Two Steps Forward, One Step Backward in the S&P 500, Right?

Stocks defended the opening bullish gap, and scored further gains intraday before the sellers took over in the session’s final 45 minutes. Have we seen a turning point?

In short, that’s unlikely, and let me tell you why exactly I think so.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The day looked like the bulls were firmly holding the reins, but another daily setback struck as we approached the closing bell. I say daily, because the volume didn’t really overcome its recent highs, and stock prices haven’t suffered a profound setback either. All that the bears were able to achieve, was pretty much reminiscent of the stock behavior during the unfolding breakout above the 61.8% Fibonacci retracement.

In other words, yesterday’s setback isn’t really a fly in the ointment for the bulls. The daily indicators keep supporting the bulls, with no imminent sell signals. The sky still remains clear for the buyers for now.

Yesterday’s intraday Stock Trading Alert captures the key reason why:

(…) Against the backdrop of strengthening high yield corporate bonds (HYG ETF), the S&P 500 upswing has been progressing nicely throughout the day, and a local top in either seems to be very far away indeed.

While the sellers might try to close the week and month on a bearish note, the above words ring true also today because we haven’t seen junk corporate bonds falling through the floor. Let’s see precisely what I mean by that.

The Credit Markets’ Point of View

High yield corporate bonds (HYG ETF) gave up all their gains since the market open, but the relatively low volume of the daily upswing rejection continues to favor the bulls. While it wouldn’t come as a surprise to see a sharper consolidation of recent sharp gains, a running consolidation with higher highs and higher lows is all we’ve been getting so far. And that’s a very bullish type of consolidation, boding well for the credit markets.

In short, the credit market uptrend is well established, and serves as a tailwind for stocks.

The chart of the high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) with the overlaid S&P 500 prices (black line), also supports the view we haven’t seen a game-changer yesterday.

Key S&P 500 Sectors and Ratios in Focus

While technology (XLK ETF) gave up its intraday gains, the swing structure of higher highs and higher lows, remains intact. And that’s the definition of what an uptrend is. The sector simply appears to be trading sideways, consolidating recent sharp gains. Yesterday’s lower volume versus the preceding higher one, sends a bullish message as buyers appear in droves when prices get lower.

Just as the tech sector, healthcare (XLV ETF) also supports the prospect of more gains to come. It’s been knocking on the door of April and May highs, and an upside breakout of the recent trading range is only a matter of time in my opinion.

The price action in the financials (XLF ETF) also follows a bullish path. We’ve seen volume rise during last three sessions, and yesterday’s session gives an impression of verification of the breakout above the April highs as the sector is consolidating recent gains.

The volume differential that favors the bulls is even more pronounced in the consumer discretionaries (XLY ETF). Real estate (XLRE ETF) for example, just extended its recent gains yesterday, disregarding the move lower in the index.

It has been only the leading ratios that suffered pronounced setbacks yesterday, as consumer discretionaries to staples (XLY:XLP) challenged their Wednesday’s intraday lows, and financials to utilities (XLF:XLU) moved below them already. But we haven’t seen what mathematicians would call an inflection point yet. In other words, it’s likely we’ll see both ratios stabilize and support the move higher in stocks next.

As for the stealth bull market trio, materials (XLB ETF) outperformed both energy (XLE ETF) and industrials (XLI ETF) as the latter two closed down – but again, on lower volume than during the preceding up days. Overall, this bull market trio still favors the stock upswing to continue.

Summary

Summing up, yesterday’s late-day reversal didn’t likely mark a call to start selling lock, stock and barrel everything in sight. Conversely, it appears to be a part of the ongoing consolidation that keeps resulting in higher highs and higher lows. As today is the last trading day of the week and month, the closing prices are of key importance for the timing of the anticipated challenge of the early March highs. While the credit market and sectoral analysis favor the stock upswing to continue, yesterday’s weak performance of the Russell 2000 (IWM ETF) is a short-term watchout. The balance of risks is skewed to the upside over the coming weeks though.

I expect stocks to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer – but we’re nowhere near the start thereof. Right now, the breakout above the three key resistances (the 61.8% Fibonacci retracement, the upper border of the early March gap, and the 200-day moving average) is still unfolding with the bears running for cover and FOMO (fear of missing out) back in vogue. In short, the ball remains in the bulls’ court to show us what they’re made of. Will the weekly and monthly closing prices later today still lean in the bulls’ favor on higher timeframes? I would cautiously say so.

Last but not least, we’ll hear Powell speak later today, and Trump will focus on China. When the latter has been announced, it marked the start of the heavy S&P 500 selling 45 minutes before the closing bell yesterday. As tensions have been rising, the short-term direction in stocks very much depends on the overall balance of President’s announcement as regards Hong Kong, the Uyghur bill, coronavirus, the China-India border and foremost the trade deal. We’ll monitor and act accordingly on the unfolding developments.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

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

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Monica Kingsley and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Monica Kingsley and her associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Ms. Kingsley is not a Registered Securities Advisor. By reading Monica Kingsley’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Monica Kingsley, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

As Said, the S&P 500 Grind Higher Goes On

Yesterday’s sizable bullish gap immediately came under attack by the sellers – no panicking though as I kept riding the bull to the glorious close and beyond. In such moments, it’s key to focus on what has changed, and what has not. The obvious conclusion has been that we have seen nothing really new under the sun.

So, will the sizable open profits keep growing further? In my humble opinion, it’s virtually guaranteed.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The bears went on the offensive right after the bullish open, but the bulls responded as anticipated, and the high daily volume reveals the extent of the buying pressure. Yes, the initiative appears to be firmly with the bulls, but why exactly have I said that the buyers responded as anticipated?

Yesterday’s intraday Stock Trading Alert provides the answer:

(…) However unpleasant it might be to see the bullish opening gap closed, the key point to highlight is that the high yield corporate bonds (HYG ETF) hasn’t really declined below yesterday’s closing prices.

Such a move has been rejected, and the ETF now trades at $82 – and I expect stocks to at least timidly follow up higher later today, and more vigorously over the coming sessions.

What we have seen right after the open, was probably a US-China tensions driven onset of selling pressure – an event of fleeting nature as the ensuing price action showed.

And stocks caught up still yesterday, reversing powerfully higher. To illustrate the extent of the bullish turn, let’s check the market breadth indicators.

It hasn’t been only the advance-decline volume that just flipped profoundly bullish. The advance-decline line has been showing where the odds in the battle to overcome the 61.8% Fibonacci retracement and other resistances lie – with the bulls. The bullish percent index is also solidly back supporting the buyers these days.

Let’s check yesterday’s action in the credit markets next.

The Credit Markets’ Point of View

High yield corporate bonds (HYG ETF) stood the ground and refused to move below yesterday’s closing prices. The uptrend in junk corporate bonds goes on, supporting higher stock prices. While a consolidation of recent sharp gains wouldn’t come as a surprise, we could have seen one yesterday already. And even if not, this leading metric of credit market health is still primed to go higher and serve as a tailwind for stocks over the coming days and weeks.

The above chart shows that both key credit market ratios, the high yield corporate bonds to short-term Treasuries (HYG:SHY) and the investment grade corporate bonds to longer-dated Treasuries (LQD:IEI), confirm each other’s upswings. Such a lockstep move doesn’t reveal any cracks in the stock market bull run.

Key S&P 500 Sectors and Ratios in Focus

Technology (XLK ETF) reversed all intraday losses, and rose on high volume yesterday. The sizable lower shadow underscores the buying interest, boding well for higher prices of the sectoral ETF. And as tech leads the stock market itself, the bullish takeaway is valid also for the S&P 500.

