well above $3250 very quickly – possibly before the end of 2020.  This would indicate that global traders and investors have priced global market risk at likely 3x higher than most common risk-off market scenarios.  The only other time when this extreme risk factoring took place in Gold was in early 1980 when interest rates were 15% or higher and the US economy had entered a period of stagflation (the late 1970s).  At that time, the price of Gold reached nearly 7x the price of the SPX at that time before contracting after a peak in 1981.

If our research is correct, Gold has just begun an upside price rally that will attempt to hedge credit and global market risks resulting from the past 10+ years of US Federal Reserve and global central bank intervention.  The attempts of the global central banks to support the credit and capital markets have created a massive credit/debt bubble that has pushed the US stock market into an incredible bubble rally.  We’ve seen nothing like this in recent history.

Until fiscal responsibility returns to the global markets, expect Gold and Silver to continue to hedge global risks and while the world continues to expand debt and credit in an attempt to support weaker economic data/output – continue to expect hedging to continue.  Until global investors perceive the debt/credit risks have abated – Gold and Silver will continue to rally in an attempt to hedge the massive risks to the global credit and banking sectors.

At this point – it is like a game of “chicken”.  Either the global central banks find some way to prompt organic economic growth or the precious metals markets will continue to illustrate the fear in the markets related to credit risks.  Should the credit markets or banking sector collapse or experience any real extended risks, Gold could rally to unbelievable levels (like in 1979~80; where the price of Gold was over $650 per ounce and the price of the SPX was $110).  If that were to happen at today’s levels, Gold would reach levels above $22,250 or higher.  Think about it.

We continue to urge our clients to stay very cautious of the current price rally in the US stock market as we continue to see risks shuffling just below the surface.  Watch Gold and Silver.  Once these metals start to really breakout, you are going to see a big shift in how investors perceive risk in the global markets.  Read our article about the US stock market going parabolic – it is important that you understand what is happening right now.

WHAT WOULD THAT LOOK LIKE FOR SILVER?

Silver is likely one of the most incredible opportunities for skilled technical traders ever.  This secondary precious metal is still trading below $19 per ounce – well below the $50 per ounce peak reached in 2011.  If you understand our logic and can appreciate how Gold could rally to levels above $5000 or $10,000 because of extreme risk factoring, then consider that Silver could rally to levels above $250 per ounce given the same risk factors – that’s a 1300% price increase.

This is why we continue to urge our clients and followers to stay cautious – stay very cautious.  We’ve been mostly in cash and have been executing very selective “low allocation” trades over the past 5+ months.  We called for a massive super-cycle event in August 2019 based on our 600+ year super-cycle modeling.  When that longer-term super-cycle was delayed because of the US/China trade deal news near the end of 2019, we knew the super-cycle event would happen at some point in the near future.  Along comes the COVID-19 event about 60 days later.  It just took another 2 months for the world to understand how much risk was involved in a global pandemic event.  The process of the world reacting to the COVID-19 risks set off a series of events that leads us to right now.

Pay attention.  There will be no Mulligans in this round of play.  You’ll either be prepared for what is likely to happen or you’ll take far greater risks than you should throughout the next 5+ years.  We’re here to help.  Read our research and learn how we can help you protect and grow your wealth.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

US Stock Market Enters Parabolic Price Move – Be Prepared, Part I

After the recent COVID-19 virus event and the global market concerns that will warrant caution for skilled traders and investors, the US stock markets have entered an upside parabolic trend that will likely end with a massive price collapse – extremely volatile and aggressive in nature.  Our research team continues to warn of the unpredictable nature of the current price rally and the fact that the upside parabolic price trend appears more prominent in the NASDAQ sector.  If history has taught us anything, it is that these types of parabolic moves can last a while and that they always end in a deep downside price correction – usually 61% to 75% of the last upside price trend.

Our research and trading team has been advising friends and followers to stay very cautious of the current markets (excluding Gold, Miners, and certain other protective sectors).  We don’t believe this rally warrants any exposure greater than 15 to 20% given the current global economic environment and the hyper-parabolic nature of the current price move.  We believe the opportunity presented by the upside advances does not negate the potential risks of a massive collapse event taking place in the near future.  In other words, we’re more cautious of how ugly and aggressive the end of this parabolic move will be than willing to try to find some opportunities in an already hyper-extended parabolic upside price trend.

Still, there are opportunities to be had in this trend for skilled short-term technical traders.  A number of sectors continue to perform quite well and using proper position sizing for trades may allow for quick targets of 5% to 10% or more.  We urge all of our friends and followers to be cautious of the current rally in the markets as we’ve only seen this happen three other times over the past 100 years: 1927~29, 1986~87, 1996~99.  The collapse after the 1929 peak resulted in a 90% decline in prices.  After 1987, the markets collapsed by nearly 36%.  After the DOT COM market peak in 1999, the markets collapsed near 51%.  Are the markets preparing for a massive collapse event right now with this hyper-parabolic upside price trend?

