Gold Setting Up Just Like Before The COVID-19 Breakdown

RESEARCH HIGHLIGHTS:

  • Gold rebounded quickly and broke to higher prices after the COVID deep selling.
  • Our Fibonacci support levels for Gold are resting near $1,885, $1,815 & $1,790.
  • More downside pressure on price is possible, but if support is maintained at $1,885 then we could see a big upside recovery trend take Gold to $2,250.

Just before the COVID-19 collapse in the markets hit near February 25, 2020, Gold started a double-dip move after reaching $1,692 on February 24.  First, Gold dipped from $1,692 to $1,564, then recovered to new highs ($1,704.50) on March 10, 2020.  Then, as the deeper COVID-19 selling continued, Gold prices dipped again – this time targeting a low level of $1,450.90.

What we found interesting is how quickly Gold prices recovered and broke to even higher price levels after this deep selling.  Our belief is that when a crisis event first hits, which we sometimes call the “shock-wave”, all assets take a beating – including Gold and Silver.  This is the event where traders and investors pull everything to CASH (closing positions).  Then, as the shock-wave ends, traders re-evaluate the price levels of assets to determine how they want to deploy their capital.

GOLD BASING NEAR $1885 FOR A BIG RALLY

Our belief that this DIP or double-dip pattern in Gold because of crisis events presents a very solid opportunity for skilled traders to add-to existing positions or strategically target shorter-term upside price swings in precious metals.

This Daily Gold chart below highlights the first dip and the second dip in Gold prices as the COVID-19 price collapse took place.  Notice how Gold rotated lower, then recovered to new highs, then dipped even lower in early March 2020.  This last dip in price levels was the very deep selling before the March 21 bottom setup (US Fed induced).

Now, take a look at the current Gold Futures Daily chart. Notice the big price correction that started on August 7, 2020 – setting up the FLAG/Pennant formation in Gold.  Interestingly enough, this top in Gold also aligns with a moderately deep price correction in the NASDAQ – before continuing to rally even higher.  Silver also setup a price peak on August 7, 2020.  Now, as the Banking illegalities report has been released, the markets again fell into a shock-wave of selling on Monday, August 21.  This time Gold fell just over 3% throughout the day before starting to recover near the end of the day.

Currently, our Fibonacci support levels are resting near $1,885, $1,815 & $1,790 as you can see from the Gold Daily chart below. We believe more downside price pressure may continue in Gold and Silver over the next few days before a strong upside price move begins to take place.  The recent low price level in Gold, near $1,885, aligns perfectly with our Fibonacci projected price target (Support) level.  If Gold has already found support near this price level, then we may already be hammering out a bottom in Gold setting up a big upside recovery trend.

The question for gold traders right now is “does the $1,885 level hold as support or will gold break lower trying to fund support?”.  My researchers and I believe the current bottom in Gold is set up and the $1,885 price will hold as support.  We also believe the next move higher will prompt a rally targeting levels near $2,250.

Watch for the momentum base to continue to form near $1,885 before the breakout rally trend in Gold starts.  Once it breaks the $2,035 level, it should start to rally upward very quickly. If the price of Gold breaks down below $1,885 then we may experience a continuing bottom to the next support level of $1,815.

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. Subscribers of my Active ETF Swing Trading Newsletter can ride my coattails as I navigate these financial markets and build wealth. My research and trading team are here to help you find better trades and navigate these incredibly crazy market trends.

While most of us have active trading accounts, our long-term investment and retirement accounts are equally at risk. We can also help you preserve and even grow your long term capital when things get ugly (likely now) with our Passive Long-Term ETF Investing Signals.  Don’t wait until it is too late – subscribe today!

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.

 

Global Markets Break Hard To The Downside – Watch Support Levels

RESEARCH HIGHLIGHTS:

  • New reports of widespread financial corruption likely triggered the current sell-off.
  • Watch out for market support levels to see if this is a short-term correction or the start of a downtrend.
  • Support for the DOW is just above 26,000.
  • Support for the SP500 is around 3,100.

US and global markets were already under pressure over the past few weeks related to COVID-19 issues and global economic expectations.  The technology sector had driven valuations to levels not seen since the DOT COM bubble near the end of August and many of the US Indexes has reached or breached all-time highs again.  My research team and I warned followers to “stay cautious” throughout much of the price rally as our proprietary price modeling systems suggests the rally was isolated and not organic.  The US Fed has spewed capital into the markets and speculative traders piled into the “excess phase” of the market to drive price levels higher.  Take a moment to review these recent research posts to learn more:

September 13, 2020: MAKE OR BREAK – BIG TRENDS AHEAD

September 1, 2020: ARE FANGS GOING TO BREAKDOWN SOON?

August 27, 2020: EXPANDING WEDGE MAY PROMPT BIG PRICE CORRECTION – COULD A BIG TOP BE SETTING UP RIGHT NOW?

MARKETS SELLING OFF ON NEWS

Before we get into the price charts, we want to highlight the news that is driving much of this selloff in the markets.  Early Monday reports (or late Sunday, depending on your location) were published highlighting illegal and nefarious activity by many global banks related to money laundering and supporting criminal rogue elements throughout the globe.  The names of the banks implicated include Deutsche Bank, Standard Chartered, Barklays, Commerzbank, Danske Bank and HSBC Holdings.  It appears the European and Asian banks had the largest exposure to this activity and risk.  There is some talk that Russian banks may have been involved as well (unconfirmed at this time by our research).

What this means for traders is that a broad, global financial crisis may be starting to unfold – this time vastly different than the 2008-09 credit crisis.  This event will be centered around illegal and corrupt actions at some of the world’s largest financial institutions and the far-reaching aspects of rogue government or private elements involved in this activity.  We believe the markets will attempt to find support after the shock of this news is digested.  Longer-term, I believe a broader market downtrend may continue – it’s just a matter of what happens next and how fast global authorities are able to engage in a proper form of legal resolution (indictments).

At this point in time, the news that global banks were acting illegally and improperly may prompt a much broader market downtrend over time.  Right now, we believe the initial “shock-wave” will be processed in price and support levels will be found fairly quickly.

SUPPORT LEVELS

This Daily YM chart below highlights the support level near 26,000 that we believe will become the first floor for price as this selloff continues.  Our proprietary Fibonacci price modeling system is also suggesting support levels just above the 26,000 are valid (see the RED and BLUE SQUARES on the right side of this chart).  My research team believe price will attempt to find support near the 26,000 level as this broad market selloff matures.

This ES Daily chart also highlights the support levels near 3,090 (the lower YELLOW line) and aligns with our proprietary Fibonacci price modeling suggested support levels just above 3,100.  We believe this will be the first level of support for the ES if the downtrend continues.

Yes, my team has been warning to stay cautious throughout much of the uptrend and we have highlighted a multi-year Head-and-Shoulders pattern that we believed could prompt a broader market decline.  But we were not aware of this illegal activity related to the global banking system.  Our research helps to confirm that technical analysis and our proprietary price modeling/research systems can act as clear forward-looking techniques for any skilled traders.  The theory that price always internalizes news before or as the news happens suggests that technical analysis will, in almost all cases, highlight the most probable outcome before the news is known.  Only in very rare “acts of God” is technical analysis sometimes delayed in reacting to the news.

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.

If you want to survive the trading over a long period of time, then you learn fairly quickly how important it is to protect against risk and to properly size your trades.  Subscribers of my Active ETF Swing Trading Newsletter can ride my coattails as I navigate these financial markets and build wealth. My research and trading team are here to help you find better trades and navigate these incredibly crazy market trends.

While most of us have active trading accounts, our long-term investment and retirement accounts are equally at risk. We can also help you preserve and even grow your long term capital when things get ugly (likely now) with our Passive Long-Term ETF Investing Signals.  Don’t wait until it is too late – subscribe today!

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

It’s Go Time for Gold! Next Stop $2,250

RESEARCH HIGHLIGHTS:

  • Gold Pennant/Flag formation is now complete and setting up new momentum base near $1,925.
  • Our Adaptive Fibonacci Models suggest support will prompt new Gold rally to $2,250.
  • The rally in Gold will continue to extend higher over the next 4+ weeks.
  • The US Dollar may move lower and/or the US stock market may break recent support to prompt this new rally in Gold.

If you are a follower of my research, then you know I follow gold and silver closely. I believe Gold has completed a Pennant/Flag formation and has completed the Pennant Apex.  Further, a new momentum base has setup near $1,925~1,930, near the upper range of our Adaptive Fibonacci Price Modeling System’s support range.  My team and I believe the current upside price move after the Pennant Apex may be the start of a momentum base rally targeting the $2,250 level or higher.

MOMENTUM BASE SHOULD PROMPT +15% RALLY IN GOLD

We believe the current momentum base in Gold, near $1,925, will prompt a move higher that will initially target $2,100, then breach this level and attempt to move to levels near $2,250 fairly quickly.  My research team and I have called nearly every upside price move over the past 6+ months, clearly and accurately describing the “measured moves” in precious metals. Please take a moment to review some of our earlier Gold research posts:

August 4, 2020: REVISITING OUR SILVER AND GOLD PREDICTIONS – GET READY FOR HIGHER PRICES

July 13, 2020: GOLD & SILVER MEASURED MOVES

April 25, 2020: FIBONACCI PRICE AMPLITUDE ARCS PREDICT BIG GOLD BREAKOUT

This Daily Gold chart above highlights our Fibonacci Price Amplitude Arcs, suggesting support is sloping downward near $1,915 right now.  We believe the momentum base that is setting up after the Pennant Apex is just starting to build upside momentum.  We believe the rally in Gold will continue to extend higher over the next 4+ weeks. This aligns with our Fibonacci Price Modeling System’s support range on the Weekly chart, which we will look at shortly.

The Weekly Gold chart, below, highlights the Pennant/Flag formation in YELLOW together with the Fibonacci Price Amplitude Arc support levels (in MAGENTA).  Additionally, we’ve drawn a LIGHT GREEN rectangle through the support range identified by our Adaptive Fibonacci Price Modeling System.  We believe this support range will continue to act to support the momentum base in Gold and push Gold prices higher once the upside momentum gains strength.  Our upside price target is more than $300 higher than the current price levels.  We believe the next upside price leg will target $2,250 or higher.

It is likely that this move in Gold will be associated with moderate risk factors related to the US Dollar and/or the US Stock market.  We believe a lower US Dollar and/or a weakening US stock market that breaks recent support will lick start this new rally in Gold.  Now is the time to really start to pay attention to how the US stock market holds up after the deep downside price rotation over the past 2+ weeks, and start positioning for a gold rally.

We are actively trading gold and have positions in this precious metal. If you would like to ride my coattail with my trade alerts and my pre-market videos where I walk through the charts every day before the opening bell, then take a look at the Technical Trader, my Active ETF Trading Newsletter. If you have any type of retirement account and are looking for signals when to own gold, equities, bonds, or cash, be sure to become a member of the Technical Investor, my Long-Term Investing Signal Newsletter.