The intraday bullish reversal was mirrored in healthcare (XLV ETF) as well, supporting prospects of more gains to come. And the same goes for financials (XLF ETF) and consumer discretionaries (XLY ETF) too. The key sectors are aligned for more gains ahead, and quite likely shortly.

Among the leading ratios, financials to utilities (XLF:XLU) has indeed broken above the declining resistance line formed by its April highs (and also above those highs themselves) – just as I expected it to. The bullish picture is made complete by the consumer discretionaries to staples ratio (XLY:XLP) that has refused to turn south, and continues to trade within spitting distance of its recent highs.

As for the stealth bull market trio, all three – energy (XLE ETF), materials (XLB ETF) and industrials (XLI ETF) – refused to decline yesterday. That’s a uniformly bullish sign, with the materials and industrials having led the move higher on the day.

Summary

Summing up, yesterday’s selling didn’t stick, and the buyers predictably took over the reins. Less and less in terms of resistances is standing in the bulls’ way and the challenge of the early March highs is slowly but surely drawing nearer. Both the credit market and sectoral analysis favor this bullish takeaway. So does the Russell 2000 upswing as the smallcaps have reversed higher just as powerfully as the S&P 500 did.

I expect stocks to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer – but we’re nowhere near the start thereof. Right now, the breakout above the three key resistances (the 61.8% Fibonacci retracement, the upper border of the early March gap, and the 200-day moving average) is still unfolding with the bears running for cover and FOMO (fear of missing out) back in vogue. In short, the ball remains in the bulls’ court.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

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

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Monica Kingsley and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Monica Kingsley and her associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Ms. Kingsley is not a Registered Securities Advisor. By reading Monica Kingsley’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Monica Kingsley, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

M2 Velocity Collapses – Could A Deep Bottom In Capital Velocity Be Setting Up?

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market collapse.  It appears to our researchers that these extended periods of zero interest rates deflate the capability of money circulating throughout the economy and engaging in real growth opportunities for investment and capital inflation.

It also suggests that the US Federal Reserve, while attempting to support the US economy and global markets, maybe destructively engaging in policy that removes the capital function from the markets in a systematic process.  Eventually, something will break related to M2 Velocity and/or the global economy.  As more capital pours into less liquid assets and/or broader investment funds and Bonds, this process ties capital up into assets that take investment away from Main Street and the lower/middle class.  There is less capital available to support the ground level economy as more and more capital ends up buried in longer-term investment assets.

VELOCITY OF M2 MONEY STOCK

US FEDERAL FUNDS RATE CHART

We believe the collapse of the M2 Velocity rate is similar to a slow decline of economic capacity and output over a longer period of time.  We believe this process will likely end in a series of defaults and bankruptcies as a result of capital being stored away into longer-term assets and investments (pensions, investment funds, and other types of longer-term assets).  As this capital is taken away from the core engine of economic growth (main street and startups), the process of slowly starving the economy begins.

We believe we’ve already entered a period of decline that has lasted at least 15+ years and the “blowout process” that ends this decline will be somewhat cataclysmic.  One way or another, the function of capital must return to levels of activity that supports a ground-level engagement of economic growth and opportunity.  A healthy balance of capital available to all levels of society and deployed in means to support growth and opportunity is essential for the proper health and future advancement of global economies.

It appears that after 2008-09, the global economy disconnected from reality as investors began relying on institutional level investments and speculation in large scale assets instead of ground-level investments and core economic function.  This translates into a very euphoric mode for stocks and commodities where capital chases capital around the planet seeking out undervalued and opportunistic investments…  until…

Pay attention to what happens over the next 4 to 5+ years related to the COVID-19 virus event.  We believe this virus event could be a “monkey wrench” in the capabilities and functions of the global economy over the next 5+ years. Pay attention to what is really happening as capital plays the “dog chasing its tail” routine and the central banks attempt to stimulate economic activity by printing more and more money.  If you understand what we are trying to suggest in this article – printing more and more money at this stage of the game is like saying “diving our of the 20th-floor window is not enough – let’s go up to the 50th floor and give it a try”.

Hang tight, there are going to be some very interesting and big price swings over the next 4+ years in the US and global markets.  Skilled technical traders should prepare for the opportunity of a lifetime if they understand what to watch for and how to protect assets.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

S&P 500 Grind Higher Goes On, Regardless of Daily Setbacks

The runup to yesterday’s US open and the regular session’s trading confirmed my call that stocks would break above the key resistances. And they did effortlessly overcome the upper border of March’s gap and the 61.8% Fibonacci retracement without really looking back. Now that they trade also above the 200-day moving average, how far can the bull run reach?

S&P 500 in the Short-Term

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

A resoundingly higher open followed by more buying before running out of steam 30 minutes before the closing bell – that’s a fair characterization of yesterday’s session. As it happened on reasonably high volume and the candle’s shape isn’t that of a profound reversal, the implications are bullish for the days to come.

It’s been only the 200-day moving average that provided resistance to stocks yesterday, and while the sizable upper knot isn’t a pleasant sight to see for the bulls, it will likely turn out to be a soon-forgotten mark in the slow grind higher that I expect to play out over the coming weeks. The best the bears can hope for in my opinion, would be a sideways digestion of recent gains.

That’s because yesterday’s session shows that the buying power is there, and the sellers haven’t been able to bring prices down much.

See this quote from yesterday’s intraday Stock Trading Alert:

(…) Stocks are consolidating the sizable gains since Friday’s closing bell, and it’s accompanied by higher high yield corporate bond values.

Up till now, the S&P 500 consolidation is taking shape of a shallow sideways trading range … The current price action appears to be a case of back-and-forth trading only, as we see no signs of an impending reversal to the downside to act upon.

Technology is having one of its weaker days today so far, while healthcare is still range-bound and financials are steeply higher. Neither real estate or consumer discretionaries are disappointing, and the stealth bull market trio (energy, materials, industrials) is higher too.

Would the credit markets’ closing prices still confirm the bullish take on stocks?

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) predictably opened higher yesterday, but just couldn’t keep the intraday gains. On the other hand though, the bears didn’t get their way either. On respectable volume, junk corporate bonds closed little changed from where they started the day, which means that we’ve most likely seen a daily consolidation only.

While further consolidation of recent sharp gains wouldn’t come as a surprise, I think it’s more probable that the bullish bias will prevail over the coming sessions, and that this leading metric of credit market health would go on to serve as a tailwind for stocks.

No material change here either – the moves in stocks and the high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) continue to be moving in lockstep. Crucially for the stock bulls, this gauge of bullish spirits remains on their side. Simply put, the setback stock bulls suffered in the last 30 minutes of yesterday’s regular session, is nothing the sellers could call home about.

The ratio of investment grade corporate bonds to long-dated Treasuries (LQD:IEI) also shows no divergence when compared to the HYG:SHY ratio. It means that we’re in a risk-on environment and the riskier HYG:SHY ratio is firmly in the driver’s seat.

Key S&P 500 Sectors in Focus

Technology (XLK ETF) was rejected at the gates of the upper border of the late-February bearish gap, declining powerfully in the last 30 minutes of the regular session. The volume was elevated, but nowhere representative of a real reversal that’s about to stick. That makes me think any potential follow-through will be readily absorbed by the buyers, and we’re likely to see yesterday’s open overcome before too long.