NASDAQ MONTHLY CHARTS

This monthly NQ, NASDAQ E-Mini Futures, chart highlights the upside parabolic price move that is currently taking place.  It also highlights the similar type of price movement that took place in the late 1990s.  In theory, the buying power driving the markets higher can last more than 12 to 15 months in some cases.  Prior to the peak in 1929, the parabolic move started near June 1926 and peaked in July 1929 – approximately 3 years.  In 1986, the rally in price was shorter – only lasting from November 1985 to August 1987 – about 21 months.  The rally to the DOT COM peak in 1999 started near March 1995 and lasted a total of approximately 51 months (just over 5 years).

The current rally, as we identify the start of the parabolic price trend, started after the 2015~16 sideways price range.  Our research team considers the start of this current upside move as initiating near July 2016 and continuing through to today – totaling almost 4 years in length.  If we discount the 2015~16 sideways price channel and consider the 2012 to 2020 Fed-induced price rally as the “total scope” of the parabolic range, then we can easily total more than 7 years into this incredible parabolic price move.  This move is truly unlike anything we’ve seen in the recent history of the US stock market – and the crazy component to all of this is it is happening at a time when the global markets have just been derailed by a global virus pandemic.

What comes next?  Well, if history is any teacher – a peak in price sets up, volatility starts to explode and a collapse in price initiates at some point in the future that completely deflates the bubble.

The most prominent example of a price bubble that many traders are familiar with is the story of the South Sea Company (1719 to 1721).  Prior to the peak in this bubble story, the South Sea Company began as an act of English Parliament (source: https://engl3164.wordpress.com/2012/10/31/the-south-sea-bubble/ ).  As stated from our source…

At this time, the English government was deeply in debt.  Harley, the Earl of Oxford, came up with a scheme to free England of this debt while capitalizing on what was perceived as a largely untapped gold and silver market in South America.  Harley proposed that Parliament could create an independent company that would assume all of England’s debt and, in exchange, would be able to charge the government yearly interest until the original sum was repaid.  The company would be able to afford to assume this debt because England would grant it a monopoly on trade from South America.  The company would prosper, English influence would be extended further into the New World, and the English government would become free of debt.  This plan was so popular that it was called “the earl of Oxford’s masterpiece” (Carswell, 1969).

It took several years to form the company and work out the details of the agreement.  By 1720, the South Seas Company was formed and received £30,981,712 in debt from the English government in exchange for a promise that the English government would pay £600,000 per year interest.  However, the plan had already begun to show major weaknesses, even before taking on this huge debt.  The success of the plan rested on the assumption that a monopoly on English trade with Latin America was worth almost limitless profit.  Certainly, Spain was enjoying great profit in extracting gold and silver from this area.  Yet a major problem was that Spain owned the rights to South American trade and would allow England only one ship’s worth of trade per year for the entire continent and only on the condition England pay 25% of the profits to Spain in addition to a 5% tax.  Even this small concession ceased entirely in 1718 when England declared war on Spain (Carswell, 1969).

We want all of our readers to understand the psychological aspect of this past bubble – the idea that the plan could not fail and would provide almost limitless success if executed as planned set off a “no fear rally” that eventually resulted in a massive price bubble.

The next major point that is critical to the understanding of how a price bubble function is the following statement from the same source…

Regardless of the fact that the South Seas company was an unproven company already sunk deeply in debt, with no realistic prospects of profit, it was perceived as an almost infallible opportunity.  As with all economic bubbles, the public’s perception of its potential was far greater than its actual value.  For this reason, stock prices soared.  Modern economists have argued that some investors may have been fully aware that this was an artificial market that was bound to fail.  However, realizing that stock prices would continue to climb until the bubble burst, it would still have been profitable to buy stock with the intention of selling before prices inevitably plummeted (Temmin and Voth, 2003).

What could go wrong with this plan for investors?  It seemed as if nothing could fail – there was almost no risk and everyone had incredibly high expectations of future success and profits…  Then, more good news for traders and investors..  More shell companies promising future greatness to continue to hype the markets…

Unfortunately, investors in the South Seas Company were not the only individuals to lose money during this time.  Many businessmen, realizing the potential for profit in such an artificial market, began similar schemes to create companies with inflated stock prices.  Hundreds of companies were formed within only a few months, with thousands of individuals rushing to buy stock.  Ultimately, these companies went the way of the South Sea Company.  Countless investors lost fortunes while many dishonest market speculators became rich (Carswell, 1969).

Eventually, when reality set back into the minds of these investors, many had lost entire fortunes, families, and futures.  Some of these company founders were hunted down and killed because of the anger and frustration of many investors and others.  The reality of the situation is that nothing is without risk – just like the stock market valuations today.

In the second part of this research article, we’ll continue to explore the potential price bubble that is setting up in the US and global stock markets as a result of the US Fed and global central banks pushing speculative investments into the global equities markets (primarily the US stock market).  It is essential that all skilled traders and investors learn to understand what is happening and to understand the severe risks that are currently in play in the markets right now.  Stay cautious, stay protected, and stay safe.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Semiconductors and AMD Close To A Breakout Move

Being a technical trader means we attempt to identify opportunities in and market, symbol, or sector based on technical indicators, price patterns, advanced price theory/modeling, and much more.  We don’t particularly care if the opportunity is a bullish breakout rally or a bearish breakdown selloff, we simply want to find the “setups” that create this opportunity because that is our “sweet spot”.  That is where the technical trader lives for the excitement of being able to find these technical setups and potential trade them for profits/success.