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

 

Make or Break – Big Trends Ahead

RESEARCH HIGHLIGHTS:

  • Although our modeling systems have recently switched into Bullish Trending mode, we are still very cautious of a Bull Trap pattern.
  • Bearish technical divergences between price and RSI with an election 50+ days away indicates market weakness and money rotating out of FAANG stocks. FAANGs are at make or break levels – it’s time to act not react.
  • 11% to 22% price rotation ranges are in play – are you ready?

My research team recently highlighted the current market trend setup over the past few weeks as cautiously bullish while watching for a potential Bull-Trap setup.  We have been warning our followers of the risks associated with a Presidential election year event as well as the continued disconnect between the market rally and the real-world economy.  These next few days and weeks will make or break the markets so we encourage you to pay attention to this article.

FASTEN YOUR SEATBELTS – WE’RE ABOUT TO GO FOR A RIDE

Although our longer-term proprietary price modeling systems have switched into Bullish Trending mode, we are still very cautious of a Bull Trap pattern in the markets.  This happens when price attempts to rally beyond recent high price levels (previous peaks) and stalls.  It becomes a Bull Trap when price accelerates beyond the previous highs on moderate volume – pulling in unsuspecting traders who think this new price high is a breakout upside trend.

In many cases, when price rotation ranges are rather muted and volatility is lower, a breakout of a previous high is technically a bullish trending signal.  When price range rotation is extreme and volatility is high, it can become a trend trap for unsuspecting traders.  When we add the typical election year price consolidation factors, which we’ve been attempting to clearly illustrate for our followers over the past 16+ months, we start to get a setup that more closely resembles a Bull-Trap than a breakout trend.

If you have not been following our research over the past few weeks, please take a moment to review this post from our research team:

September 1, 2020: ARE FANGS GOING TO BREAKDOWN SOON?

We believe the next 5 to 10 trading days will be a make or break event for the markets.  Very clear support has set up in the FAANGS Index and our Custom US Stock Market Index has set up a very clear technical divergence pattern after reaching a new price high.  Either support will hold near current price levels and the US stock market will continue to rally higher or a big breakdown in price will setup which may prompt an 11% to 16% downside price correction.  This is why my research team has continued to push the “cautiously bullish” term and highlighted the potential for the Bull-Trap pattern over the past 30+ days.

Our research from June 1, 2020, also highlights how Election Year Cycles affect the markets:

“Currently, we are urging our friends and followers to stay overly cautious of this upward price trend in the US stock markets.  Even though we have seen the NQ and other sectors rally to near all-time highs, we believe the markets are still excessively volatile and the indecision leading up to a Presidential election cycle could prompt some really big price moves in the future.  We are still trading the long side of the market and advising our clients to take very low-risk trades which have been properly sized.  This is a traders market where skilled technical traders can find incredible gains.

June through August will likely become critical in regards to the future price trends and will likely determine if the markets continue to push higher or rotate downward as concerns and potential crisis events continue to unfold.  Historically, June through August prior to a Presidential election cycle are very important measures of what happens near and after the election event.”

Skilled technical traders should be concerned with risks at all times.  The VIX is currently trading near 27.  Historically, VIX levels below 15 have been considered “moderate/low volatility levels”.  The current VIX level suggests volatility levels are, at a minimum, 2x historically moderate levels.

The downward price rotation in the Technology and NASDAQ sectors over the past 10+ days sets up a nearly perfect Bull-Trap pattern.  The technical divergence between price highs and the RSI adds another layer of technical confirmation to the Bull-Trap setup.  This leaves us with a make or break scenario where current support must hold in order for any further upside price activity to continue – otherwise, we are looking at a technical breakdown in price.

Our Custom FAANGS Index chart, below, highlights a similar RSI technical divergence pattern as well as clearly shows the support level (the GREEN LINE) we believe is the active floor in price levels.  If the FAANGS Index finds support above 900 and executes a “washout low” price rotation above the 900 level, we may see another upward price leg take place in the near future.  Otherwise, if the FAANGS Index breaks downward and breaches the 900 level, we believe the 750 level, the peak before the COVID-19 collapse, becomes a very real target.

Headed into the last 50+ days before the US presidential election event, uncertainty and concern related to future policy, tax rates, social unrest and other issues permeate investors sub-conscience.  We may not believe it to be true, but many skilled technical traders are already thinking about and considering “what’s next” in relation to the next 5+ months.  Remember, the election takes place on November 3, but the transitional process is typically not completed until after January 21 or so.  Therefore, we are looking forward to at least 5+ months of potentially extreme volatility and potentially large price rotations.

In closing, we urge all skilled technical traders to sit back, take a real hard look at these setups and prepare for what may become a very active few weeks and months of trading and price volatility.  One way or another, the US stock markets will either resume the upward price trend or break lower because of this technical Bull-Trap pattern.  The opportunities lie in properly positioning, hedging and allocating capital effectively to take advantage of these big setups.

If you look back at past research and posts, you will see that my incredible team and our proprietary technical analysis tools have accurately shown you what to expect from the markets in the future.  Do you want to now learn how to profit from these expected moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical bull/bear signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market and protect your wealth!

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

 

FANG Index Nearing Critical Support – Could Breakout At Any Moment

RESEARCH HIGHLIGHTS:

  • The washout-low price move in FANG stocks may present a needed rotation in price before another upside move sets up.
  • Tweezer Bottoms pattern and RSI pennant formation suggest very clear support levels.
  • Watch how Volume and the VIX pick up over the next few days, and how price reacts to this bounce at 945.

Our Custom FANG Index (consisting of Facebook, Microsoft, Twitter, Amazon, Google, and Nvidia) shows the FANG Index, and technology sector, are trading just above critical support near 945.  The congestion area on this chart between July and August just below this 945 level highlights the key resistance/support level that we are currently watching as price support.

TWEEZER BOTTOMS MAY SUGGEST MORE UPSIDE POTENTIAL

This Custom FANG Index Weekly chart clearly slows the Tweezer Bottoms pattern that formed in the markets after the close on Tuesday, September 8, 2020.  This pattern suggests a very clear support level is found near the recent lows – near 945.  If this support level holds, then the FANG Index price should begin to bounce and move higher.  If this support level is broken, prices may continue to push lower while attempting to find historical support levels.

The Fibonacci Price Amplitude Arcs suggest a broader price frequency inflection point is also setting up near the recent peak.  This Fibonacci Price Amplitude Arc suggests a major inflection point is taking place in the Custom FANG index right now.  We believe the 945 level resulting from the Tweezer Bottoms pattern is a critical price level to support a future price rally in this sector.

Lastly, we want to point out the Pennant/Flag formation in the RSI indicator over the past 8+ months (highlighted in RED).  The combination of these technical patterns, as well as the new Tweezer Bottoms pattern, suggests the current breakdown to the 945 level may present a “washout-low” type rotation after the RSI Pennant Apex.  Overall, this downside move in the FANG index represents a moderately strong APEX rotation.  If this is a “washout” rotation, then we may be setting up for another big upside price move soon.

Right now, we are cautiously watching the 945 level and expecting the Custom FANG Index to recover from these Tweezer Bottoms lows.  We believe there is a very solid chance that the washout-low price move may present a needed rotation in price before another upside move sets up.

Watch for the markets and technology sector to attempt a recovery as long as the 945 level on this Custom FANG Index chart holds. Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have accurately shown you what to expect from the markets in the future.  Do you want to now learn how to profit from these expected moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical bull/bear signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market and protect your wealth!

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

 

Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse

RESEARCH HIGHLIGHTS:

  • Breakdown in Crude Oil sparks talk of sub $30 price targets.
  • Initial support likely near $32 to $33.
  • Predictive Modeling suggests deeper price lows may be reached before November 2020.

Have you been paying attention to Crude Oil recently?  Prices have collapsed over -15% from the recent highs near $43.78. You may remember a research article I posted originally in July 2019 suggesting a big breakdown in Crude Oil was going to take place in early 2020 and extreme volatility was likely between February 2020 and April 2020.  Our researchers predicted the following within that research article:

“If our ADL predictive modeling is correct, we will see rotation between $47 and $64 over the next 3+ months before a breakdown in price hits in November 2019.  This will be followed by two fairly narrow price range months (December 2019 and January 2020) where oil prices will tighten near $45 to $50.  After that tightening, we believe an extremely volatile price move will happen in February through April 2020 that could see oil prices trade as low as $22 and as high as $51 over a two to three-month span.”

Then, in early March 2020, we published this follow-up article on our Crude Oil predictions Within that article, we updated our analysis to include the following statement:

“If our research is correct, Crude oil may find a bottom somewhere near $17 to $24, the potential rally back up to somewhere above $37~41 ppb before staging another massive selloff.  The massive volatility suggested by the ADL system also suggests a broad price range over the next 60+ days.”

BREAKDOWN IN CRUDE TARGETING SUB $30 LEVELS

Currently, Crude Oil prices have broken into a deep downward collapse after reaching highs near $44 ppb. The extended topping formation above $41 ppb aligns with our earlier research suggesting the broad market peak in Crude Oil over the past three months may have setup another breakdown event as the global markets react to renewed economic fears and the continued COVID-19 event.

Our Adaptive Dynamic Learning (ADL) predictive modeling system is currently suggesting deeper price lows, initially targeting $32 to $33, then possibly falling below $27.50, are likely followed by an extended period of congestion below $30 throughout the end of November.  In reality, Crude price levels could fall below $22 on a broader market selloff, then recover to levels above $24~28 before entering the congestion period we are describing.

We believe ERY may rally 15% to 20%+ as Crude Oil collapses.  The timing and setup, as well as the technical confirmation from our ADL predictive modeling system, suggests ERY could rally at least 11% to 14% over the next few days and weeks.  The extended lower price consolidation that we are expecting may prompt ERY to rally an additional 5% to 8% if a deeper price low in Crude Oil, below $25, is established.

We don’t believe Crude Oil will attempt to target the COVID-19 lows at this time.  We believe a roughly 61% price collapse from recent highs is likely based on a Fibonacci Retracement of COVID-19 lows to the recent highs.  This places an immediate target price level for Crude Oil below $32.76 ppb.  Our ADL system predicting a target price below $30 ppb suggests a deeper price move is highly likely.  Thus, we believe a move to levels below $30 is highly likely with support being between $25 to $30.  Our Fibonacci Price Modeling system places critical support near $28.30.

Once Crude Oil reaches the bottom and finds support, we’ll be re-evaluating the potential for further price activity and trends. We want to warn you that once Crude Oil establishes the support level below, or near, the $30 ppb level, it will likely enter an extended sideways consolidation phase until after November 11, 2020.  So be prepared for some potentially volatile sideways price activity after the bottom is established.

Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have shown you what to expect from the markets in the future.  Do you want to learn how to profit from these expected moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market and protect your wealth!

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

 

Bitcoin Down Almost 10% Today, You’ll Be Surprised to Hear What’s Next

RESEARCH HIGHLIGHTS:

  • Bitcoin collapsed near Triple Fib Amplitude Arcs – is this a sign of pending reversal for other assets?
  • It is very likely that Bitcoin price levels will fall below the May through July levels, near $9k in an attempt to identify new support levels. The $8k level would be the next downside price target.  Beyond that, possibly $7k or even $6k.
  • Gold and Silver will move lower before going higher as a potential price collapse in Bitcoin suggests general market fear is hitting all global assets.
  • As other assets decline in valuation levels, the US Dollar will likely be viewed as the strongest currency to own and rise.