Healthcare (XLV ETF) brought us another long red candle, but on relatively lower volume – and that means even smaller bearish short-term implications than could be the case for technology. In other words, I expect a return of the buyers in both of these key sectoral ETFs pretty soon.

Financials (XLF ETF) have been the star heavyweight performer of yesterday’s session, coming within spitting distance of both April local tops. Financials rose on outstanding volume, and kept half of their intraday gains, which makes the outlook for coming days bullish.

So, we see the three sectors positioned for more gains, would the rest of the crowd agree?

Consumer discretionaries (XLY ETF) certainly would as they kept much of their opening gains intact, unlike technology. Real estate (XLRE ETF) also showed up strongly.

As for the stealth bull market trio, all three – energy (XLE ETF), materials (XLB ETF) and industrials (XLI ETF) – moved higher, with the industrials leading the pack. That’s a bullish combination, boding well for stocks over the coming weeks.

Summary

Summing up, yesterday’s session brought us powerful follow-through buying and less and less in terms of resistances is standing in the bulls’ way. The 61.8% Fibonacci retracement and the early March gap are history, and soon will also be the resistance provided by the 200-day moving average. Both the credit market and sectoral analysis favor this bullish takeaway. So does the Russell 2000 upswing as stocks ignore the rising US-China tensions, and instead focus on a new 1 trillion euro stimulus package across the Pond. The lasting move above the 200-day moving average would be for starters only, as I expect stocks to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer. But before that, the ball remains in the bulls’ court.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

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

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Monica Kingsley and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Monica Kingsley and her associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Ms. Kingsley is not a Registered Securities Advisor. By reading Monica Kingsley’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Monica Kingsley, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock Market Analysis: The Bulls Took Over the Reins, Again

Stocks versus key resistances – that’ how much of last week’s trading could be characterized. Yet the bullish bias has been easily noticeable as prices kept making higher highs and higher lows on a daily basis. As a cherry on Friday’s trading cake, the S&P 500 predictably shook off the Hong Kong-driven rise in US-China tensions. Will stocks confirm our analysis and break above the upper border of March’s gap and the 61.8% Fibonacci retracement shortly?

Judging by the case we lay out next, it’s probable.

S&P 500 in the Medium- and Short-Run

We’ll start this week’s flagship Stock Trading Alert with the weekly chart (charts courtesy of http://stockcharts.com ):

After last week’s attempt to reverse to the downside, stocks continued to reject lower prices in Monday’s premarket session, resulting in a bullish opening gap. And the S&P 500 hasn’t really looked back since, moving two steps ahead, one step backwards throughout the week.

Knocking on the two key resistances reinforcing each other, it still managed to overcome the lower one, the 61.8% Fibonacci retracement. For how long will the upper one, the early March bearish gap stand?

While the weekly volume was largely neutral in its implications, the indicators don’t stand in the way of further gains – but as they’re not trending strongly either, we’ll have to look for more clues on the daily chart.

The daily chart clearly shows stocks cutting into the combined resistance posed by the early March gap and the 61.8% Fibonacci retracement. Friday’s upswing means that the index finished the week back above the latter one.

This is what we’ve written in our Friday’s Alert:

(…) this week’s daily downswings were only able to achieve higher lows. It means that it’s two steps forward, one step backwards for the stock bulls.

Apart from the Hong Kong jitters, there hasn’t been any other catalyst or development that would prompt the markets to reassess the risks. While it’s true that there needn’t be a catalyst, the overnight move lower appears of limited shelf life. Flash in the pan, in other words. The chart posture remains bullish, and we see it likely that the buyers would take on the 200-day moving average (that’s around 3000) before too long.

Yesterday’s volume doesn’t mark a reversal either, and the daily indicators keep supporting the unfolding upleg. When will more buyers jump onboard? Once they do, we expect FOMO (fear of missing out) to become dominant over the wait-and-see approach of this extended consolidation.

Yes, it proved to be a consolidation, because no matter how bearish or bullish the indications for a move either way, stocks kept frustrating both the buyers and sellers equally. As a rollover to the downside never came, the chart pressure to move higher keeps building with each passing day and week, in our opinion.

Friday’s higher close happened on lower volume, and didn’t affect the daily indicators greatly. Regardless, price risks continue being skewed to the upside.

Would the credit markets confirm our bullish take on stocks?

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) moved higher yesterday, but the daily volume is no reason to celebrate. Consolidation of recent sharp gains wouldn’t come as a surprise, but this leading metric of credit market health is still primed to go higher and serve as a tailwind for stocks.

The moves in stocks and the high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) continue to be moving in lockstep. Crucially for the stock bulls, this gauge of bullish spirits remains on their side.

The same can be said about the ratio of investment grade corporate bonds to long-dated Treasuries (LQD:IEI). There is no divergence when compared to the previous HYG:SHY ratio.

The ratio of stocks to Treasuries, the S&P 500 to 10-year Treasuries ratio (SPX:UST), paints the struggle of stocks to break higher. As it continues to trade within sight of recent highs amid still bullish indicators, it favors another S&P 500 upswing.

Key S&P 500 Sectors and Ratios in Focus

These were the thoughts we posted in the intraday Stock Trading Alert less than two hours before Friday’s session close:

(…) While the S&P 500 didn’t make much progress so far, it’s the performance of high yield corporate bonds that supports more gains downs the road – and it doesn’t all that much matter whether they come still today, or whether stocks catch up vigorously during Monday’s premarket session / just thereafter.

The key development among the heavyweight sectors (tech, healthcare and financials) is that they’re refusing to budge and decline today.

Let’s examine their performance looking at the closing prices.

Indeed, technology (XLK ETF) refused to move lower, validating our earlier thoughts. It appears that a shallow correction is all there has been to it, and that the uptrend can go on and close the late February gap as it would challenge the February highs next.

Healthcare (XLV ETF) also refused to sell off any deeper. Given the swing structure seen, we expect the sector to eventually break higher from its sideways trading range.

While the HYG ETF closed higher on Friday, financials (XLF ETF) merely refused to decline. Given the posture of the daily indicators and the low volume of Friday’s trading, that’s no cause for concern – while more sideways trading can go on in the short term, the sector remains likely to challenge its April highs and overcome them.

Once again, consumer discretionaries (XLY ETF) refused to move lower while the consumer staples (XLP ETF) slightly gained. However, the consumer discretionaries to staples ratio (XLY:XLP) continues to trade within spitting distance to its recent highs. These were our Thursday’s thoughts about the move’s importance as the ratio:

(…) is already trading well above its February highs. Given the degree of real economy destruction seen around, that’s quite a signal this leading indicator is sending. The financials to utilities ratio (XLF:XLU) looks to have stabilized not too far from the declining resistance line connecting its mid-March and early-May intraday tops, and it’s our opinion that it would go on to break higher.

The XLF:XLU ratio erased its intraday decline on Friday, and continues to trade sideways for now. While it didn’t break above the declining resistance line yet, we expect it to overcome it eventually.

As for the stealth bull market trio, all three – energy (XLE ETF), materials (XLB ETF) and industrials (XLI ETF) – refused to decline any more intraday. And the sellers weren’t really on the trading floor as it didn’t take much buying power to rebuff the meek attempt. While that’s a bullish sign in general, let’s explore specifically sector-by-sector.

Looking at the closing prices only, energy suffered a daily setback. But it is far from rolling over to the downside, and we expect it to keep on consolidating with a bullish bias.