AMD Cup & Handle/Pennant Daily Chart

Let me teach you about two price patterns that are currently setting up in Advanced Micro Devices (AMD) where we can attempt to illustrate how a combination of technical triggers may align to present a very clear opportunity for technical traders.

This chart highlights a Cup & Handle pattern and a Bullish Pennant/Flag pattern.  Ideally, the combination of these two patterns would suggest a higher probability of an upside bullish breakout rally beginning near the apex of the Pennant formation. Yet, Pennant formations, and other types of technical patterns, can often present a “Washout sell-off in price” near the apex (or breakout area) as a means of shaking out stops before entering the next leg of the trend.

The “Washout” move happens as price tightens into a narrowing price channel and nears the end of a Pennant/Flag formation pattern. This typically results in a broader price move against the predicted technical pattern trend, in this case, down.  What happens is that traders tend to set stop levels just outside the tightening price channels as a means to protect against a price breakdown or rally against their position.  These stop orders present very real volatility targets when price begins the Apex breakout/breakdown event.  The price will usually rotate against the primary technical trend for a short period of time, taking out many stops in the process, then stall and begin to move in the direction of the technical pattern predicted trend, which would be a rally towards $72.

In this case with AMD, the Apex breakout move (to the upside) may be preceded by a price breakdown move near, or below, the $48 to $49 level – this is the “washout” move.  We’ve highlighted what we believe is the lower technical support level in AMD near $44.  This would represent a moderately deep downside price “washout” target level for skilled technical traders.  After this potential washout trend completes, a broader upside price trend usually sets us prompting a rally towards the original Pennant/Flag targets and likely completing the Cup & Handle pattern breakout.

The combination of the Cup & Handle pattern with the Bullish Pennant price pattern in AMD presents a very real opportunity for skilled technical traders.  If your risk tolerance for the trade is capable of riding out the potential “washout low”, then you may consider setting your long entry trades just below the $48 to $50 levels as we near the true Apex event of this trade setup.  There is no guarantee that the washout event will move down to the lower $44 support level – so consider that level a deeper price support level representing a deeper downside price washout.

Ideally, the pending Apex event of the Cup & Handle pattern and the Pennant pattern will result in a moderate 8% to 15% price washout move before the upside price trend initiates.  This suggests that the washout rotation may end near $48 or $49, where price may find support, then begin to rally higher.  The Breakdown Support level on this chart should be considered a “failure level” for this bullish price pattern.  If the price moves below that level when it initiates the Apex volatility, then it is very likely that support has broken down and the predicted upside price trend has failed.

This is how technical traders approach many types of technical price triggers.  We have an expected outcome for price and trends.  We understand the volatility factors related to the trade triggers and we attempt to identify risk factors and profit capabilities before we execute any trades.  If these parameters for our traders are adequate, then we may decide to execute the trade attempting to capture the profits.

Get ready, this AMD trade setup is nearing the Apex moment and our research team believes a $48 to $50 entry price range is an adequate “washout” range with minor risk factors.  Upside price targets should start near $61.50 and $69.  If you understand how to execute the trade properly, we’ve just delivered a complete blueprint for a potential Apex Breakout trade in AMD using simple technical analysis. This is the basic view of what we offer the active followers of our swing trade alert newsletter. Ride my coattails as I navigate these financial markets and build wealth one chart pattern at a time.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. Make 2020 and beyond incredibly profitable by following my analysis and trade alerts.

Get my Active ETF Swing Trading Newsletter or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

A Stealth Double Dip or Bear Market Has Started

The stock has gone through many cycles since the 2000 tech bubble. The tech bubble was the last significant time the stock market’s popularity among individuals piqued their interest in such a huge way similar to what we see now in the markets.

Market legend Jeremy Grantham recently talked on CNBC about the price action in the markets is the “Real McCoy” of bubbles. We will get back to his insight later in this article, but let’s get into some technical analysis that helps us see when and where the market bubble could burst.  When it does, it’s going to seriously hurt all the newly unemployed and sports betting traders who don’t know better yet how the markets move.

The stock market and how it moves is always evolving. Since 2008 when the FED stepped into the bailout America, which manipulated the financial system, the markets have been riddled with new policies by presidents and the Fed.

Instead of letting the markets naturally correct and revalue stock prices with each economic cycle (which is more or less what happened in the past), now, leaders and central bankers don’t want to let the music stop.  Now they are pushing money into the economy and making the rules/policies/taxes better for each business.

Unfortunately, we know how all this fiscal stimulus and manipulation will ultimately end. Changing rules/policies, pumping money into the economy, and giving out free money, may help short term, but this only worsens everyone down the road.

Currently, traders and investors think they have the fed acting like their parents to fall back on if things get tough and that there are no financial threats to a falling stock market. Traders are paying a premium for stocks and buying ever pause of dip. While all those traders may be feeling great with position and gains, they can and will likely all be wiped out soon enough if position sizing and risk management are not in place for each position held.

Don’t get me wrong, I am not a doomsday kind of person, but this is “Crazy Stuff” as Jeremy said in his recent interview.

Ok, now with that rant behind us, let’s move on to three simple charts that paint a clear picture because last week’s closing price action is potentially the beginning of something ugly.