Many of you are familiar with my team’s advanced study of Fibonacci Price Theory and our use of our proprietary Fibonacci Price Amplitude Arc indicators.  This technical analysis theory is a combination of Nikola Tesla’s Mechanical Resonance theory and traditional Fibonacci Price Theory.  We believe the innate frequency of price action (once found), can be used to identify future critical inflection points in price.  In this case with Bitcoin, three unique Fibonacci Price Amplitude Arcs aligned within 5 days to present a very real price inflection point.  The recent collapse in the price of Bitcoin may be inherently related to the frequency of price from past peaks and troughs using our advanced Fibonacci Price Theory.

We found it interesting that Bitcoin prices stayed below $10k through most of June and July, when other Fibonacci Price Amplitude Arcs crossed price, then began to move higher after the last Price Amplitude Arc completed near July 20, 2020.  After that Fibonacci Arc completed, the only Fibonacci Price Amplitude Arcs present in the future were the Triple Fibonacci Arcs shown on this Daily Bitcoin chart (below).

Our team also believes that once Bitcoin cleared the previous Fibonacci Arcs, a bit of a “reprieve” took place in price where a moderate upside price rally too place.  As we neared the Triple Fibonacci Arcs, price activity muted and reversed.  Could it be that price reacts to frequency levels we are not seeing on the charts?

The Weekly BitCoin chart, below, highlights many of the origination points (peaks and troughs) of the Fibonacci Price Amplitude Arcs.  We anchor them to price peaks or troughs as a way to use and study them, measuring critical price waves (up or down) using Eclipse drawing tools, then drag them and anchor them to current or past peaks or troughs.  Then we study the levels to determine if the frequency of price validity is accurate or not.  If we believe we have drawn a Fibonacci Price Amplitude Arc that is valid, we’ll keep in on the chart for future reference.

We believe this current Triple Fibonacci Arc pattern may be present in other symbols given how the US stock markets have reversed recently.  It may be that these critical price inflection points operate across major indexes like tides in the ocean work across multiple ports and harbors.  When a big or critical Fibonacci Price Amplitude Arc hits, we believe it results in a broad market reaction.

If this breakdown in Bitcoin Continues, the $8k level would be the next downside price target.  Beyond that, possibly $7k and maybe as low as $6k.  We will have to see how Bitcoin reacts to this Triple Fibonacci Price Amplitude Arc and how deep price corrects at this time.  It is very likely that Bitcoin price levels will fall below the May through July levels, near $9k in an attempt to identify new support levels.

We also believe Gold and Silver will move lower as a price collapse in Bitcoin suggests general market fear it hitting all global assets.  The US Dollar may attempt to form support as well because of this move.  As other assets decline in valuation levels, some primary currency will likely be viewed as the strongest alternative asset – this will likely be the US Dollar.  Eventually, after what we believe could be a moderate downtrend in Gold and Silver, precious metals will begin to move dramatically higher as foreign currency and Bitcoin prices continue to fall.  Capital will always seek out the best, least risky, investment solutions at times of chaos and risk.  If Bitcoin becomes highly volatile and continues to fall, then alternate assets present very real opportunities.

Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have shown you what to expect from the markets in the future.  Do you want to learn how to profit from these expected moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market and protect your wealth!

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

 

SPX to Gold/Silver Ratios Explored – What To Expect Next

RESEARCH HIGHLIGHTS:

  • A Phase II rally in metals is just getting ready to start.
  • Phase II rallies are very explosive and tend to enter Parabolic trends.
  • Gold could rally 250% to 350% over the next several years.
  • Silver could rally 550% to 750% over the next several years.

My research team and I started exploring the relationship between the Gold-to-Silver ratio and the S&P 500 to find trends in Metals and the US Stock Markets.  We called the collapse in the Gold-to-Silver ratio accurately back in March 2020, and we believe the current setup in the S&P to the Gold-to-Silver ratio shows the move in Precious Metals is far from over.

If you would like to review some of our earlier research posts, please take a minute to review these posts:

August 13, 2020: DETAILED 2020/2021 PRICE FORECASTS FOR GOLD & SILVER

May 15, 2020: SILVER BEGINS TO ACCELERATE HIGHER FASTER THAN GOLD

PLAYING WITH RATIOS – WHAT CAN WE LEARN

The Weekly Gold-to-Silver ratio chart below highlights our predictions from late March 2020 where we suggested the incredible spike in the ratio value was similar to the spike that took place in 2008.  We identified a Flag/Pennant setup after each spike in the ratio volume and predicted a downward ratio decline would continue – pushing both Gold and Silver higher.  We also suggested that Silver would begin to rally much faster than Gold throughout this move.

METALS MAY RALLY 350% TO 750% FROM CURRENT LEVELS

Now, with the Gold-to-Silver ratio sitting near 69.50, we believe another important ratio component has come into play for Precious Metals – the S&P to Gold-to-Silver ratio. If our earlier research continue to be correct, then the Gold-to-Silver ratio should continue to decline targeting levels near or below 50 at some point over the next 3+ years.

We believe this process may take place in a very transitional global stock market.  When we suggest this term “transitional”, we are suggesting a very fluid and aggressive global stock market where capital will actively move from risks to opportunities very quickly.  As the global environment shifts from stability to moderate crisis over the next 3+ years, we believe more and more capital will attempt to find safety in Precious Metals and other safe-havens.

The one thing that is really starting to concern me is the news and talk that the riots and protests in the US may get much worse over the next 6 to 12+ months.  From a technical standpoint, it is very difficult to define technical indicators that attempt to quantify the effect of these riots and destruction to local economies.  Although, we do have one technical analysis component to rely upon – price – since it always discounts external factors faster than the news can print stories.  Because of this, we believe the new ratios we are sharing with you today are very important.

Please take a look below at our new Monthly ratio analysis of the SPX500 to the price of Gold.  We believe this ratio chart highlights how global investors are moving away from safety, shown with rising ratio levels on this chart, and back into safety/metals, shown with declining ratio levels on this chart.  Let’s take a look at a bit of history.

From 1981 to the peak in 1999 (nearly 18 years), investors shrugged off risk and piled capital into the US and global stock markets as the Reagan, Clinton, and DOT COM rallies ran back-to-back.  The ratio rallied from low levels near 0.30 to high levels near 5.60.  This represents a tremendous increase in the global stock market valuations while precious metals languished in a lower/sideways price range.  Then, in late 1999 and early 2000, the ratio peaked and began to move downward.  That downward ratio trend lasted nearly 10 years in total and produced the $1923.70 peak price in Gold in Sept 2011.  The real rally in Gold didn’t begin to accelerate until mid-2005 – nearly 5 years after the peak in this ratio chart.

We believe the current move in Gold and Silver is similar to the 2000~2005 initial impulse move after the peak in 1999 (highlighted in LIGHT BLUE).  This impulse move sets up a bigger, more aggressive downside price trend as the rally in precious metals accelerates and moves in a parabolic trend when markets near peaks (highlighted in RED).  These aggressive moves are typically 2x to 3x (or more) than the normal precious metals price ranges and can be very explosive in nature.  If we are correct in our analysis, the end of 2020, and throughout the next 2 to 3+ years, we may enter one of these explosive price phases in precious metals because of the current setup in this SPX500/Gold ratio pattern.

If the ratio declines from the current 1.78 level to a level near 0.40, this would represent a 77% decline.  Our researchers believe this could prompt a 250% to 350% rally in Gold if the SPX500 stays above $2,200 (near the recent March 2020 lows).  This would suggest that Gold could rally to levels above $5,500 to $7,500 over the next 3+ years.

Our researchers applied the same ratio analysis to Silver.  Comparing the SPX500 to Silver ratio setup similar types of patterns, yet we noticed the impulse move in Silver is often shorter in time as Silver attempts to rally faster than Gold to make up for depressed price levels throughout the rally phase of the ratio levels.  Silver, as many of us already know, tends to be the forgotten little brother to Gold.

Our researchers believe the impulse move in Silver has already completed.  We believe the next phase of the decline in the SPX500/Silver ratio will begin the real fear move in Silver.  This suggests a rally to levels above $36 to $45 fairly quickly – which will be very near to the all-time high of $49.82.

Using similar ratio analysis calculations in the chart below, we believe the upside price target for Silver would target 5.5x to 7.5x current Silver price levels, assuming the ratio level falls to levels below 0.30.  That places the ultimate peak level in Silver near $156 to $213.  As incredible as that may seem, if the SPX500 stays above the $2,000 price range and does not decline below 2016 lows because of Federal Reserve actions and global central bank support, then a ratio decline targeting recent historically low levels would equate into an even bigger upside price moves in precious metals.  The ratio can’t fall to near historic ratio levels unless metals prices rally to levels to offset the advance in the SPX500 price.

As amazing as this may seem for many of you, we want to be one of the first and only research firms to provide technical research to support our predictions.  Our past research continues to astound many professionals in the industry.  Now, we are making a bold prediction that metals may enter a Phase II rally mode over the next 3 to 6+ months and that new phase may include an incredible parabolic upside price rally.  Gold may target $5,500 to $7,500 or more.  Silver may target $135 to $213 or higher.  These are 350% to 750% price rallies in Gold and Silver – they are absolutely HUGE and a once-in-a-lifetime opportunity.

The last thing we want you to consider is that each of these research charts suggests these trends and cycles last about 7.5 to 11.5 years (on average).  If this trend continues and we are only about 2.5 to 3 years into this current trend, then we have another 5 to 7+ years of upward trending in Gold and Silver before a peak price level may setup.

Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have shown you what to from the markets in the future.  Do you want to learn how to profit from these expected huge moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market!

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

 

Are Fangs Going To Breakdown Soon?

RESEARCH HIGHLIGHTS:

  • FANG Index may begin to peak/top as RSI Divergence pattern sets up.
  • Dow Theory trend divergence confirmation suggests the end of the “Excess Rally” is near.
  • The VIX moving higher suggests greater concerns of increased volatility.
  • Dow Jones Utility Index moving lower on increased volume may be the key in a multiple-pattern set up that will confirm larger market trends.

For some context into today’s research article, please review our recent Dow Theory Trending article from last week.  We believe the divergent trend between the Dow Jones Industrial Average, the Dow Jones Transport Index, and the Dow Jones Utilities are keys to understanding the current market setup.  Today, the Utilities are moving lower with moderately increased volume while the $INDU and $TRAN are both moving higher.  We strongly believe we are very near to a peak in the US stock markets based on Dow Theory and the divergent trends between these three indexes.

ARE FANGS GOING TO BREAKDOWN OVER THE NEXT 4 TO 10+ DAYS?

A secondary pattern we are watching closely is the FANG Index Weekly Chart, below.  This simple RSI Divergence pattern setup suggests a peak may also be near for the rally in FANG/Technology.  Whenever a strong upward price trend exists that fails to deliver a new RSI high level, this is called “technical divergence”.  At this point in time, we believe the alignment between the Dow Theory Trend divergence in association with the FANG RSI divergence may be more than a coincidence – it may be tied to the end of an overall “excess rally”.