The materials’ chart is in a stronger technical posture, having come closer to its all-time highs, and having closed the early March gap already. It certainly appears more gains are on the horizon – especially considering the low volume of Friday’s downswing.

It’s also among the industrials that we see base building for an eventual launch higher. Yes, that’s keeps being true despite the lower low made recently in this sector, or retesting it in materials – an overshoot can come before the market moves in its true direction. And just as with the S&P 500 breaking below the 50% Fibonacci retracement not too long ago, we see that in the stealth bull trio too.

Summary

Summing up, Thursday’s decline didn’t land in good company of Friday as stocks refused to decline, and actually reverted back above the 61.8% Fibonacci retracement. Another attempt to close the early March gap is supported by the daily indicators, and we expect stocks to break above both formidable resistances on a lasting basis. Both the credit market and sectoral strength examination favor this conclusion. Thereafter, the bulls would target the 200-day moving average at around 3000. That’s for starters, as we expect to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer. But before that, the ball remains in the bulls’ court.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

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

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

S&P 500 Analysis: Yesterday Was Supposed To Be a Reversal, Right?

Stocks have closed between two strong resistances yesterday – between the upper border of March’s gap and the 61.8% Fibonacci retracement. But the overnight rise in US-China tensions (this time, regarding Hong Kong), sent the S&P 500 futures below the key Fibonacci retracement. Can stocks recover and finish the job of breaking higher?

While it may not happen today, it’s nonetheless still likely in the near future.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Stocks are increasingly cutting into the combined resistance posed by the early March gap and the 61.8% Fibonacci retracement, and this week’s daily downswings were only able to achieve higher lows. It means that it’s two steps forward, one step backwards for the stock bulls.

Apart from the Hong Kong jitters, there hasn’t been any other catalyst or development that would prompt the markets to reassess the risks. While it’s true that there needn’t be a catalyst, the overnight move lower appears of limited shelf life. Flash in the pan, in other words. The chart posture remains bullish, and we see it likely that the buyers would take on the 200-day moving average (that’s around 3000) before too long.

Yesterday’s volume doesn’t mark a reversal either, and the daily indicators keep supporting the unfolding upleg. When will more buyers jump onboard? Once they do, we expect FOMO (fear of missing out) to become dominant over the wait-and-see approach of this extended consolidation.

Yes, it proved to be a consolidation, because no matter how bearish or bullish the indications for a move either way, stocks kept frustrating both the buyers and sellers equally. As a rollover to the downside never came, the chart pressure to move higher keeps building with each passing day and week, in our opinion.

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) didn’t really move lower yesterday, and the daily volume hints at merely a daily consolidation of recent gains. This leading metric of credit market health is primed to go higher, and serve as a tailwind for stocks.

Yesterday’s pullback in stocks appears no cause of concern, as it’s just a short-term breather during the daily consolidation in the high yield corporate bonds to short-term Treasuries ratio (HYG:SHY).

Key S&P 500 Sectors and Ratios in Focus

Yesterday’s sizable red candle lacked volume to make it stand out, which is why we think it’s just a daily event. Once it plays out entirely, tech will likely move higher again, pulling the index along.

Healthcare (XLV ETF) would be an unlikely ally in the stock upswing resumption. Actually, that was a quip – it wouldn’t be at all unlikely and definitely not out of the blue. The slight increase in yesterday’s volume coupled with half of intraday losses being erased, speaks in favor of higher values not too far ahead.

Alongside the HYG ETF, financials (XLF ETF) held steady yesterday, and the decreasing volume together with the daily indicators’ posture (they haven’t rolled over to the downside) favors the move higher to continue, and break above the early May highs.

Once again, consumer discretionaries (XLY ETF) refused to move lower while the consumer staples (XLP ETF) declined. The predictable result is another move higher in the consumer discretionaries to staples ratio (XLY:XLP). These were our yesterday’s thoughts about the importance as it:

(…) is already trading well above its February highs. Given the degree of real economy destruction seen around, that’s quite a signal this leading indicator is sending. The financials to utilities ratio (XLF:XLU) looks to have stabilized not too far from the declining resistance line connecting its mid-March and early-May intraday tops, and it’s our opinion that it would go on to break higher.

The XLF:XLU ratio probed the above-mentioned declining resistance line. While it didn’t break higher yet, it didn’t decline either. Our expectations for it to break higher remain intact.

Among the stealth bull market trio, there was no breakthrough either way yesterday. Energy (XLE ETF) moved lower, but didn’t give up this week’s gains. Neither did materials (XLB ETF). Comparatively, industrials (XLI ETF) performed best. Overall, that marks consolidation of recent gains, and building a base for an eventual launch higher across these sectors. Yes, that’s true despite the lower low made last week in industrials, or retesting it in materials.

Summary

Summing up, yesterday’s decline doesn’t pose an obstacle for the bullish outlook for the S&P 500. Its overnight part being headline-driven would likely be of limited lasting power, and we expect stocks to break above both formidable resistances on a lasting basis. Yes, the 61.8% Fibonacci retracement breakout will likely be confirmed, and so will the upper border of the early March gap. Both the credit market and sectoral strength examination supports this conclusion. Thereafter, the bulls would target the 200-day moving average at around 3000. That’s for starters, as we expect to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer. But before that, the ball remains in the bulls’ court.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

This Key Resistance Breakout Is Where the Rubber Meets the Road

Tuesday’s refusal of the stock upswing didn’t really stick, and the S&P 500 opened higher. Trading with an upward bias during the session, the index closed comfortably above the 61.8% Fibonacci retracement. As outlandish as it might seem, does it denote a new bull market being on the way? It just can’t be overstated how crucial this level is to the stock market outlook…

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Cutting into the 61.8% Fibonacci retracement several times already, stocks are on a slow but steady move this week. It’s as well the early March gap that they’re challenging. While the S&P 500 just closed above the Fibonacci retracement (that’s around 2940), the gap’s upper border stands still unbeaten.

Yesterday’s volume doesn’t mark a spike where the buyers would be falling over themselves to enter into the market, but it’s not representative of a reversal either (thanks to closing relatively near the intraday highs). It’s just on the lower end of the average spectrum, which would be consistent with a gradual upswing development. Is it that neither the buyers nor the sellers believe it? By believe, we mean to be ready to get into the market in droves, in place of a wait-and-see position.

The daily indicators keep supporting the unfolding upleg. Will they convince more buyers to enter the fray with passing time? As we see the grind higher in fits and starts as the most likely scenario, it’s probable.

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) keeps providing tailwind for the move higher in stocks. On sizable volume and near its intraday highs, this leading metric of credit market health overcame the late April and early May highs. With its daily indicators supporting further gains, how does the broad credit market performance reflect upon the stock advance?

Stocks aren’t getting ahead of themselves. The high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) keeps being in accord with the march north in the overlaid S&P 500 chart (the black line).

Key S&P 500 Sectors and Ratios in Focus

To illustrate the point, have you seen how easily technology (XLK ETF) overcame Tuesday’s daily setback? In our yesterday’s analysis, we noted that the daily reversal lower on a not so outstanding volume means that the uptrend is intact. And it is.

Healthcare (XLV ETF) couldn’t keep its opening gains yesterday, and remains very much range-bound. Financials (XLF ETF) gave up their intraday gains, but their bullish opening gap remains intact as they’re knocking on the door of the early May highs in an attempt to overcome them.

Consumer discretionaries (XLY ETF) refused to close its opening bullish gap, and instead consolidated sizable opening gains. While consumer staples (XLP ETF) rose as well, they relatively underperformed the discretionaries.