I know my team, and I have been talking about a market top and lower prices for a long time as we are trying to warn as many traders and investors as we possibly can. Unfortunately, the FOMO (fear of missing out) on this rally has taken over peoples emotions and forcing them to buy buy buy and think its smooth sailing from here, which we believe is not the case. Going against the herd during extreme sentiment times like this is tough to do.

Take a look at these charts for a simple view of the market internals weakening and how it has proved to play out in the past.

S&P 500 VS Stocks Trading Above 200-Day MA
2004-2009 Bull & Bear Market

This chart is fairly clear in showing that when 50% or more of stocks are trading above the 200-day moving average, we are in a bull market. It is not a short term indicator, it does lag, but the setup with the red arrows shows the strong stock market rally in the top, and the breakdown below 50% and the rebound of stocks trading over the 200 moving average. This is what happened during the last bull and bear market and just like what we are experiencing now.

S&P 500 VS Stocks Trading Above 200-Day MA
2014 – 2020 Bull & Bear Market

This chart shows a few interesting things. First, the number of stocks trading over the 200-day moving average is below 50%. Last week this value had a massive reversal indicating the majority of stocks have been experiencing momentum moves to the upside and are now starting to be sold.

Momentum stocks are when stocks move so quickly to the upside that everyone has FOMO and just chasing prices higher.  Once they begin to roll over, everyone panics and dumps the shares, and the share value falls fast and hard. This is a bearish sign because once the momentum stalls, we know what goes straight up, generally comes straight back down for at least half of the recent rally.

The other pattern that is of concern is the megaphone pattern. This indicates price instability and adds more risk to investors’ long stocks and not planning to dump them when things turn south.

Since 2015 the market has had all kinds of landmines and manipulation form fed, new tax policies, etc. In my opinion, and many others I have talked with 2015/2016, the market was ready for a normal correction cycle (bear market), but the new policies put in place supercharged the economy for another mega wave higher, which brings us to today. As I mentioned before, when you start gaming the system and changing the rules, things become uncertain and unstable long term, which eventually leads to failure. Megaphone patterns show precisely the unstable price and health of the market.

Bonds Point To Near Term Market Weakness

Bonds have been holding up exceptionally well during this fed induced rally. Bonds tend to lead the stock market and start to rally or at least outperform stocks before the stock market corrects in any significant way.

For example, in January this year, we traded GDXJ and TLT as they were leading the way and pointing to much higher prices vs. the stock market. GDXJ we locked in 10% and exited the position it at the high tick the day when gold miners topped and fell 57% over the next few weeks. That price level, which we exited was a significant resistance zone and was our target price to exit.

TLT had broken out of a huge bull flag and was starting to outperform stocks. We purchased TLT and ended up closing that out for over 20% as the stock market crashed.

Both of these assets not only warned us that the stock market was becoming fragile but provided great trading opportunities.

This shows you the power of using inter-market analysis, technical analysis, and predefined trading rules. By using these techniques, you don’t get sucked into the emotional side of trading, which leads to falling in love with winners and not selling them until they turn into losers you that you can’t handle the size of the loss anymore.

If you have not yet watched this video where I compile our recent major calls of the Feb crash months before it happened, the 30% rally prediction, and more on what I am talking about in this article, be sure to watch this video.

 

Concluding thoughts:

In short, I hope you glean something useful from this article and that I don’t come across as a doomsday kind of guy. If this is the start of a double-dip, it’s going to be huge, and if it’s the start of a bear market, it is going to be life-changing.

If you are new to trading, technical analysis, or are a long term passive investor worried about what to do, you can follow my lead. I share both my investing signals and more active swing trade signals using simple ETFs at www.TheTechncialTraders.com

For a look at all of today’s economic events, check out our economic calendar.

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Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

 

All That Glitters When the World Jitters is Probably Gold

The economic pressures and concerns within the global markets have not abated just because the US Fed has ramped up the printing presses. Inversely, the stock market price levels may be elevated based on a false expectation of a quick recovery and of future expectations that may be very unrealistic.

In terms of technical analysis, Gold has set up a very interesting sideways basing pattern after recently breaking above a major resistance channel near $1720.  Our research team believes the recent base in Gold, near $1720 to $1740 is setting up just like the 2005 to 2007 peak in the US stock markets – just before the Credit Crisis hit in 2008.  We believe the similarities of the current and past events, in price and in technical/fundamental data, are strangely similar.

An underlying asset/economic class had recently experienced a stupendous bullish rally.  This euphoric rally phase was brought on because the US Fed and global markets were running high on cash and credit – heck, everyone was.  The “no fear” mentality was running wild, and so was the market.  Suddenly, it appeared that the credit markets were seizing up and that interest rates had nearly doubled or tripled overnight as banks and lending institutions reacted to the US Fed raising rates.  At that point, the catalyst for the Credit Crisis had already been set up – much like what is happening today.

SPY – SPDR S&P500 ETF Trust Weekly Chart

This SPY chart highlights the similarities between 2006-08 and now.  It may be difficult for you to see on this compressed chart, but the price pattern we’ve experienced over the past 2+ years is very similar to the price pattern that set up the peak in the markets near October 2007.  This time, volatility appears to be 3x or 4x the levels from 2006/07 – yikes.