In the following NASDAQ 100 (NAS100) Index weekly chart, we have highlighted past RSI divergence patterns (Tops) to help illustrate how RSI Technical Divergence works.  Obviously, we would need to see a breakdown in the upward price trend within the next 5 to 7+ days to better confirm this technical pattern, but the downside move in the Dow Jones Utility Index helps to confirm that the upward price rally in the US stock market is nearing what may become a major peak/top.  If our analysis is correct, traders should begin to act to aggressively protect open long positions and watch the Dow Jones Utilities and the VIX for signs of increased risk.

Sometimes these subtle technical patterns align across multiple symbols/instruments to create a much larger pattern.  We don’t have any technical confirmation of this setup yet, other than the Dow Jones Utilities falling on increased volume.  Our researchers have issued multiple warnings that a peak/top or Head-and-Shoulders pattern appears to be setting up across multiple symbols.  We believe traders need to stay very cautious right now. Ultimately, this close to a US presidential election and nearing the end of Q3, we would expect some increased volatility in the markets and a potential correction in this upside price rally.  Stay prepared.

Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have shown you what to from the markets in the future.  Do you want to learn how to profit from these expected huge moves?  If so, sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold or retirement account and are looking for long-term technical signals for when to buy and sell equities, bonds, precious metals, or sit in cash then be sure to subscribe to my Passive Long-Term ETF Investing Signals to stay ahead of the market!

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

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltc.

NOTICE AND DISCLAIMER: 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.

 

Gold Is Flagging Out – Breakout Rally Targeting $1,950 Or Higher Is Next

RESEARCH HIGHLIGHTS:

  • Gold Found Support Near $1,945- Right Where We Expected
  • Gold Setting Up A Pennant/Flag And Is Nearing The Apex
  • Another Measured Move Is Setting Up – Targeting $2250 Or Higher
  • Silver Should Rally To $36 Or Higher When Gold Breaks

Nearly every Precious Metals/Gold enthusiast that follows our work has been emailing or messaging us asking about the next rally phase for Gold.  Thank you for all of your messages and supportive comments.  If you have not been following along, please review our recent research on gold and silver price moves, the rally in platinum, and detailed 2020/2021 price forecasts for gold and silver.

After watching the VIX start to move higher last week while the S&P and Dow Jones pushed to new all-time highs, our research team has been actively studying the Pennant/Flag formation in Gold that has been setting up. Our “Measured Move” article suggests support near $1,945 will act as a launchpad for an upward price advance to levels near $2,150 or higher.  As the momentum of this upside price move continues to build, as we’ve recently seen with the last upside price leg, we believe the $2,200~$2,250 could be the next real upside price target for Gold.

Over the past few weeks, Gold has confirmed our projected $1,945 support level by closing out near this level for multiple weeks (8/10: $1.949.80, 8/17: $1,947).  We believe the ability of price to close above the $1,945 level, even though price traded below this level, shows how strong this support level really is.  Now that Gold has started to rally near the Apex of the Pennant/Flag pattern, we believe the next upside leg could be starting.

This Daily Gold Futures chart, above, highlights the extended upward price trend and the recent downward FLAG/Pennant setup – flagging out near $1945.  We believe the next upside price move could prompt a move to levels well above $2,200 to $2,250 as the momentum behind this move continues to build.

Once Gold clears $2,200 on an upside price advance, we’ll clearly be in “new high price” territory and it  will shock many investors that Gold continues to rally  in the face of the US stock market rally.  Something does not settle when one considers Gold suggesting massive fear underlies US stock market price levels near all-time highs. You may want to review our Dow Theory article to attempt to better understand what we believe is driving fear.

The Weekly Gold Futures chart below helps to pinpoint the upper price target range assuming momentum continues to build as the next breakout move takes place.  Our research team believes this next leg may push up to levels just below $2,400 before stalling out again, then likely retrace to levels near $2,250~$2,275 where another sideways/flag pattern may setup. This time, the sideways/flag setup may be very quick in terms of completing, possibly only visible on intra-day charts.

We believe the next upside price rally will have begun once Gold closes above $1,985~$1,990 (near the Flag Apex).  Get ready, this should be a very solid upside price move targeting $2,250 or higher.

Please pay attention to our research and how accurately our research team has deployed technical analysis over the past 3+ years tracking this move in Gold.  Isn’t it time you learned how I and my research team can help you find and execute better trades?  Our incredible technical analysis tools have just shown you what to expect 6+ months into the future.  Do you want to learn how to profit from these huge moves?  Sign up for my Active ETF Swing Trade Signals today!

Stay healthy, safe and strong!

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

 

Dow Jones Utilities Breaking Trend

RESEARCH HIGHLIGHTS:

  • Dow Theory suggests indices must confirm each other and volume must confirm the trend.
  • The new downward trend in the Dow Utilities Index suggests indices are starting to break apart in terms of trending in unison.
  • Volume recently has been trailing lower, which suggests the momentum behind these new all-time highs is weakening.
  • If the Utilities Index continues to move lower and we see increased volume in the selling trend, we will consider the Dow Theory Trend component “broken” and expect a major peak/top soon after.

We know some of you are Dow Theory enthusiasts and followers.  We follow the Transportation Index as a leading indicator for potential major market trends almost exclusively because of what we have learned from Dow Theory. You can  learn more about the primary indicator in Dow Theory here. The two most important aspects of Dow Theory that we are researching today are two components:

  1. Indices Must Confirm Each Other
  2. Volume Must Confirm The Trend

My researchers and I have identified that the Dow Jones Utility Index has started to break downward in trend, breaking the recent upside price trend.  This breakdown in the Utilities Index suggests the Indices are starting to break apart in terms of trending in unison.  We have not seen increased volume in the downward trending of the Utility Index yet and we are waiting for this technical trigger to confirm the Breakdown in Dow Theory Trending by watching for the Utility Index to potentially begin a broader downside price move with increased volume.

IS DOW THEORY SIGNALING A BREAKDOWN IN TREND

Our research team is focusing on the Dow Jones Industrial Average, the Dow Jones Transportation Index, and the Dow Jones Utility Index for this article.  These three charts are key to understand the broader components of Dow Theory and how the technical and trending aspects of Dow Theory work.  We’re focusing on the Utilities Index because it is diverging from the Industrials and Transports in a big way.  We just need to see some Volume support this new downtrend in the Utilities Index to begin to raise some big RED FLAGS about a major market top setting up.

Let’s start by investigating the Dow Jones Industrial Weekly Chart, below.  We’ve highlighted the broader Head-and-Shoulders pattern in MAGENTA as well as drawn a YELLOW LINE across the UPPER GAP range from the February COVID-19 market collapse.  We believe these levels will be critical in understanding how the markets are poised to test and potentially break above these broader market resistance levels.  Additionally, we’ve drawn an upward sloping CYAN trend line that shows you how diligently price has continued to move higher since the bottom setup in March 2020.  There has been very little recent weakness in the advance of price as new highs continue to be reached.

Volume recently has been trailing lower, which suggests the momentum behind these new all-time highs is weakening.  It appears many traders are sitting on the sidelines and not participating in this upside price rally out of fear or concern that it may not be sustainable.

PRIMARY TRENDS HAVE THREE PHASES

A primary trend will pass through three phases, according to the Dow theory. In a bull market, these are the accumulation phase, the public participation (or big move) phase, and the excess phase. In a bear market, they are called the distribution phase, the public participation phase, and the panic (or despair) phase. It is quite possible that we have moved past the accumulation and public participation phases and are now firmly within the “excess phase” ..  Or what we call the “speculative phase”.

Now we will look at the Dow Jones Transportation Index, below, which is set up somewhat similar to the Industrials.  We see an extended Head-and-Shoulders pattern setup with a high price level from the Right-Shoulder acting as current resistance.  We also see a very solid upward price trend which has accelerated higher over the past 5+ weeks on diminishing volume. At this point, we should consider the Industrials and the Transports “in alignment” with one another.  The only real concern related to a weakening trend is the diminishing volume on both of these charts.

Now, we add the Dow Jones Utilities Index, below again, which sets up the entire Peaking/Topping Dow Theory technical pattern.  The first thing we see in this Dow Jones Utilities Weekly chart is that the recent price trend is moving lower. This contradicts the trends of the Industrials and Transports. Next, we see a much clearer Head-and-Shoulders pattern set up in the Utilities Index – which suggests resistance near 850 may play a big role in future price activity.  Lastly, we see diminishing volume in this recent downtrend of price – which suggests “capitulation” has yet to enter this downward price trend.

Our researchers believe the only thing missing from the Utilities breakdown, which would indicate a broader market peak is setting up, is increased  volume while the Utilities continue to trend lower.  Once this technical pattern sets up, we believe we would have enough technical confirmation of a breakdown of the Dow Theory Trend Alignment component to warn that a major market peak/top is very near (or already happened).

What this means for skilled technical traders is that you should start “hedging” against risk and considering how to protect your open long positions.  If you have not already considered how to accomplish this, we would suggest Precious Metals, Miners, Bonds and possibly small positions in Inverse ETF (such as SDS or QID).  Hedging is a very valuable tool for skilled technical traders when trends weaken or risks become more evident in the markets.  Moving capital into positions that can help protect against loss can help to balance your portfolio and reduce exposure to risk factors.

In closing, we do not have confirmation of this Dow Theory technical pattern yet. All we need to see is for the Utilities Index to continue to move lower and to see increased volume in the selling trend.  Once we see this, we’ll consider the Dow Theory Trend component “broken” and we believe a major peak/top won’t be too far away.  We suggest all of you pay close attention to these three indexes and watch for a breakdown of the primary trends in the future.  This is a great way for you to understand basic Dow Theory and the how broad market trends tend to work in “alignment” or “unison”.

Hedge accordingly.  We could be in for a wild ride in this breakdown confirms with increased volume. If you want to survive the trading over a long period of time, then you learn fairly quickly how important it is to protect against risk and to properly size your trades.  Subscribers of my Active ETF Swing Trading Newsletter can ride my coattails as I navigate these financial markets and build wealth. My research and trading team are here to help you find better trades and navigate these incredibly crazy market trends.

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 (likely soon) and I will show you how. We’ve recently issued a Long-term Investment Signal for subscribers of my Passive Long-Term ETF Investing Signals.

Stay safe and have a great weekend!

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

Expanding Wedge May Prompt Big Price Correction – Could A Big Top Be Setting Up Right Now?

RESEARCH HIGHLIGHTS:

  • The Monthly S&P500 E-Mini Futures chart is revealing an Expanding Wedge pattern that has been setting up since Jan/Feb 2018.
  • The VIX has set up a base and begun to move moderately higher over the past 7+ days – above the 20.00 point level and above the GAP created by the initial COVID-19 selloff.
  • Our Custom Volatility Index chart warns of a “bull trap” set up, and we may see an 11% to 15% (or more) sell-off in the US and global markets if the Custom Volatility Index collapses below 10 over the next few weeks.
  • Are These Technical Setups Warning That A Market Top Is Forming?