As a result, believe it or not, the consumer discretionaries to staples ratio (XLY:XLP) is already trading well above its February highs. Given the degree of real economy destruction seen around, that’s quite a signal this leading indicator is sending. The financials to utilities ratio (XLF:XLU) looks to have stabilized not too far from the declining resistance line connecting its mid-March and early-May intraday tops, and it’s our opinion that it would go on to break higher.

Among the stealth bull market trio, energy (XLE ETF) performed best. Together with materials (XLB ETF) and industrials (XLI ETF) though, they’ve been largely consolidating last two days’ gains. Consolidating with a bullish bias, that is – and that bodes well for the stock rally to continue at its own pace.

From the Readers’ Mailbag

Q: I switched jobs and was in the process of moving my 401k directly from one company to another. The old company sent a paper check to me cashed out on March 12th..a low point. I have to put the check into my new 401k account. waited for market to go back down but never happened. Now i will be buying higher than sold. I have the check to the 401k company FBO myself -What are my options if any?

A: Let me give you an answer that doesn’t constitute any tax accounting or similar advice, and concentrates instead on the stock market situation at hand, and how I would approach the matter were I in your shoes.

First things first – it’s not a shame to buy higher, if the outlook is correspondingly bullish. You’re assessing the outlook, and not a price point by itself.

Off the all-time February highs, stocks dived to the March 23 lows. The recovery has been similarly steep, and eventually overcame the resistance posed by the 38.2% Fibonacci retracement in early April. All right, but should the bear market be alive and well still at that time, stocks should have very real trouble overcoming the 50% Fibonacci retracement.

And they did have issues, and it was only last week that they refused to plunge below it again. So, they kind of left the glass half full, half empty. That would give a big-picture impression of possible, yet not outrageously large gains ahead, or just muddling through directionless for some time.

Now, we see stocks taking on the 61.8% Fibonacci retracement, in what would mark a transition to a stock bull market. And it stands a pretty good chance of coming true, regardless of all the suffering in the real economy. This is a third attempt to overcome this key resistance, so it again speaks of a thorny road ahead. Thorny, but mostly higher on low volatility compared to Q1– and as we expect the breakout to succeed, it would attract new institutional money alongside more retail investors. Not that the latter wouldn’t be coming already (money market outflows show that).

One more point in support of the new bull market theory and against retesting or breaking below the March lows. If you look at similar post WWII situations in stocks, and see how the S&P 500 performed since reaching the 50% Fibonacci retracement average, the current situation, despite all the corona facts, hysteria and tidal wave of bankruptcies ahead, is taken as no big deal. I mean, stocks are pretty much following the average case scenario.

And that’s a steady climb higher at a not too steep a pace. By not too steep, I mean almost a straight line pointing to stocks around 3050 quite before the Labor Day. Right now, stocks are fairly reasonably priced, and it should be noted that even the worst case scenario would take them only to the low 2600s during the summer. That’s not such a large downside that stocks could suffer if you consider the real world as seen through your very own eyes.

That’s how I see the table set for the upcoming weeks. Of course, the runup to the elections and the possible arrival in earnest of the second corona wave would decide whether stocks go on to march higher (quite possibly faster than before considering the great uncertainty removed), or point lower next. Either way, we would get plenty of advance warnings – the current situation simply requires chart reading, methodology and being attuned to the fundamental developments and interventions, all on a daily basis.

Now comes the being in your place part. I would either look for overshoots to the downside from the ideal path forward in stocks over the summer, and allocate capital to buy when we get temporary discounts. Yes, that means disregarding the fact that financial markets are the only place where buyers run out of the store screaming in fear whenever a discount presents itself.

Or I would just go the dollar-cost-averaging path, meaning I would allocate a certain portion of the funds to place at steady intervals over time in what is essentially giving up on trying to time the market. Both attempts have their pros and cons, and it’s essentially about the time and emotional capital you want to invest…

What is not part of your question, but still needs to be answered in one breath, is where I would allocate those funds. Then, there is the distant time horizon of a 401(k).

While we can count on financial repression to go on and keep yields relatively low, remember that during the 1980s, Treasuries were jokingly called certificates of guaranteed confiscation. Given the inflationary clouds ahead, you’d stand a better chance in Treasury inflation-protected-securities (TIPS), laddered bond portfolio of your own making (yes, buying individual bonds and keeping them till maturity), or even going for dividend aristocrats (these are stocks with decades-old history of paying out dividends and raising them constantly along the way – these are your Coca Colas or Procter & Gambles and the like).

Heck, even some technology stocks behave in a way that can be similarly taken advantage of. I personally view the Microsoft or Apple charts as bullish – and this is just two of the many greatly-performing tech stocks. The tech sector is primed for more gains, and healthcare is too – these heavyweights have the brightest prospects in 2020.

The above shows the vulnerability of having to cash out of the market at an inopportune time. That messes up with lifetime planning (just as the two bear markets in 2000s did), and the above thoughts represent my top of mind ideas to deal with it gracefully.

Summary

Summing up, Tuesday’s decline was erased before the market open already, and the S&P 500 had kept the bullish intraday bias since. But this isn’t about such a short time frame only – both the credit market performance and sectoral analysis keep pointing in the direction of more stock gains to come. The bulls’ first objective is to confirm the breakout above the 61.8% Fibonacci retracement by three consecutive closes higher, and to overcome the early March bearish gap (its upper border is at around 2970) in a show of strength. Thereafter, the bulls would target the 200-day moving average at around 3000. That’s for starters, as we expect to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer. But before that, the ball remains in the bulls’ court.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Real Estate Showing Signs Of Collateral Damage- Part IV

This final part of our multi-part Real Estate article should help you understand what will likely transpire over the next 6+ months and how the unknown collateral damage may result in a “Double-Dip” price event taking place before August/September 2020.  In the first three parts of this article, we’ve attempted to highlight how the current COVID-19 virus event is different than any of the previous two crisis events.

We’ve also highlighted how consumer psychology will change over the next 12+ months as this event continues to unfold.  Most importantly, we attempted to highlight how the disruption in income, one of the biggest factors we should consider, for businesses, individuals, states, and governments will likely present a very real contraction event over the next 24+ months.

It is difficult to really explain how so many people fail to see what we are seeing in terms of our research.  Yes, the COVID-19 virus event will end at some point and the economy will begin to engage at growing rates.  Yet, the process of getting to that stage is likely to be full of unknown economic events over the next 24+ months.

We’ve published articles suggesting our Super-Cycles and generational cycle research suggests we have entered a 10 to 20 year period of “unraveling and crisis processes” before a rebuilding phase can begin to take place.  If our research is correct, this unraveling and crisis phase will end near 2025~26.  This suggests we have another 5+ years of unknown collateral damage and unknown economic events

On February 24, 2020, we published this article which is very important because it warned our followers to prepare for a crisis event and to protect your portfolios with what to expect in the yield curve.

Our suggestion is to plan to set up your portfolio so you have sufficient cash in reserve in the event of an unexpected market decline.  We also suggest proper protection/hedge investments, such as precious metals and metals miner ETFs.

The reality is that mortgage delinquencies have already begun to skyrocket higher.  It is obvious to anyone paying attention that the lack of real income opportunities for individuals and businesses will translate into major economic collateral damage processes (crisis events) playing out over the next 12+ months. Depending on how the COVID-19 virus lingers throughout the world and the extent of the global shutdowns, we could be on the cusp of experiencing one of the biggest “revaluation events” in history.