Gold to Silver Price Ratio Weekly Chart

The current level relating the price of Gold to the price of Silver is 98.2 – an extremely high historical level.  There has never been a time like this in history where Gold has achieved this high of a price ratio compared to Silver.  It is very likely that Gold has rallied to these current levels as a “global hedge against risk” and that Silver has simply been overlooked as a secondary asset.  Even though supply for Gold and Silver has been decreased over the past 6+ months because of demand and the COVID-19 virus, we believe the current pricing relationships present a very clear opportunity for skilled technical traders.

Traditionally, the Gold to Silver ratio will likely fall to levels below 65 to normalize the price disparity.  This suggests that Silver may see a 2x or 3x rally over the next 12+ months and Gold would likely see a 60% to 150% rally from current levels.

Gold Futures Weekly Chart

This Gold Futures Weekly Chart highlights Fibonacci Expansion ratios from similar pre-expansion price ranges.  The first measures the advance of Gold from 2001 to 2008 – the peak of the 2008 markets.  The second measures the advance of Gold from 2015 to the recent peak (2020) – the presumed peak in the US stock markets

The overlapping Fibonacci expansion levels on this chart paints a very clear picture that Gold may attempt to target certain levels should it begin a much broader upside price move…

_ $1950 – Key initial target level and could become minor resistance.

_ $2250 – The next major target level representing a 2x expansion from the initial 2008 price rally.

_ $2731 – This key level is like to become the bigger target for 2020.  Our research team believes the alignment of this level with the current price expansion in Gold sits perfectly as the next upside price target.

_ $3200 – This upper price target shows some importance – yet it is still quite far away from current price levels.  Still, it is a valid upside price target.

We suggest taking a moment to review some of our earlier research posts related to Precious Metals and Gold…

June 3, 2020: Gold & Silver “Washout” – Get Ready For A Big Move Higher

May 28, 2020: Shortage Of Physical Gold & Silver

May 19, 2020: Gold. Silver, Miners Teeter On The Brink Of A Breakout

GLTR Precious Metals ETF Daily Chart

This Daily GLTR chart highlights the current FLAG formation that has setup in price and is about to breakout/breakdown.  Our researchers believe the obvious breakout move to the upside is going to happen given the current global economic environment and the fact that we are looking at Q2 data within 10+ days that will likely shock many investors.  Notice that our Fibonacci price modeling system has drawn UPPER GREEN and LOWER RED triggers levels well above and below the current FLAG APEX level.  This adaptive p[rice modeling system attempts to track price rotation and ranges while adapting internal factoring levels to identify proper Trigger and Target levels.  At this point, GLTR must move above $85 to trigger a new BULLISH TREND or below $77.50 to trigger a new BEARISH TREND.

GLTR Precious Metals ETF Weekly Chart

This Weekly GLTR chart highlights a 100% Fibonacci expansion range from the previous upside price rally levels.  Should GLTR breakout to the upside and complete a 100% measured upside price move, the next target level for GLTR would be $94.70 – nearly 15.5% higher.

This is an incredible opportunity for skilled technical traders if they understand how the precious metals and miners sectors are aligning for a bigger move higher.  There has rarely been a time in history where Gold and Silver have been this depressed in terms of pricing when the global economy and stock markets have been this inflated/elevated. It really may be the “opportunity of a lifetime”.

We believe the next 15 to 30+ days will prompt a “melt-up” in Gold to levels near $2000 to $2100. Silver will likely rally to levels above $25 to $26 over that same span of time.  Once the bigger price breakout begins in Silver, attempting to normalize to the advanced price levels in Gold, Silver will begin to rally much quicker than Gold prices.  We believe that will happen as Gold nears and breaches the $2000 price level.

For skilled technical traders, this extended price move in Precious Metals, Miners, and a host of other sectors presents a very clear opportunity to time and execute some very exciting trades.  We had been warning our friends and followers for over 18+ months now that the end of 2019 and all of 2020 was going to be incredible years for skilled traders.  Don’t miss the bigger moves – they are about to unfold over the next 30 to 60+ days and continue well into 2022.

In short, I hope you glean something useful from this article and that I don’t come across as a doomsday kind of guy. If this is the start of a double-dip, it’s going to be huge, if it’s the start of a bear market, it’s going to be life-changing. If you are new to trading, technical analysis or are long-term passive investor worried about what to do you can follow my lead and trades both as a swing trader and my long term investing signals using simple ETFs at www.TheTechncialTraders.com

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
Found of Technical Traders Ltd.

 

Gold Bull Miners Breakout, and the USD Analysis for June 19, 2020

This video shows you the monthly stage analysis and new bull markets emerging, and a bear market that directly affects gold, silver, miners, and the US Dollar.

Gold, Silver, Miners and USD Video Analysis 19.06.20

The most recent analysis is posted in this full article:  https://www.fxempire.com/forecasts/article/gold-has-finally-cleared-major-resistance-time-for-liftoff-656175

For a look at all of today’s economic events, check out our economic calendar.

Gold Has Finally Cleared Major Resistance – Time for Liftoff

Our research team authored an article on April 24, 2020, suggesting Gold would have to clear a major resistance channel/arc before any further attempt at a rally would take place.  You can read that article here.