I want to bring this large expanding wedge pattern to your attention as my research team and I watch the markets continue to push to new all-time highs.  This is a follow on to our research from our Special Alert report warning of Head-and-Shoulder patterns in some of our custom charts. We know it may sound a bit alarming to be the one to bring up a potentially devastating Bearish technical pattern at this time, but as technical traders, we must stay aware of risks even if they may not materialize.  Trading is a process where we take measured risks in an attempt to generate profits over time.  Risk becomes a very big issue if it is not properly managed – just as trading becomes very difficult if one doesn’t learn to take profits in good trades.

LONG-TERM EXPANDING WEDGE RISKS – BE WARNED

The Monthly S&P500 E-Mini Futures chart below highlights the Expanding Wedge pattern that is setting up over the past 26+ months (starting in Jan/Feb 2018).  The US stock market has rallied after the COVID-19 virus event to push to new all-time highs – rising above the upper wedge channel.  Our researchers believe this pattern may be warning of a potential for a very deep price correction – possibly 11% to 18% or more.

There are a number of other technical setups that are starting to confirm a potential break down. The following Weekly Custom Volatility Index chart shows some very interesting price action this week.  First, we want you to pay attention to the Standard Deviation Channels that are drawn on this chart – there are two of them.  The longer-term Standard Deviation Channel is sloping higher while the shorter-term Channel is sloping downward.  We want you to focus on the downward sloping Standard Deviation Channel and how price has risen to the upper 1x Standard Deviation range (the BLUE LINE) and stalled this week (while the markets continue to push to new all-time highs).

This setup on the Custom Volatility Index chart has our research team concerned that these new price highs may actually be setting up a “Bull Trap” – getting retail and institutional traders to chase the rally, then collapsing into a deep and aggressive downward price trend. If the Custom Volatility Index collapses below 10 over the next few weeks, it would indicate a very strong selling mode has begun where we may see a 11% to 15% (or more) sell off in the US and global markets.

Now, pay attention to the long-term Standard Deviation Channel on this next chart.  Notice how the current Volatility Index price level has just recently moved above the MIDPOINT of the longer-term Standard Deviation Channel (the MIDDLE of the Green area within the channel).  This “touch-n-blowoff” type of price action suggests price have returned to the MIDPOINT of the longer-term price Std. Deviation range and run into strong resistance.

If price is going to continue higher, we would expect this Custom Volatility Index to rally above the 14 level and continue to push higher.  Right now, this moderate selloff within the Custom Volatility Index suggests a Peak or Top may be setting up in the markets – suckering in traders as the markets push to new highs on speculative trading in Technology and other sectors.

VIX IS CLIMBING

Lastly, the VIX has setup a base and begun to move moderately higher over the past 7+ days – above the 20.00 point level (above the GAP created by the initial COVID-19 selloff).  Our researchers believe the upward price moves in the VIX over the past few days suggest that FEAR is starting to rise again while the US stock markets push to new all-time highs.

This suggests that many traders are not comfortable with how the markets are pushing ever higher while economic data and forward concerns still persist.  It may be that speculative capital has pushed the US stock market back to new all-time highs while traders chase the Technology Bubble – while more seasoned traders watch and think “what are these people doing chasing these crazy trends”?

Either way, a spike in the VIX above 25 to 30 would certainly spook the market after we have watched traders pour capital into these new all-time highs.  And we believe the potential for the VIX to spike over the next 3+ weeks is substantial given the speed and tenacity of the upward price trend in the US stock market recently.

The upside price rally has been impressive, but is also create a very real risk potential when traders pile into speculative bubbles/trends like this.  We’ve been through things like this before in 1999 and in 2005~2007.  Look at the size of that Expanding Wedge pattern on the Monthly chart.  Being on the wrong side of a 25% downside price correction is not a lot of fun.  Be prepared and follow our research.

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 (likely soon) and I will show you how. We’ve recently issued a Long-term Investment Signal for subscribers of our Technical Investor newsletter. Be sure to become a member of my Passive Long-Term ETF Investing Signals.

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: 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.

 

Look For Platinum To Rally – Following Gold

RESEARCH HIGHLIGHTS:

  • Incredible Opportunities In Precious Metals Right Now
  • Platinum Sets Up For A Big Breakout
  • Gold Poised To Continue Rally
  • Silver Is Still In The “Super-Hero” Setup
  • Rally Hinges On The Platinum Breakout Above $1,050.50

Platinum may be setting up in a technical pattern that is similar to the end of 2001/early 2002.  At that time, Gold had already begun to rally above $340 and Platinum had rallied to levels above $600.  Then, while Gold continued to rally, Platinum contracted to price levels near $400 on diminishing volume.

Once that contraction was complete, Platinum began and upside price move with stronger volume levels which lasted almost seven years – reaching a peak above $2,300.  Could the same setup be happening right now?

PLATINUM MIRRORING GOLD – JUST LIKE IT DID IN 2003

The upside price move in Gold may be the key to understanding the potential for an upside price move in Platinum.  Gold has already rallied from $1,340 to over $1,000 over the past 12+ months while Platinum has moved lower from $2,000 to $800 and has recently started forming a rounded bottom formation.

The deep price decline in Platinum in March 2020 setup a very deep low near $562.  We believe the diminishing volume and deep low bottom setup in Platinum are mirroring the 2002 deep bottom setup and starting a potentially strong rally for Platinum.

This Platinum Monthly chart below shows the 2000 to 2010 rally, including the 2002 deep bottom setup and volume setup, suggests that once Platinum rallied above the previous high price level near $641, the opportunity for a continued upside price rally was consistent.  We believe the basis for this move was the continued upside price rally in Gold.  As Gold began to appreciate, Platinum continued to appreciate and trend higher – following Gold’s lead.

The current Platinum/Gold Monthly chart, below, shows a strong rounded bottom formation in Gold (the BLUE line on this chart) and the upside breakout in Gold that took place back in May 2019. Meanwhile, Platinum has extended a rounded bottom formation and recently set up a very deep spike price low with the COVID-19 price collapse.

My team and I believe once Platinum breaks above the $1,050.50 level on increasing trading volume while Gold continues to rally, a larger upside price trend will setup in both Gold and Platinum that could mirror what happened from 2004 through 2010.  This would suggest Gold could rally more than 400% from current levels and Platinum could rally more than 300% from current levels.

The following Weekly Platinum chart highlights the setup in Platinum we believe may prompt a big upside breakout move soon.  The diminishing volume throughout a downside price trend – followed by increasing volume throughout a recovery, and eventual breakout of the resistance level near $1,050.50.

We would watch for Gold to continue to rally over the next 12+ weeks, while the volume levels increase in Platinum as it attempts to close in on the $1,050.50 price level.  Once that level is breached to the upside, we would expect volume levels to continue to increase (on average) as both Gold and Platinum are considered as a “pair of fear hedge metals” and continue to rally up to a peak.

If we are correct in our interpretation of the pattern, then a 400% rally in Gold from the breakout level in Platinum would put the Gold peak price level somewhere above $7,500 or higher.  This would put the Platinum peak level somewhere near $3,450 or higher.

As many of you may already know, we love the metals and we love to apply our technical analysis skills and pattern research onto these charts.  Could you imagine the scope of the rally that is setting up in Platinum mirrors the 2003 to 2010 price rally – just waiting for this breakout pattern to complete?

Get ready because this could be one over the biggest upside price moves in precious metals that anyone has ever seen since the 2003 to 2010 rally.  This might push Gold above $7,500 an ounce and may push Platinum above $3,400 per ounce.  Guess where Silver prices should be at those levels?? (we’ll give you a hint: somewhere north of $125 per ounce).

If you found this informative, then sign up now to get a pre-market video every day before the opening bell that walks you through the charts and my proprietary technical analysis of all of the major assets classes. You will also receive my easy-to-follow ETF swing trades that always include an entry price, a stop, two exit targets, as well as a recommended position sizing. Visit my Active ETF Trading Newsletter to learn more.

Chris Vermeulen
Chief Market Strategist
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.

 

Natural Gas Rally Nearing $2.95 Resistance – May Target $3.75 or higher

Quietly, as we’ve been focused on Gold, Silver, and other symbols, Natural Gas has rallied above the $2.00 level and is starting to break higher again targeting the $2.95 level.  The very deep “rounded bottom” pattern that set up in early 2020 presented a very real opportunity for skilled technical traders by setting up multiple, very deep entry points.  We wrote about these setups in a May article when Natural Gas broke $2.00 and again a few weeks ago when NG started its upside breakout move.

The current rally as seen in the chart below appears to be stalling near the $2.50~$2.55 level, which goes all the way back to the Fibonacci Predictive Modeling System trigger levels from April 2020 and October 2020 (see the RED LINES on the chart).  We believe any stalling price levels near the $2.55 level will breakout to the upside with a further rally attempting to target the $2.95 level.  After that level is reached, there is a potential that a further upside price move may take place, but we would urge skilled traders to consider the $2.85 to $2.95 level as the “pull profit” level.  Any further leg higher may, or may not, actually happen.

This move from the low $1.50 to $1.65 level in Natural Gas has resulted in a tremendous 70% upside price rally.  Another $0.50 rally from current levels would represent a nearly 95% to 100% upside price rally from the ultimate lows near $1.43.

This last breakout rally may represent a solid 35% to 55% upside price opportunity for skilled technical traders in UNG.  When looking at the UNG chart, below, we believe that once UNG crosses the $15.00 price level it will quickly attempt to target the $20 to $22 level if NG rallies to levels near $3.00.  It should also be noted UNG has not rallied at a similar percentage price level to NG during this bottom/rally.  As such, a breakout move in NG could prompt UNG to rally 70% or more – possibly targeting $22 or higher.

Pay very close attention to the risks in the current market so it is important for traders to stay on top of the charts! 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 – sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold account and are looking for technical signals for when to own equities, bonds, or cash, be sure to subscribe to my Passive Long-Term ETF Investing Signals so that you can stay ahead of the markets and rest easy at night!

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our FREE research does not constitute a trade recommendation, investment or financial advice, or solicitation for you or any other reader to take any action regarding this research.

 

High-Flying COVID-19 Sectors May Be Setting Up For A Correction

Key Highlights:

  • COVID-19 has hit many retail and commercial sectors hard – but boosts Technology and Automobiles.
  • The NASDAQ 100 Technology Sector Index suggests the 100% Measured Move is complete. 
  • NASDAQ BNCHMK Computer Hardware Index has reached a lofty 150% upside Measured Move expansion. 
  • US Automobiles Index currently nearing a 135% upside Measured Move.
  • Will these trends continue, or are they a temporary “transitional process”?

As we’ve all been adjusting to the “work from home” transition that was forced upon us back in March/April 2020, a certain group of market sectors has really taken off and rallied into 100% and 100%+ Measured Moves.  One thing I can personally associate with the home office transition the need to upgrade various components of my home office as the COVID-19 lock-down initiated.  This has boosted the Technology sector. Another, less obvious, result of COVID revealed by our research showed what appears to be a mad dash to buy Automobiles.

COMPUTER HARDWARE AND TECHNOLOGY HAVE BEEN FLYING OUT THE DOORS

Our research team believes the transitional process of upgrading and setting up remote/home offices took place as consumers initially began to transition away from the Office.  Initially, the $1,200 stimulus many received likely piled into technology and upgrades. Those of us who started to work from home needed to upgrade equipment and technology to address video conferencing and more.  Many consumers also splurged on furniture, accessories, and other equipment to create our own “work-from-home paradise”. Corporations also increased their technology spend in this period to accommodate a fully remote workforce.