This Bloomberg article summarizes our research and thinking nicely. Despite government support, we believe a massive revaluation event related to Real Estate and other assets is just starting to unfold.  Skilled technical traders will stay keenly aware of this potential event and position their portfolios to protect assets in the event of a sudden change in trend.

Price trends have just started to move lower based on this data from Realtor.com up to March 2020.  We believe the April and May data will show a substantial collapse in pricing levels – particularly in areas that continue to experience high COVID-19 issues.  This suggests California, Washington, New York, New Jersey, Florida, and other areas could experience a sustained price decline lasting more than 12to 24 months.

Florida Real Estate Price Trends

Washington Real Estate Price Trends

Watch as more populated areas (cities and larger regional areas) see a shift in consumer sentiment related to Real Estate price levels over the next 6+ months.  Once the consumers start shifting away from seeing Real Estate as an opportunity at any price and begin to watch the price levels drop, their psychology changes in terms of “when will the bottom happen?”.  Once this happens, the markets change into a Bear market trend for real estate as at-risk homeowners are placed under severe pricing pressure and markets continue to implode.

What this means for skilled technical traders is that opportunities will be endless over the next 12+ months to target real gains through skilled technical trades.  As capital shifts from one sector to another – avoiding risk and attempting to capitalize on the opportunity, skilled technical traders will be able to ride these trends and waves to create substantial gains.

Protect your portfolios now.  Don’t fall for the overly optimistic “follow the NQ higher” trade as risks are still excessive.  Wait for the right setups and determine how much risk you can afford to take on each trade. This is not the time to bet the farm on one big trade – wait for the right setups and wait for the collateral damage to play out.

It doesn’t matter what type of trader or investor you are – the move in Gold and the major global markets over the next 12+ months is going to be incredible.  Gold rallying to $2100, $3000 or higher means the US and global markets will continue to stay under some degree of pricing pressure throughout the next 12 to 24 months.  This means there are inherent risks in the markets that many traders are simply ignoring.

I keep pounding my fists on the table hoping people can see what I am trying to warn them about, which is the next major market crash, much worse than what we saw in March. See this article and video for a super easy to understand the scenario that is playing out as we speak.

If you want to learn more about the Super-Cycles and Generational Cycles that are taking place in the markets right now, please take a minute to review our Change Your Thinking – Change Your Future book detailing our research into these super-cycles.  It is almost impossible to believe that our researchers called this move back in March 2019 in our book and reports.

If you have been following me for a while, then you know my analysis and trades are the real deal. You also would know that I made over $1.9 million from the financial markets during the 2008 crash and recover into 2010. I have been semi-retired since the age of 27.  I continue to follow, predict, and trade the markets because its the ultimate business and my passion.

A bear market and its recovery can make your rich in a very short period. I believe this is about to happen again, so why not follow my super simple SP500 ETF investing strategy?  Trade with your investment account and become a stock market success with me!

I’m offering my investing signals for the next few years to those who want to know their investment capital is in the asset. Let face it; there is a time to be 100% long stocks, to own an inverse fund, and when to sit in cash. Your financial advisor would NEVER recommend a cash position, why because he is not allowed, he and his firm will not make money. Instead, they will keep you long stocks, with some bonds, and you will have to ride out the bear market rollercoaster again.

During the March Market crash, the BEST position was cash for short term trades. EVERY asset fell in value (stocks, bonds, gold, commodities) two months ago. Only one asset rallied, guess what it was? The USD dollar (CASH), moving to USD cash, gained a whopping 11% while most indexes and sectors fell 35-80+%. all you had to do was close all positions in your portfolio, and you would have looked like a hero, and that’s what I did with my account and members of my swing trading newsletter.

Follow me to success. Trade my most simple single ETF investing strategy and know when to own stocks, when to own an inverse ETF, or be in cash. For only $149 you can have the keys to the kingdom during a time when we are going to experience more historical price swings. This is as good as it gets, in my opinion.

Even if we don’t enter a new bear market this year, my investing signals will still nail the bull market and make you a ton of money. This is the most affordable insurance plan for your retirement account, so you don’t lose it.

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. 2020 is going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

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

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year.

We all have trading accounts, and while our trading accounts are important, 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 a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

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

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Should We Really Be Concerned By Yesterday’s S&P 500 Pullback?

Despite yesterday’s bearish opening gap, the bulls closed it, taking prices higher in a very measured and cautious way. Then, the bears took over the reins and drove the index well below the levels at the start of the day. Have we seen a reversal?

In short, that’s very unlikely – and not only because of the low volume of yesterday’s downswing…

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The much anticipated Powell testimony, along with Treasury Secretary Mnuchin, was treated by the market place as a non-event. Stocks recovered from the initial setback, and it was only the final 75 minutes of trading that took them down. While the slide may have looked impressive given the low intraday volatility, has it achieved anything lasting and of importance?

Both the volume and daily price action examination hint at merely a consolidation in an unfolding upleg. Stochastics is still on its buy signal, the CCI in the uptrend territory, and we better not read too much into the RSI curling lower. On balance, the daily indicators are supporting the bullish case and another breakout attempt over the 61.8% Fibonacci retracement. Metaphorically speaking, stocks are like a coiled spring now.

The importance of overcoming this resistance can’t be overstated for the institutional investors. With the rise of passive investing we’ve seen over the decade (yes, it had more assets under management than active investing for a good few years already), how much new buying will it bring in as the resistance is overcome? In our opinion, just enough to put a good floor below stocks. A market-based one, this time. And the examination of money flows from the money market funds supports that conclusion too, because last week’s pullback was heavily bought.

But last week, it were the credit markets, that were profoundly lagging and flashing caution. What about now, have they sold off during yesterday’s stock pullback?

The Credit Markets’ Point of View

Absolutely not. High yield corporate debt (HYG ETF) kept its opening gains, and merely gave up some intraday ones. That’s a short-term sign of outperformance, meaning the stock bulls have the wind in their sails.

Just as with stocks, yesterday’s HYG ETF upswing happened on low volume, hinting that this hasn’t been the real deal yet. It’s likely just a consolidation before another corporate junk bonds upleg, in our opinion.

The high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) also confirms our view that yesterday’s shallow pullback in the overlaid S&P 500 chart (the black line), has been no game changer.

Key S&P 500 Sectors in Focus

Technology (XLK ETF) gave up its intraday gains, and reversed lower on a not so outstanding volume. In other words, its uptrend is intact – just look at the volume around last week’s lows compared to previous two days’ one. While the accumulation at the lows hadn’t been above the volume of Wednesday’s plunge, it has still been more pronounced than the distribution just seen. Coupled with the daily indicators’ posture, that’s another reason for why the march north will likely go on.

Healthcare (XLV ETF) declined yesterday, but remains pretty much range-bound. Financials (XLF ETF) also moved lower yesterday, but its indicators support another move higher as the sector appears getting ready to move clearly above the midpoint of its April range.

Despite the ominous daily reversal candle with sizable upper knot seen in the consumer discretionaries (XLY ETF), the sector didn’t decline on outrageous volume. In other words, its move is consistent with merely a daily setback suffered. Importantly, it outperformed its defensive counterpart, the consumer staples (XLP ETF), which declined on the day – just as utilities (XLU ETF) did.

Among the stealth bull market trio, both energy (XLE ETF) and materials (XLB ETF) gave up most of their Monday’s gains, with industrials (XLI ETF) holding up best. The volumes behind yesterday’s declines within these three sectors don’t mark a reversal either. Again, it’s consistent with only a daily setback seen.