At that time, we expected this resistance channel to contain gold prices for a short 10 to 14+days before a bigger upside price move was going to begin.  You can see from our original charts that we believed the resistance channel would be broken fairly quickly.  Yet, Gold has continued to trail moderately lower as the US stock market has continued to rally and the US Fed has stepped up their support and is buying up all sorts of debt and assets.

ORIGINAL APRIL 24 DAILY GOLD CHART

CURRENT DAILY GOLD CHART

Comparing the original chart to the current Daily Gold chart, below, you should be able to see how the price has now established a base above the GREEN ARCING resistance channel that we believe is the final hurdle before Gold attempts a move to levels above $2100.  Although Gold has yet to really start a massive upside price rally, at this point we believe the big move higher could start at any moment.

The US Fed has continued to warn that the recovery process may be full of unknowns and risks.  The global markets are going to react to what happens in the US markets and Q2 data is just a few weeks away.  We believe precious metals are poised to make another 10% to 20% upside price move that may initiate at any moment.  All it takes is a push away from these consolidation levels to put Gold an Silver back on the radar for traders.  Once traders see the move start – they will pile into the rally just like they always do as many people expect Gold to rally above $2500 before the end of this year.

Gold prices must move upward to levels above $1825 to confirm a new bullish trend or downward below $1630 to confirm a new bearish trend.  See the highlighted GREEN and RED rectangles on this Gold Daily Chart.

CURRENT WEEKLY GOLD CHART

This current Weekly Gold chart shows how the price has stayed glued to the GREEN Fibonacci Price Amplitude Arc and how clearly these levels act as real resistance or support.  The Weekly Gold Chart already confirms the Bullish price trend for Gold and supports the $1630 Bearish Price Trigger Target for any move to the downside.  In other words, Gold would have to fall below $1630 to qualify as entering a new bearish price trend.

The next upside move in Gold and Silver could start at any moment  The current support level in Gold suggests $1680 to $1700 is strong support and all it would take to start this next big move is a sprinkling of “fear” to start a precious metals greed cycle again.  How that happens, normally, is that the general stock markets move into a declining price phase on economic weakness or poor earnings data (or worse) and traders suddenly watch Gold rally up 5 to 7% fairly quickly.  At that point, traders begin to focus on the metals and the fact that we are just about $200 away from new all-time highs.

It won’t take much to push Gold into the $2100 level and once that happens there will be talks of $5000, $10,000 – even $20,000 gold prices.  Watch for the next sign of real weakness in the US stock market (possibly a breakdown event or some other event) and watch for Gold to attempt to rally above $1775.  That would be a pretty good sign that the upside price rally in Metals has initiated.

Ride our coattails as we navigate these financial markets and build wealth while others watch most of their retirement funds drop another 35-65% during the rest of this financial crisis going into late 2020 and early 2021.

Subscribers of my Active ETF Swing Trading Newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain. This week we closed out SPY ETF trade taking advantage of this bounce and entered a new trade with our account is at another all-time high value.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Fibonacci Price Modeling Suggests Massive Resistance Range In US Markets

The big selloff in the US markets last week (-1600 pts in the Dow Jones) on the comments from the US Fed aligns with previous Fibonacci Price Trigger levels throughout the early portion of 2020 to create a massive Support/Resistance range in the markets according to our research team.  It is very likely that the big selloff bar from last week will also establish a minor Support/Resistance range within the price range of that big selloff bar.

One of the key technical components of our Fibonacci Price Modeling system is that it acts as a trend following system, projects key target and reversal levels, and also highlights key trigger levels as price rotates up and down in different time frames.  The benefit we derive from this modeling system is that we can interpret the data into various forms of key technical factors for our friends, followers, and members.

YM – DOW JONES DAILY CHART

Although this YM Daily chart, below, may be a bit complicated, pay attention to the BLUE SHADED RECTANGLE between 25,600 and 26,500.  Additionally, pay attention to the heavy MAGENTA LINE near 26,000.  This rectangle and the magenta line are derived from Fibonacci Trigger levels generated by our Fibonacci Price Modeling system.

You can see these Trigger Levels as GREEN and RED horizontal lines drawn just below new price peaks or just above new price bottoms.  Fibonacci Price Theory is based on tracking price peaks and troughs in a process as price attempts to trend higher or lower.  Our Fibonacci Price Modeling system attempts to adapt to price variances using a modified AI technology and attempts to highlight projected Trigger Levels and future potential Target Levels with each new price rotation.

Our researchers believe the BLUE RECTANGLE range will act as a major price support/resistance level after the big selloff bar last week.  This price range, totaling almost 1000 points, is likely to prompt volatile price rotation near or within this range as price attempts to either breakout to the upside or breakdown into a new Bearish trend.

If the price moves lower, below the 25,500 level, there are very few prior Fibonacci Trigger levels that offer support on the way down.  One, near 23,850, and additional deeper Trigger Levels near 20,000 to 20,850 are the only deeper reference points recently.  Thus, our researchers believe any price breakdown below 25,500 could prompt a very deep and fast price correction in the markets – setting up a potential double-bottom type of pattern.

YM – DOW JONES 60 MINUTE CHART

This 60 Minute YM chart, generated about 70 minutes after the Daily chart, above, clearly shows how price reacted near the upper range of the BLUE Fibonacci Price Channel.  Almost immediately after attempting to breach the upper range of the support channel, the price collapsed back into the channel and wiped out close to 300+ points very quickly.