This new spending translated into a slew of online and in-person sales.  One of our research team members recounted a story about visiting a local computer store shortly after the $1,200 stimulus checks arrived into the public’s hands and how the store owner stated: “we’ve seen a huge wave of $1,200 purchases over the past week or so – guess where those came from”. That same computer store last Thursday afternoon still had a line of people in front (understanding it is limiting the number of people into the store) and it didn’t appear that they were hurting for business.

Our research team believes the transitional process of setting up a new home office and/or doing upgrades to existing equipment has likely already peaked.  If you are like most of us, you buy what you need and it works for you for 5+ years before you consider needing to upgrade again – maybe longer.  This process, which likely started in April/May 2020, has already pushed sales of computer hardware, software, and other equipment to new highs.  In fact, one of our favorite technical triggers, the “100% Measured Move” is clearly evident on some of the charts that follow.

This first chart is the Weekly NASDAQ 100 Technology Sector Index, which highlights a very clear 100% Measure Move to the upside after the bottom setup near March 21, 2020.  The upside rally from early 2019 through February 2020 consisted of a +2518.44 point upside price rally (totaling +73.14%).  The current upside price rally from the March 2020 lows consisted of a +2534.68 point upside price rally (totaling +64.89%).  Even though the rally ranges are slightly different, this consists of a nearly perfect “100% Upside Measured Move”.  Traditionally, price activity would stall at this point – attempting to establish a new price trend.

The 100% Measured Move technical pattern suggests that price often attempts to repeat a “price range” that has already been established by a previous trend.  Sometimes, the Measured Move can extend beyond the 100% range (sometimes reaching Fibonacci expansion levels like 125%, 135%, 150%, or more).  When those bigger Measured Moves take place, even larger and more volatile downside price corrections often follow a price peak.

In this case, the NASDAQ 100 Technology Sector Index suggests the 100% Measured Move is complete.  Skilled traders should look to lighten existing long trades and prepare for a correction in the current price trend if and when the peak sets up.

This next chart of the Weekly US BNCHMK Computer Hardware Index shows how a 150% Measure Move Expansion has taken place. Please notice how price corrected after reaching the 100% Measured Move total in early July.  This is the type of “correction” we expect to see after the 100% Measured Move completes.  The ability of this Index to push higher, above the 100% range, suggests traders and investors still believe in the ability for the rally to continue.  We’ve discussed how we believe speculative traders have piled into certain sectors  – almost like a dog chasing its tail.  We believe this may be the case with recent activity in the Computer Hardware and the Technology sectors.

Our opinion is that once consumers have completed their upgrades and new purchases, it is very unlikely that they’ll continue to buy new equipment or computers every week or month.  Generally, the equipment you purchase today will last for 5+ years.

Still, the message we want to clearly illustrate in this research article is that this NASDAQ BNCHMK Computer Hardware Index has reached a lofty 150% upside Measured Move expansion.  This is often a very big upside price move which results in a moderately volatile price correction.  Be prepared.

SURPRISE MOVE WITH US AUTOMOBILES INDEX

The one sector that really surprised us with a broad upside Measured Move expansion was Automobiles.  It would appear many US consumers are taking advantage of the “perceived slowdown” in economic activity to upgrade their vehicles to newer models.  Maybe it is a situation where consumers are not spending as much on travel back and forth to work or eating out and have suddenly found they can afford a newer (and increasingly electric) vehicle?  Either way, it appears US consumers love their Automobiles and have become moderately active in purchasing newer models over the past 6 months.

The US Automobiles Index Weekly chart, below, shows a perfect 100% Upside Measured Move from the March 21, 2020 lows.  Then, this chart shows a further expansion of the price rally which is currently nearing a 135% upside Measured Move.  Pay very close attention to how the original 100% range expansion prompted a moderately deep price correction in early July.

Will this boon in car sales continue?  Again, you don’t go out and buy new cars every week or month.  Once you commit to the new car purchase, that new car lasts you 5 to 10+ years (in most cases).  So, we believe this transitional process of a “purchase frenzy” will likely abate over the next 6 to 12+ months as consumers settle into the Fall and Winter season and wait to see if a new COVID wave takes hold in the coming months. We believe those consumers who were able to take advantage of low rates or deep discounts on vehicles made the decision to upgrade simply because they found “extra cash” sitting around they would normally spend if there was not COVID-19 lock-down.

We wanted to illustrate how these high-flying sectors may become real opportunities for skilled traders/investors if the price corrections are deep enough to present real opportunities for a price recovery.  Remember, once the US economy begins to establish real organic growth and wage growth again, the opportunity for various sectors of the US economy to begin to skyrocket is quite strong.  The sectors we’ve highlighted today are sectors that have already benefited from the COVID-19 transition – where consumers spent on computer hardware and technology for their new home offices and on automobiles.

It is interesting to see how the lock-down would damage certain industries/sectors, while acting as rocket-fuel for others.  The extra cash consumers saved by not going out and from their stimulus checks turned into big gains for Technology and Automobiles.  Will these gains continue?  We believe the transitional process may be nearing an end but may not have peaked yet.  There may still be some upside left as long as consumers find money to spend.

Be sure to read the other research reports we issued recently, especially this week’s research on Gold & Silver Cycles and our Special Alert that points to a massive dual head-and-shoulders set up taking place this week.

If you found this informative, then sign up now to get a pre-market video every day before the opening bell that walks you through the charts and my proprietary technical analysis of all of the major assets classes. You will also receive my easy-to-follow ETF swing trades that always include an entry price, a stop, two exit targets, as well as a recommended position sizing. Visit my Active ETF Trading Newsletter to learn more.

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategist
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.

 

Precious Metals Cycles Demand Attention

Research Highlights:

  • With Gold trading above $2,000 for the first time and Silver trading near $27.50, you need to understand the risks in the markets that precious metals are warning of.
  • If Gold breaks above $2,400, then there is a very real concern that the global markets could be close to some type of decline/collapse event.
  • We believe the upside potential in precious metals could drive a very wide sideways market rotation, similar to what happened between 1999 and 2011, over the next 3+ years that may catch many off-guard.

Over the past few weeks and months, my research team and I have been actively publishing this research to help you better understand what is really happening in the markets right now.  With Gold trading above $2,000 for the first time and Silver trading near $27.50, skilled traders need to understand the risks in the markets that precious metals are warning of.  Think of it like this, as long as Gold continues to trade near or above $1900, the risk levels in the global markets are at extreme levels for traders and investors.  If Gold breaks above $2,400, then there is a very real concern that the global markets could be close to some type of decline/collapse event.

1990 TO 2010: SIMILARITIES ABOUND

My research team believes the US stock market has already peaked near the January/February 2018 market highs.  Our proprietary index analysis and price modeling systems suggest the US stock market has been buoyed by the US Federal Reserve stimulus and foreign capital inflows (investment) while the US Dollar has strengthened.  This trend may continue for a number of weeks or months, but precious metals are already warning that real fear has accelerated to levels we’ve not seen since 2010~2011.

We believe the upside potential in precious metals could drive a very wide sideways market rotation, very similar to what happened between 1999 and 2011, over the next 3+ years that may catch many skilled traders and investors off-guard.  Historically, when the stock market rallies in a speculative mode, like we saw in 1997~1999, a price bubble forms as speculators and retail traders pile into the hot trades with a “fear of missing out” (FOMO) belief.  This process drives price levels to extreme highs and creates an elevated level of fear by many experienced traders who have lived through this type of event before.

We are going to show you a price cycle event that takes place between the SPX500, Gold and the relationship between these two symbols.  The first setup, entitled ‘A-Setup’ on the chart below, took place over 11+ years at a time when stagflation had taken a toll on the US economy in the late 70s and early 80s.  The growth of the SPX500 throughout the 1990s was impressive – well over 580% from 1987.

The recent growth of the SPX500 from the March 2009 lows is just over 400% and has recently rotated in a volatile sideways price correction related to the COVID-19 virus event representing a nearly 36% correction.  Back in 1998, a similar type of correction happened just before the peak in the markets where the SPX500 corrected nearly 23%, recovered very quickly and rallied from those lows another +66% before peaking in January 2000.

We believe the “A-Setup” represents a longer-term price setup that represents a price bubble and investor fear balancing out greed and risk as price levels extend into the stratosphere.  We believe a similar cycle setup has completed whereas the first contraction wave, prompting a strong rise in precious metals prices, has completed while the SPX500 attempts a FOMO driven final rally attempt.  If our research is correct, precious metals will break higher as risk outweighs greed over the next few weeks and months – likely pushing the SPX500 lower and resulting in a downward correlative price event for the SPX500/Gold ratio.  Very similar to what happened after the peak in 2000.

This downside correlative event will work to address the price bubble and to revalue the US stock market near levels that provide a resurgence in organic growth.  The excesses of the global markets were reduced to critical valuation levels by this process where the organic economy recovered enough to drive future growth, Just like what happened in 2004 through 2011~12.  The difference this time (B-Setup) is we believe the cycle is operating at about 1.3x to 1.5x faster than the cycle that took place between 1988 and 2000.  Therefore, we believe the cycle will be 1.5x to 2.0x more volatile.

We urge traders to stay very cautious of the markets right now.  Even though it appears that the recovery is strengthening and the stock market level is at, or near, all-time highs, warning signs are everywhere if you are paying attention.  A recent article discussing Walmart’s earnings release and sales data for August supports the proposition that consumer demand is falling as stimulus checks run out. In the article, Walmart CEO Doug McMillon said: “My sense is that the order of things, the order of tailwinds that impacted the business were one, stimulus, two, eating at home, three, being at home, and all the things that you wanted to do to have the indoors and outdoors be more pleasurable.”

If you read that statement as we do, the transitional process that took place over the past 4+ months where the US government provided stimulus and unemployment benefits that, for some, equated to more monthly income than they achieve while working, presented a “spend-happy” consumer with lots of free time on their hands.

We believe consumer activity will change dramatically and the economic recovery everyone seems to believe has taken place will settle into more of a “reality-shock”, especially since the stimulus and unemployment benefits are being decreased (or stopped altogether for some), evictions and mortgage foreclosures are starting to process, and we leave the Summer season and move into Fall/Winter.

A BREAKOUT OR BREAKDOWN ?

Additionally, world trade data suggests the global economy has sunk to the lowest global trade levels since 2010 (at the bottom of the Credit Crisis). It doesn’t take a college degree to figure out that global trade levels that are many standard deviations below the deepest historical levels over the past 10+ years do not settle well with a  perception of a strong global recovery and skyrocketing US stock market price levels.  What is says is, “a speculative price bubble has exploded as foreign and speculative traders piled into the US Fed stimulus recovery after March 21, 2020”.  And that speculative rally presents the same type of recovery that took place in late 1999 – just before the bottom fell out of the markets.