By the way, not even on yesterday’s housing data coming in below expectations (yes, we mean the key ones – the actual housing starts), the real estate sector (XLRE ETF) didn’t sell off dramatically. Its performance actually mirrors that of the financials, which shouldn’t really be all that surprising.

From the Readers’ Mailbag

Q: Do you think the “real economy bottom” is at hand?  With 20% unemployment, massive debt, multiple small business failures, and a still raging virus, I would question that perception.

A: Well, if you count those who (almost magically) dropped out of the workforce, we’re well over 20% unemployment. New jobless claims are one part of the story, but the continuing unemployment claims are more important. Sure, if you look around and see the retail sales, they are out of a horror show. But company earnings (prospects) have slowly started to turn the corner already.

Sure, the brick-and-mortar retail sector is suffering and among many other household names, JC Penney filed for bankruptcy. But please remember that these are beached whales that have been massively overbuilding well before the great financial crisis struck. The US simply has the most square feet per capita in the world, so the coronapocalypse is the straw that’s breaking the camel’s back here. Among the destruction though, creativity and online solutions in the sector abound – we’re not looking at Amazon (AMZN) here.

But I agree that small business, the backbone of US economy, is suffering, and unfortunately will continue to do so. With the way the S&P 500 is structured (the weighting of the behemoths and importance of foreign sales especially should the dollar roll over – in my humble opinion, it will later this year), the index can continue higher still though, and probably more vigorously than the Russell 2000 (IWM ETF).

I also agree that we’re in the ebbing stage of the virus, and the risk of a second wave is still very much there – regardless of the relative complacency that rules the day.

But still, the market perception, its discounting mechanism, is what counts. And the S&P 500 is very much willing to bridge the valley. Remember early April when Fauci was talking lockdown here, there, everywhere? The index obliged lower but just couldn’t decline any more for several days, while we still saw the exponential rise in infections and were waiting for another shoe to drop. It didn’t happen, and unless we see the June data (continuing unemployment claims, participation rate, retail, manufacturing and the like) coming in lower than those of May, the stock market is unlikely to sell off more than a couple of percent and enter a bear market territory (which is defined by a more than 20% decline).

Also, the sentiment data don’t favor a really deep downswing – there are just too many bears out there. The forward-looking volatility measure, the VIX, also supports the stock upswing to continue, as its increases are associated mostly with stock selloffs. That’s because stocks usually decline faster than they rise (we saw that yesterday on intraday basis). Look at the VIX, it’s been trending lower, making a series of lower highs and lower lows since mid-March.

In closing, the real economy is just one factor in the S&P 500 equation, and you’re right the real economy bottom might not have yet been reached. I agree, this is a mini-depression, and we’re bound to find out what mini actually means in terms of time. Yet, it’s the green shoots (e.g. the slowing pace of manufacturing’s decline – see the Empire State Manufacturing Index) that stocks are acting upon (similarly to how they did in March and April 2009), and we have to deal with the stocks’ perceptions first of all here.

Summary

Summing up, yesterday’s decline into the closing bell didn’t materially change the bullish perspective in stocks or upturn the credit markets. Corporate debt continues being supportive of the stock upswing, and the unfolding breakout (rigorously speaking, it takes preferably three sessions’ closes higher to declare it confirmed) above the 61.8% Fibonacci retracement is likely to succeed this time. Thereafter, the bulls would target the 200-day moving average at around 3000. As outlined on Monday, while we don’t expect a sizable selloff, we don’t see dramatic gains as overly likely either. The best known measure of volatility, VIX, appears to support the bullish view over the coming weeks.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Credit Markets Gave Their Nod to the S&P 500 Upswing

Yesterday’s session did away with the non-confirmation of last week’s reversal from the 50% Fibonacci retracement. Junk corporate bonds lent their support to the stock upswing, and the S&P 500 closed above the 61.8% Fibonacci retracement. Will the bulls be strong enough to confirm the breakout, or is a correction next?

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Steadily rising in the runup to the start of the US session, stocks opened with a sizable bullish gap. And they haven’t looked back since, closing on high volume above the key resistance, the 61.8% Fibonacci retracement. Reflecting the upswing, the daily indicators turned largely supportive.

What has happened as far as headlines go? We got another Powell statement, but it didn’t bring materially bullish surprises. Be the judge – he said that the US economy can decline 20-30% amid the pandemic, with the downturn possibly being with us till late 2021. His next remark that the Fed hasn’t exhausted its toolbox isn’t totally new either – it’s only that during his Wednesday’s Peterson Institute webinar, the call for more fiscal measures was the prominent one.

The willingness to reverse and expand the shrank versions of active lending programs, or introduce new ones, appears to be really there. And it didn’t require a more sizable downswing – the breakdown attempt below the 50% Fibonacci retracement was all it took. Fed Chair’s testimony before the Senate Banking Committee is coming later today, with stocks moving down to the low 2940s.

The second piece to the puzzle has been the Moderna (MRNA) early trial vaccine announcement. Despite the study’s focus being safety, and that the composition was actually tested in two low doses on merely 8 patients, the stock market reacted broadly and positively on these interim results. It should be said however, that both the stock itself and the healthcare sector (XLV ETF) as such, have formed sizable black candles, i.e. they gapped higher but gave up large amounts of the opening gains.

These were our yesterday’s intraday observations:

(…) we’re dealing with a sizable bullish gap that makes a move higher later today likely. On the other hand, our expectation as to tomorrow’s Powell testimony remain the same – i.e. a downswing in its wake remains likely.

Chances are, the HYG ETF won’t decline in a bearish attempt to close the gap.

As credit has been underperforming stocks recently, stocks don’t have to spring higher immediately after the HYG ETF overcomes its highs. At the same time, a large part of the rationale for the short position has been taken away with the HYG ETF action so far.

At the same time, buying a breakout attempt doesn’t come without its own set of risks. It’s unconfirmed yet.

In closing, today’s market action so far has given more weight to the bullish case, and our scenario of a slow grind higher still seems most probable.

The bullish gap remains open, supporting the buyers. High yield corporate bonds indeed haven’t declined yesterday, and have caught up with the stock upswing seen on Thursday and Friday. As stocks refused to decline, the slow gring higher over the coming weeks and months got more likely.

The below comments on the S&P 500 prospects expressed in our yesterday’s flagship Stock Trading Alert remain valid also today:

(…) As the coronavirus infection charts appear to have relatively stabilized, and the Fed offered ample support at a critical juncture, the stock market hasn’t sold off in a dramatic way since. Moving from the March 23 lows to the 50% Fibonacci retracement, it has overcome this resistance and taken twice on the 61.8% one. Last week, the 50% retracement held as support.

The above paragraph would speak in favor of a near-term trading range between the two retracements. But would that mean that no selloff below the lower one can happen? Absolutely not, the 2720 or even the low 2600s can get tested. And that needn’t to happen on very adverse corona-related developments. Faced with incoming data, the market can start to doubt whether we’re within sight / we’ve reached the bottom and the real economy is on the mend now. Continuing unemployment claims, retail data, manufacturing figures and similar would show. Or escalation in US-China trade tensions can drive the stock selloff similarly to the way it did early on Friday. Or the Fed playing the monetary interventions on-off game, can work to similar effect.