Our research team believes the 26,000 will continue to act as a key price level going forward.  The upward sloping price channel line, drawn as a LIGHT SKY-BLUE LINE through the recent downside price rotation, is another key price channel supporting the current market.  Once both of these levels are breached to the downside, there is very little support to be found before reaching the 23,850 level.

As we’ve been warning our friends and clients, this is the time to stay very cautious with your trades as volatility will likely continue to be elevated and bit price rotations are likely as we head into Q2 earnings season.  Everyone wants to see a strong recovery in the US markets and speculative traders are pushing in that direction.  The reality of the situation may be that we see a longer-term recovery taking place over the next 6 to 12+ months.

Right now, the YM price is still above the heavy Magenta support level.  We need to watch price activity as this level becomes critical for the price to attempt any future upside price moves.  If the price falls below this level, then a deeper price breakdown may be initiating.

Subscribers of my Active ETF Swing Trading Newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain. This week we closed out SPY ETF trade taking advantage of this bounce and entered a new trade with our account is at another all-time high value.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of www.TheTechnicalTraders.com

 

Financial Sector ETF May Break Below Price Gap

Our research team warned of a peak in the Financial Sector ETF on June 10, 2020, with this article.

It was important to understand the technical setup that existed at that time and what the Fibonacci Price Modeling system was showing then.  There was very clear support near $23 that was highlighted by the Fibonacci Price Modeling System and we were very clear in our future price predictions within that article…

“The $27 price peak sets up directly between our two Fibonacci Daily upside price target (Peak) levels.  We believe this setup is a very strong indication that a move to below $23 may be setting up over the next 30+ days.  The Q2 data may very well push investors to re-evaluate the potential for the Financial sector if delinquencies and at-risk borrowers continue to default in greater numbers. “

The timing of our original article could not have been better for skilled technical traders.  Since that June 10, 2020 article posted, the XLF price has fallen almost exactly to $23 (-10.15%).

Currently, the FLX price is recovering just above the price gap that will act as the next “window” for the price to attempt to fill.  Skilled technical traders should watch the Breakdown Gap that setup between June 10 and June 11 as an upper window of resistance (between $25.20 and $24.35).  It is very likely that the XLF price may attempt to breach or fill this gap window before initiating another downside price move targeting levels below $22.

DAILY XLF CHART

It is our opinion that should sudden price weakness drive price levels lower, away from the upper gap range, then weakness in the financial sector could create a series of new lower price gaps as XLF price levels attempt to gap downward – through $22, then $20, then ultimately the $18 to $19 price level.

This Weekly XLF chart highlights the longer-term Fibonacci Price Modeling System’s expectations showing the current downside price move has broken below the Bearish Fibonacci Price Trigger Level near $24.87.  At this point, the next lower support level is near $22.10 – just below the lower Gap level.

It is our opinion that the Financial Sector ETF will attempt to break below $22 in the near future and may attempt to fall to levels near or below $20.  The current support in the market from the $23 level may prompt a move into the upper Gap level before the next downside move begins – although we feel that is not likely to happen.

WEEKLY XLF CHART

Watch for a breakdown in price trading below $23.50 as an indication that weakness has prompted price to trade below the recent “Belt-Line” price level.  We believe a new close below $23.50 would be a good indication that the lower Gap is about to be filled and a deeper price move may take place targeting $20 to $21.

As the Q2 data starts to hit the news wires over the next 4+ weeks, we believe risks to the financial system will become very evident as a result of the COVID-19 shutdown.  Be prepared for increased volatility in almost all sectors and the very real potential for a retest of recent low price levels.

Just think of this for a minute. While most of us have active trading accounts, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during the next bear market, you could lose 25-50% or more of your net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how. One of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position but we do have a way for you or your advisor can take advantage of the market gyrations with our Technical Wealth Advisor investing signals.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we issued a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

How To Spot S&P 500 Running Corrections – June 15, 2020

Here is a quick video on how to spot running corrections and how to use Fibonacci Extensions to measure price targets with 61%, and 100% levels. If this pattern holds true then we could see a much larger decline later this week.

S&P 500 Video 15.06.20

Also, here is a link to my last technical analysis video on how I called the market top with its rising wedge/running correction and the extreme sentiment that was in the market: https://www.fxempire.com/forecasts/article/exclusive-sp-500-technical-analysis-for-june-5-2020-653630

For a look at all of today’s economic events, check out our economic calendar.

Revisiting Our ADL Predictions for S&P 500

Our research team authored an article suggesting that our Adaptive Dynamic Learning Predictive Modeling system indicated the US major markets were 12% to 15% overvalued on May 23, 2020.  This was just before the last “euphoric” phase of the recent rally took began the week after our prediction.  From the date of May 23, 2020, to the recent peak in the markets, the SPY rallied another 9.72% above the price levels when we made the ADL prediction.  This suggests that the major markets rallied to levels near 21% to 24% overvalued near the recent peak.