If the US stock market follows the 2000 price pattern, then a further upside rally should push price levels above the previous peak levels from February 2020.  This would prompt many traders and investors to begin leveraging long positions thinking the rally may never end.  Our researchers believe the major Fibonacci Price Amplitude Resistance Arc, highlighted in CYAN on the chart below, will act as a soft ceiling in price throughout much of the rest of 2020.

If this resistance level holds and price begins to decline from current levels, then we believe a price bottom will setup in late 2021 or early 2022 (similar to the 2002 price bottom).  Of course, that leads to the question “will there be a repeat of the 2008-09 peak and subsequent price collapse?”. At this point, we’re not certain of any event that far out into the future – but our cycles suggest 2023~2025 may set up a major price peak in the markets.

Stay cautious right now.  If our research is correct, Gold and Silver will continue to rally as fear drives the B-Setup further into completion.  Volatility should begin to increase and we expect more a more difficult recovery to take place over the next 12+ months.  We still have quite a bit of collateral damage to process through the economy and we need to get our economy functioning again so we can get people back to work, increase consumption, and strengthen global trade.  If you look at the real data, not the high flying US stock market, the global markets are simply not supporting this speculative price bubble.  Therefore, we urge you to stay cautious at this time.

Pay very close attention to the risks in the current market so it is important for traders to stay on top of the charts! 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 – sign up for my Active ETF Swing Trade Signals today!

If you have a buy-and-hold account and are looking for technical signals for when to own equities, bonds, or cash, be sure to subscribe to my Passive Long-Term ETF Investing Signals so that you can stay ahead of the markets and rest easy at night!

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

Stay healthy and safe.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

Special Alert: Massive Dual Head-and-Shoulders Setup

Summary:

  • Dual Head-and-Shoulders patterns warn of a potentially big downside move and new highs may be a trap for bulls
    • Valuation levels suggest the broader US stock market is lagging
    • Precious metals continue to warn of risks
    • The market “melt-up” may be nearing an end

My research team is issuing a Special Alert Warning after the NASDAQ and SPY reached new all-time highs.  Our research team identified a massive Head-and-Shoulders pattern (highlighted in BLUE) that originated in 2014, set up a “head” in 2018, and is now forming a “right shoulder” spanning 2019 and 2020.  Additionally, a minor Head-and-Shoulders pattern is setting up on the right side of the chart below (highlighted in MAGENTA) that peaks in early February 2020 – just before the COVID-19 price collapse.  Will this dual Head-and-Shoulders pattern prompt a massive downside price move over the next few weeks and months, or will the US stock market continue to rally higher – breaking the resistance level the shorter-term “head” (near $174) and keep going?

Even though the NASDAQ and the SPY reached new all-time highs today, we’ve been warning that the US stock market is currently riding a wave of speculation and rising multiples that does not support the organic growth models our researchers use to track price activity and trends.  Our Custom Smart Cash Index highlighted a peak in the US and global markets that took place in February 2018.

This peak price level represents a true organic growth peak for the global stock market.  After that peak, price levels on our Custom Smart Cash Index began to decline even though the global central banks and US Fed started printing capital to support trade issues, failing global economies, and the COVID-19 virus event.  My researchers believe the true peak in organic global economic opportunity and growth peaked in February 2018 and the current peak price levels are driven by “pure speculation”.

In support of this Special Warning Alert, we want to be very clear about the potential outcome of these Dual Head-and-Shoulders patterns.  Either the markets are going to react to these massive setups and potentially begin to move downward after the right shoulder completes and price initiates a breakdown trigger…  OR… price will attempt to continue to rally in an attempt to break the minor and major right shoulder peak levels (head levels).  This is one of those technical setups that allow skilled technical traders to take advantage of any eventual outcome (up or down).

Our researchers believe there is a much higher likelihood of downside price move initiating from these Dual Head-and-Shoulders triggers – possibly as a result of concerns related to the US Presidential election event or as a result of the US election outcome (or something else).  Even though it appears the US economy is gaining some traction in the recovery process, we are seeing only 4% to 5% of the S&P500 listed companies really experiencing strong revenue growth whereas the remaining 95% are weaker or barely holding on to revenue levels.

The US Fed and Congress have maneuvered to attempt to provide necessary assistance for small businesses and most Americans, yet the longer the shutdowns continue, the more damage is inflicted on the US economy and consumers.  All of this taking place months before a highly contested US Presidential Election could be a recipe for a disaster in the near future.  If the US Government continues to act paralyzed before the November 2020 election event, it will hurt US consumers and small businesses the most.

The Weekly Custom US Stock Market Index chart, above, highlights another Head-and-Shoulders pattern that appears to be setting up as a massive warning.  Again, prices could continue to rally higher, breaking above the $960 (head level) and continue to rally.  Yet, right now, our other Custom indexes are all setting up in a manner that suggests we could see a downside price move and increased volatility over the next 60 to 90+ days.  We’ve drawn some examples of what may happen (bullish or bearish) as this pattern concludes.

Lastly, our Custom Volatility Index Weekly chart, below, suggests that even though he NASDAQ and S&P500 rallied to near all-time highs today, the valuation levels on the Custom Volatility Index chart are still 40% to 50% below previous market peak levels (near 20~22).  Because of this, we believe the risk of an extremely volatile price move (up or down) is very high.  The VIX is currently trading near 21.57 and has flattened out above the VIX Spike GAP on February 24, 2020.  It is very likely that the VIX may take another 12 to 18+ months to settle back down below 12 to 14 again and this suggests increased volatility still exists in the global markets.

There are two key levels our researchers are watching on our Custom Volatility Index, the 13.00 level, and the 15.05 level (highlighted in BLUE).  We believe both of these levels will be critical for price to move higher (or initiate a breakdown move) as the “melt-up” rally attempts to continue.  Skilled technical traders need to be very aware of the risks that are present in the current markets at this time and heed the Head-and-Shoulders patterns until we see a very clear outcome (either bullish or bearish).

Pay attention to the Head-and-Shoulders shoulders pattern setting up on the Custom Volatility Index Weekly chart as well.  The warnings are everywhere at this time. Better to be aware and cautious than caught off guard by a volatile price event.

We’ve clearly laid out the possibility that the “melt-up” could continue and the breakdown price event we are warning about may not actually happen.  Yet we believe there is a fairly high likelihood that unknowns and concerns related to the US and global economy, the US Presidential Election event and the outcome of that event as well as how consumers and small- and medium-sized businesses will fair over the next 6+months could very well define the outcome of the speculative “melt-up” process.  Remember, what happens with the US Presidential Elections is really a global event in terms of the economy and future expectations.

Please take precautions over the next few weeks and months.  Watch metals and the US Dollar for signs that the markets are weakening.  The next 60+ days are going to get more and more chaotic leading up to the US Presidential Election event.  Anything could happen and we believe the new cycles, much like 2016, could become a real issue going forward.

If you found this informative, then sign up now to get a pre-market video every day before the opening bell that walks you through the charts and my proprietary technical analysis of all of the major assets classes. You will also receive my easy-to-follow ETF swing trades that always include an entry price, a stop, two exit targets, as well as a recommended position sizing. Visit my Active ETF Trading Newsletter to learn more.

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

Stay healthy and rest easy at night by staying informed through our services.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

US Dollar Has A Lot Of Upside Potential – Part III

  • Presidential election cycles drive US Dollar trends.
  • US Dollar expected to rise before the election and then stall right before the day of the election.
  • Money will start shifting away from the stock market now, and traders will likely target safe-haven investments and undervalued traditional investments (dividends, blue chips, utilities, energy, bonds, consumer service and supplies, and possibly technology suppliers) going forward.
  • The potential for a US Dollar upside price rally after the elections (just like the 2013~2014 setup) is a very valid expectation from a technical analysis perspective.

This is the final part of our three-part US Dollar research article. My research team’s belief is that the US Dollar will recover in value before the US Presidential Election, then stall right before the election date as traders attempt to digest the outcome of the election.  In this final part of our research article, we’re going to share insights and technical analysis setups that we believe support our predictions on the US Dollar.  Please take a minute to review Part I and Part II of this research series if you have missed any portion of it.

Our research team has highlighted a price pattern in the US Dollar that seems to be fairly consistent over the past 8+ years.  This pattern suggests the US Dollar will move higher over the next 60+ days, which may likely correlate with the US stock market stalling and/or moving lower. Just prior to the November 3, 2020 election date, the US Dollar should stall as global traders and investors await the results. After the election is complete, then we watch the scramble as global traders and investors attempt to reposition assets to take advantage of perceived opportunities.

CUSTOM SMART MONEY SETTING UP A HEAD-AND-SHOULDERS TOP

We are going to start by reviewing our Custom Smart Money Index Weekly chart, below.  This Smart Money Index chart highlights the triple-top pattern that appears to be setting up after the COVID-19 collapse.  We find this important because the “true smart money peak” in the US stock market occurred near the peak in January/February 2018.

Therefore, our researchers believe the true organic growth peak in the US and global markets occurred well over 2 years ago – not throughout the new price peaks we’ve experienced in the US markets after the COVID-19 collapse.  Those, secondary price peaks, were speculative peaks – not organic economic growth peaks.  And speculative peaks tend to end in explosive contraction events.

Without getting into politics, policies or other aspects of the 2020 US Presidential Election, there are only 60+ days left for skilled traders and investors to prepare for either a Trump or Biden Presidency.  Each candidate has outlined numerous objectives, tax policies and spending plans.  All of the translates into how consumers and businesses plan for and prepare to operate within these potentially new economic constructs.  When you stop and think about the potential differences between a Trump second term and a new Biden term – the stakes for investors and traders are much higher than many expect.

Because of this high-stake US Presidential election, we believe global traders and investors will begin to move assets away from the high-flying US stock market and away from excessive risks.  Traders will instead likely target safe-haven investments and undervalued traditional investments (dividends, blue chips, utilities, energy, bonds, consumer service and supplies and possibly technology suppliers) going forward.

My research team believes the transition away from the high-flying technology sectors and S&P sectors will be a move into protection – away from risks relating to a potential collapse in the US stock market.  We believe the triple-top in our Custom Smart Cash Index clearly illustrates how the US and global stock market is functioning – even though the price charts for the NASDAQ and S&P 500 charts show moderately higher price levels.  This Custom Smart Cash Index shows a clear Head-and-Shoulders pattern setting up – which is a strong indication that another decline in price levels may be in our immediate future.

COMPARISON CURRENCY ANALYSIS SHOWS US DOLLAR MAY RALLY 5% OR MORE

This comparison chart, below, comparing the Asian currencies and the US/Western currencies highlights another technical pattern that we believe substantiates a potential US Dollar rally over the next 60+ days.  The Custom Asian to US/Western currency index chart is the Candlestick price chart while the US Dollar Index is shown on this chart as the BLUE LINE on this chart.

What we want you to focus on is how the Asian to US/Western index tends to parallel the US Dollar Index more than 80% of the time on this chart.  Yet, we also want you to focus on the times when the US Dollar Index (the BLUE LINE) varies away from the Custom Index price levels. We found this very interesting as the US Dollar Index tends to react in ways that leads and lags the price correlation of the Custom Index.