Please take a moment to review our original ADL article here: https://www.fxempire.com/forecasts/article/predictive-modeling-suggests-us-markets-12-over-valued-650989

In keeping with our research team’s conclusions, the downside price move that initiated on Wednesday, June 10, 2020, after the US Fed statements, and really broke down on June 11, 2020, will likely continue resulting in the US major markets attempting to find support near our ADL predictive modeling system levels.  The downside price trend could extend below our ADL price target levels if the selling in the markets pushes into an extreme selling event.  It is not uncommon for the price to attempt to move through the ADL price levels attempting to find support and/or resistance.

ORIGINAL ES ADL PREDICTED TARGET LEVEL WEEKLY

This is the ES chart showing our ADL predictive modeling system results from the May 23, 2020 date.  You can see the ADL predicted price levels near 2520 on this chart and the fact that the markets rallied away from these levels in late May created what we call a “price anomaly”.  This is when price moves away from the ADL levels in a manner that is somewhat unreasonable.  The same thing happened during the peak price level in early February 2018 and the October peak in 2018.

SPY ADL PREDICTED TARGET LEVEL DAILY

Based on our ADL predictive modeling system and the targeted price levels, we believe the SPY will fall to levels close to or below $260 over the next 10 to 15+ days.  It makes perfect sense that the markets over-extended a speculative price rally based on the context that the US economy would rebound from the COVID-19 shutdown.  Now that the US Fed has deflated that expectation and the riots and other issues related to social and political events are pending, we believe a “sudden realization” within the markets could send the US stock market price levels much lower over the next 2+ weeks – eventually attempting to find support near recent lows.

Concluding Thoughts:

Remember, developing a winning strategy is not about trading every trend and day-trading every move, it is about timing your trades and strategically positioning your portfolio to take advantage of the “best asset now”.  We’ve developed proprietary technology that assists us in determining the best assets to be invested in and our predictive modeling and other proprietary tools assist us in identifying confirmed trade triggers.  Our objective is to assist our clients in generating consistent profits – not hundreds of trades.

If you were caught on the wrong side of this move recently, please remember that we tried to warn you of our multiple research articles and clear content.  We’ve been warning that this upside rally was a speculative price move driven by foreign and US investors believing the V-shaped recovery was real.  The reality of the situation is that this recovery is going to be much more volatile than many people believe.  This is a global economic event – not just a Fed Blip or some other isolated panic volatility.

You better stay on top of these trends and risks in the markets to stay ahead of these bigger moves.

One of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position but we do have a way for you or your advisor can take advantage of the market gyrations with our Technical Wealth Advisor investing signals.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we issued a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

The Black Swan Event for Stocks is About to Repeat

The Black Swan Event for Stocks is About to Repeat

This hybrid article with videos walks you through what and why the markets crashed, what they are starting to do now, and how you can take advantage of this black swan event.

The year has been filled with big broad market swings, sell-offs, and rallies, making people pull their hair out and scream. Only those who don’t understand portfolio risk, position-sizing, and can’t read the charts are in pain this year. Unfortunately, that’s the majority of traders thought.

The video below covers what is happening in the markets this week, today, and what to expect looking forward several weeks, so get ready for some incredible market moves!

With that said this year has been a little slower with our portfolio simply because we focus on steady growth. We don’t ride the stock market rollercoaster, which has everyone stressed out. We see no point in holding positions and dealing with the stress which comes with it when you can sidestep it or better yet, profit from it.

My focus is on our BAN strategy, which stands for “Best Asset Now.” We review 30+ markets, sectors, commodities, and currencies to find the best opportunity with the lowest level of risk. We are not looking for a bunch of volatile trades. Instead, we shoot for a 1-4% return on our entire portfolio a month, which may sound dull but do the math, and you soon realize its tough to beat!

Price swings and volatility are high this year are extreme, which means we pear back the number of trades we make, and reduce position size to protect both our subscribers trading and investing accounts, along with our own.

This market volatility is attracting new traders to the market like a mosquito to a bug zapper light. We, on the other hand, take the opposite approach and step back to only cherry-pick a few low-risk trades here and there.

When stocks and commodities are moving 10-92% a day as we have seen recently, it’s not the best time to be risking your hard-earned money because you can do a lot of damage quickly overnight with the way this market had been behaving.

Anyway, if you are looking for a simple, logical trading strategy with ETFs that is hitting new high watermarks for the year with less than a 3% drawdown on the year, then watch this video of my most recent analysis and prediction.

 

Here are the other two other videos I referenced in the video above: showing the price predictions before they happened.

Feb 21: Black Swan Event Begins

Call the Black Swan Even lat 2019, not knowing what it would be, then on February 21 we warned the black swan event had begun – Read Here.

We also warned of the waterfall sell-off before that on Jan 26 – Read here

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March 27: 30+% Market Rally Analysis:

 

June 5th: Market Rally Top For This Week Analysis

 

 

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we issued a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

S&P 500 Technical & Sentiment Analysis for June 11, 2020

S&P 500 Technical & Sentiment Analysis for June 11, 2020

Huge move down today, but pop in price and this reversal we pinpointed last Friday here in this video: https://youtu.be/mwGC_VoXYwA

I also called this 30% bounce at the market lows and what to expect coming into todays top which is available in this video: https://youtu.be/GzGQRBVDey0

We are calling this market play by play for major trends so be sure to subscribe to the video channel and follow along. My trading signals are available at http://www.TheTechnicalTraders.com

For a look at all of today’s economic events, check out our economic calendar.