We also believe the current extreme low price level in the US Dollar Index is similar to the 2013~14 area on this chart – where the US Dollar was pushed lower because the US stock market continued to rally to new highs and traders/investors concerns were the “fear of missing out” of the rally.  When this happens, global traders pile into the US stock market and ignore the US Dollar.  Who cares that the US Dollar lost 3% to 4% of value when the US Stock market just rallied 13% to 20% over the past 16+ months.

Yet, the minute the US stock market enters a period of consolidation, sideways trading and concern, then everyone suddenly cares what’s happening with global currencies and the US Dollar because 8% to 15%+ rotations in the stock market while the US Dollar is falling 3% to 5% or more can really hurt foreign investors.

We believe the current setup on the right side of this Asian to US/Western currency correlation chart is very similar to what happened in late 2013 – where the correlation price index rose to a peak near 38 – then stalled into a narrow sideways channel.  The US Dollar Index collapsed throughout this span of time and then suddenly started to gain in value in late 2014 – right near the peak in the markets before the 2015/2016 US stock market (which also correlated with the start of the 2016 Presidential Election campaigns).

Imagine what would happen if a similar rally in the US Dollar took place after the 2020 elections and how that will reflect as global investors pile into the US markets with a stronger US Dollar.

As technical traders, we attempt to identify and analyze these types of technical patterns as well as price patterns and other advance price theory. Our job is to try to find hidden, often somewhat secret, correlations in price, technical patterns, seasonal patterns or cross-market trends so our members can profit from these setups.  When we’re right, we try to take advantage of these setups and alert our members to the trade setups as they happen.  When we’re wrong, we take our losses – just like everyone else.

We believe this setup in the US Dollar Index could be a very valid technical price trigger that could prompt a big rally in the US Dollar and US Stock market.  We believe the rally in the US stock market may start to to really shape up in late 2021.  Yet, everything depends on what happens over the next 90+ days and how the US elections turn out.  This year, the one thing we’re not going to try to predict is the results of the US Presidential elections – that’s not our specialty.  We do believe the potential for a US Dollar upside price rally after the elections (just like the 2013~2014 setup) is a very valid expectation.

Either way, we’re going to be here to help you find these incredible setups and great trades.  Think about how a big rally in the US Dollar will result in a massive influx of capital from foreign investors and institutions.  It is a very real possibility at this point – stay tuned for more from our research team.

Isn’t it time you learned how my research team and I can help you find and execute better trades?  Do you want to learn how to profit from market moves? Our technical analysis tools have shown you what to expect months into the future, so sign up for my Active ETF Swing Trade Signals today to learn more!

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

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

 

Technical Analysis Points to US Dollar Upside Potential – Part I

Article Highlights:

  • The US Dollar Presidential Price Cycle indicates rising US Dollar
  • The US Dollar is not the best asset, but rather the best of all currencies
  • Price Relationships Suggest The US Dollar Is Currently Undervalued
  • How The Presidential Price Cycle May Create Opportunities in Precious Metals and the US Stock Market

It’s been a while since we published an article about the US Dollar and this is the perfect time to discuss that is likely to happen over the next 6 to 18+ months.  The US Presidential Election is just around the corner and traders/investors are certain to interpret the uncertainty of the US Presidential Election cycle, and the pending policy and liability related changes, as a warning that equities and the US Dollar may be in for a wild ride over the next 6+ months.

UNDERSTANDING GLOBAL CURRENCY “SHININESS”

Typically, the US Dollar declines over the 6 to 12+ months prior to a major US Presidential election cycle.  Whenever there is a major contest for a new US President or an active and aggressive campaign between two individuals, there is a lot on the line. A US Presidential Election is not just about electing a President – it is about setting US, Foreign, Social, Economic, and Taxation polities well into the future.  How businesses and voters interpret the benefits vs. risks usually decides the outcome fairly openly.  Yet, global traders vote by deciding how much they believe in the policies and leadership in the new US President and/or how they interpret the risks related to new policies, laws, and regulations.

The US is a major driver of global economic growth throughout the world.  The US leads the four other large mature economies by 8.5% to over 20% when compared by global GDPChina is the closest economy to the US, yet it still falls nearly 8.5% behind the US economy annually.  Even if we were to combine China, Japan, Germany, and India into one economic block, it would beat the US economy by only 5.5% annually.

This is why, at least for now, unless some other global economy rises to the level to dramatically threaten the US economy, the US Dollar will likely continue to sustain value and dominance throughout the world.  It also aligns with my “Shiniest Pile Of Poop” theory.  Yea, I know that is a horrible name for a currency valuation theory – but it helps us understand how currencies (and other commodities) are processed in the minds of consumers and traders.

A simple example is that of having to dig through the garbage trying to find something to eat (again, a horrible example).  Yet, within this example, any human would automatically start ranking the quality of the garbage attempting to determine which items were the “best quality” – even though they are all trash.  This process comes naturally for anyone in this position – you simply must select the best items in the pile of trash as potential food items.

How does this relate to currencies? Even though certain currencies may become more attractive from time to time, as traders find value in them and perceive stronger future prices, the reality is that major global currencies will always be considered “shinier” than others. Keep this in mind as we explain our thinking related to the US Dollar going forward.

REPEATING US DOLLAR CYCLES

As we can see from the chart below, the US Dollar reacts to US Presidential Election cycles by typically weakening 6 to 12+ months prior to the election date.  Each of the last three US Presidential Elections was predicated by a declining US Dollar value and a rise in the US stock market.  In 2012, there was virtually no active challenger to Obama’s second term – the expected US Dollar price rotation was rather muted.  In 2016, the US experiences once of the most heated and aggressive Presidential campaigns between Hillary Clinton and Donald Trump – the expected US Dollar price rotation was much larger.  Currently, as the Presidential Election cycle heats up, we expect a similar range to the 2016~2018 US Dollar price range.

The initial downside selloff in the US Dollar appears to be nearly complete.  The second phase of the US Dollar Election cycle should prompt a moderate upside price move in the US Dollar while the US Stock market stalls ahead of the 2020 US Presidential Elections.  Our researchers equate this to the uncertainty and potential liabilities of a change in the Office of the US President and the implications related to new policies, taxation, regulation, and other future changes.  Traders move into safety within the US Stock market while higher-risk sectors weaken.  Essentially, everyone attempts to “place their bets” as to the outcome of the US Presidential Election cycle.

Isn’t it time you learned how I and my research team can help you find and execute better trades?  Our incredible technical analysis tools have just shown you what to expect months into the future.  Do you want to learn how to profit from market moves?  Sign up for my Active ETF Swing Trade Signals today! If you have a buy-and-hold account and are looking for long-term technical signals for when to buy and sell equities, bonds, or cash, be sure to subscribe to my Passive Long-Term ETF Investing Signals.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation, investment or trading advice, 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 you in an effort to try to keep you well informed.

 

Our Proprietary ADL Predictions for US Markets

Our friends and followers love it when we publish and Adaptive Dynamic Learning (ADL) predictive modeling chart.  These are very special charts because they show us what our proprietary predictive modeling system is suggesting is a likely outcome many weeks or months into the future.  We wanted to highlight the YM ADL chart, below, because we published it near the end of 2019 in a research article suggesting a deep price correction was setting up for 2020.  Additionally, you should be able to follow the YELLOW ARROWS on the chart to see how and where the ADL predictive modeling system suggested the YM price would target.

This new ADL research, in combination with our other recent research posts, suggests the US stock market may be stalling ahead of the US Presidential elections in a moderate “melt-up” trend.  Essentially, this means the upside trend bias will likely stay intact for another 35+ days with moderate volatility (meaning 4% to 8%+ rotational ranges) before peaking sometime in October or very early November 2020.

As we can see from the chart, the likelihood of a deep price decline in the markets before the US election (November 3, 2020) could possibly be related to earnings, news, a “reality-check”, or some other event.  The stakes are fairly high for the 2020 US Presidential elections in terms of the future of the US and the world.  New policies and leadership could dramatically alter trader/investor expectations.

DOW JONES ADL PREDICTIONS

Our ADL predictive modeling system is currently suggesting the YM price activity may seek higher prices over the next 30 to 60 days, yet the huge downside prediction for a price collapse in November/December 2020 is likely related to the US Presidential Election event.  This suggests that the US stock market, and major indexes, could enter a period of volatility and sideways congestion over the next 60+ days which ultimately results in another massive breakdown in price near October/November/December 2020.

The ADL predictive modeling system is suggesting an -18% to -24% downside price move should be expected from a peak level in the YM near 28,925.  We’ve learned from past experience with the ADL system that price levels may react earlier or later than ADL predictions suggest – but generally the ADL predictions are very accurate.  Take a look at the big downside move related to the COVID-19 breakdown in February/March 2020.  Even though the ADL predictive modeling system suggested a lower target level near 22,645, the markets actually sold-off to a deeper level near 18,086. The same type of extreme selling could take place in November/December 2020 with this next predicted breakdown.

We believe there is a very real potential for an early topping pattern to setup over the next 30 to 60 days in the US stock market – a rounded or “R-shaped” topping pattern.  The ADL predictive modeling system attempts to identify projected future price target levels, but as you can see from the deep price decline in February/March 2020, price can move well beyond the projected ADL target levels – sometimes entering what we call an “anomaly phase”.  This is where price moves against the predicted ADL levels in a way that seems counter to expected price reaction.

Please note that sometimes these moves happen when extended momentum carries a rally or selloff beyond an ADL predicted peak or bottom level.  Sometimes the markets break higher or lower before the ADL predicted system triggers.  The bottom line is that our ADL system is suggesting volatility and a deeper downside price correction will happen within the next 30 to 60 days – prior to the November 2020 elections.

THE BIGGER PICTURE FOR METALS & MARKETS

Attempting to put all of this into a bigger picture conclusion for our friends and followers, we believe the upside price trend in the markets is the dominant trend right now.  Given that basis, our ADL predictive modeling system is suggesting the upside price trend will likely end within the next 20 to 30+ days, peaking near 28,925 then immediately entering a big downward price correction.  We believe the continue upside price move will be more of a sideways price advance – possibly setting up into a Pennant/Flag type of setup where moderate downside price rotation will create more uncertainty for traders/investors.  This will probably not be a fun time for long-side traders as the risk for 4% to 8% rotations in price will be very real.

Still, from a trader’s perspective, this upside price trend, and the bigger downside price move setting up in November/December 2020, presents very real opportunity for huge gains if you know how to time these moves and prepare for the risks.  Right now, this market and the profits therein are fantastic opportunities for skilled technical traders.  As we suggesting way back in 2018 and 2019, 2020 and 2021 are going to be incredible opportunities for skilled technical traders.

Be sure to read the other research reports we issued recently, especially this week’s research on Gold & Silver price expectations for 2020/2021 and our July 29, 2020 report on other Technical Patterns we see forming in the markets.

If you found this informative, then sign up now to get a pre-market video every day before the opening bell that walks you through the charts and my proprietary technical analysis of all of the major assets classes. You will also receive my easy-to-follow ETF swing trades that always include an entry price, a stop, two exit targets, as well as a recommended position sizing. Visit my Active ETF Trading Newsletter to learn more.

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

Stay safe and healthy, and have a great weekend!

Chris Vermeulen
Chief Market Strategist
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.