Still, having gone as high from the low 2200s, the risk of retest or breakdown below these lows, isn’t there at the moment. Not with all the implicit and explicit Fed support, the many fiscal stimulus measures, and crucially, not unless corona goes from we-have-flattened-the-curve to oh-it’s-exponential-again. Despite the relative complacency and the dangers it brings, we’re still far from the market pressing the panic button.

Reaching 2800, 2720 or the low 2600s wouldn’t count as panic. Considering this year’s swings, a move to these levels (especially the first two, but there’s potential for an overshoot to the 2600s) would constitute a relatively shallow correction, after which a slow grind higher could go on (barring catastrophic corona developments). After all, we’re in an election year.

Let’s check yesterday’s key move that happened in the credit markets.

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) gapped higher, rejected the intraday attempt to move lower, and finished with more gains. The volume on the upswing has been respectable, and the daily indicators paint a bullish picture for the sessions to come.

The high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) now also confirms the overlaid S&P 500 chart’s upswing (the black line). Relatively speaking though, stocks are getting a bit pricey as they’re the asset class leading higher.

Key S&P 500 Sectors in Focus

Technology (XLK ETF) kept its bullish gap open, hesitantly rising during the day on low volume. Healthcare (XLV ETF) erased around two thirds of its bullish gap, while financials (XLF ETF) rose to the midpoint of their April range. It’s been only the consumer discretionaries (XLY ETF) that overcame their recent highs.

Among the stealth bull market trio, both energy (XLE ETF) and materials (XLB ETF) are challenging their local tops, with industrials (XLI ETF) not lagging too far behind. The volumes behind there upswings attest to the unfolding resumption of a push higher, supporting our hypothesis of slow grind higher over the coming months.

Summary

Summing up, yesterday’s upturn in the credit markets dealt with the key remaining obstacle in the prospect of generally higher stock prices. The breakout above the 61.8% Fibonacci retracement stands a chance of being confirmed perhaps as early as this week. The effects of today’s Powell testimony should prove temporary in keeping a lid on stock prices. As outlined, while we don’t expect a sizable selloff, we don’t see dramatic gains as overly likely either. The best known measure of volatility, VIX, appears to support this view. The perceived likelihood of the real economy bottom being at hand, also speaks in favor of the above.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

It’s the Credit Markets Vs. the S&P 500 Upswing Now

Neither on Thursday, nor on Friday did the bears manage to break below the 50% Fibonacci retracement. Stocks rebounded, albeit less convincingly than on Thursday. Or was it convincing enough? Let’s examine both sides of the story to assess whether it’s the bulls or bears that are holding the upper hand now.

S&P 500 in the Medium- and Short-Run

We’ll start this week’s flagship Stock Trading Alert with the weekly chart (charts courtesy of http://stockcharts.com ):

The bulls opened the week, making another run at the 61.8% Fibonacci retracement. Late on Tuesday, the Fed made several pronouncement that were not really surprising, but they still served to take the wind off the bulls’ sails. Namely, it was stated that more fiscal stimulus might be necessary, and that the virus needs to get under control so as to fix the economy. On Wednesday, Powell echoed these kind-of-obvious positions, and stocks sold off to the 50% Fibonacci retracement. On Thursday, they declined on another 3,000K unemployment claims data, yet reversed later in the day. Friday brought us renewed US-China tensions and terrible retail sales figures, which took stocks lower again – yet they recovered in the latter half of the session.

As a result, the weekly candle bears a red body that marks the decline, and a sizable lower knot denoting last two days’ recovery. Neither the weekly volume nor the weekly indicators stand out in any way. Are stocks likely to go on grinding slowly higher, or will the bears try luck again with another downswing attempt?

Let’s see the daily charts for more details.

Trading around the 50% Fibonacci retracement attracted relatively more volume than the breakout attempt above the 61.8% one. As the buyers are certainly becoming more active around the 2800 area, is it likely to hold another selling wave should it come? And how likely will it come?

Well, the daily indicators aren’t exactly on their buy signals just yet – Stochastics is still on a sell signal, while CCI has ticked higher before reaching the -100 area and RSI is fairly neutral.

Let’s dig a bit deeper into Friday’s events and paint a picture of what’s to come early this week. While the Democrat-proposed $3T bill is dead on arrival, it’s fairly obvious there would be a new fiscal stimulus – however, it hasn’t materialized yet even as an outline. Then, after backlash against the implied cure-all coronavirus vaccine position, Trump flip-flopped to say that the virus would just go away at some point, all by itself – which seems to have helped with Friday’s modest upswing.

On Tuesday, we’ll hear Powell’s testimony – and after last week’s reaction to the cautious tone struck, the risks of another selloff are there. It can’t be denied that the authorities have managed to paper over the problem, but is the consumer and small business sector coming back? We’re of the opinion that the nearest months will show the veracity of the rebound, and we suspect that a very wide-stretched U-shaped real economy recovery would actually be the optimistic scenario here.

These weeks, the market will likely remain in a wait-and-see mode, reluctant to make a sizable move either way. But what if the risks were skewed rather to the downside in the very near-term? Coming back to the Fed, it’s likely – after moving decisively in late March and early April, their Treasury/mortgage-backed securities purchases keep being low. That’s one key buyers less. What would be a better excuse to ramp up the printing presses than another slide in the markets?

In other words, it’s unlikely that Powell, after putting pressure on the executive branch to act, would bring the punch bowl to the Senate hearing. This makes it likely that the market would need to spook the Fed into action first.

Do we find support for the above theory in the credit markets?

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) didn’t really rebound either on Thursday or on Friday. That’s a sign of non-confirmation of the stock upswing.

The high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) also keeps underperforming. Just as we wrote on Thursday, this ratio is well positioned to exert downside pressure on the overlaid S&P 500 chart (the black line), even after Friday’s modest move higher.

Fundamentally speaking, that’s what one can expect when Fed’s firepower isn’t really there at the moment. This is why another attempt to move lower in stocks, is likely.

Key S&P 500 Sectors and Ratios in Focus

Sure, technology (XLK ETF) rebounded on encouraging volume, but the technical picture isn’t fully convincing. The daily indicators still aren‘t on their buy signals, and while the sector keeps making higher highs and higher lows, last two days‘ rebound appears extended and consolidation with a downside bias isn’t out of the question.

Healthcare’s (XLV ETF) price action looks more favorable to the bulls, especially since Friday’s volume overcame that of the Wednesday’s downswing. Unlike tech, the sector didn’t open near its Thursday’s starting prices. But can it keep pulling the S&P 500 higher?

Financials (XLF ETF) continue underperforming, and despite erasing Wednesday’s plunge, they’re not trending higher. They reflect the weak performance of the credit markets, which doesn’t bode well for the advancing index as such.

Energy (XLE ETF) is taking a breather, and has issues moving higher regardless of the oil price recovery. As the volume also leaves quite something to be desired, the short-term risks appear skewed to the downside.

However, that’s not true to such an extent in materials (XLB ETF). On one hand, they rejected the lower low and sprang higher, but the daily indicators and volume aren’t yet on the side of the bulls. While that may change later this week, we’re not there yet, and consolidation over the nearest sessions remains the most likely scenario.

The last of the stealth bull market trio, the industrials (XLI ETF) performed as feebly as energy did. It’s a safe bet to say that these three sectors haven’t exactly assumed leadership in the S&P 500 rebound, making it more likely that the stock bulls will get again tested this week.

The financials to utilities ratio (XLF:XLU) still doesn’t act bullish – the sideways action would favor consolidation in this relatively broad sideways trading range (2800 to 2940) in the S&P 500 – still within the lower half of that spectrum for now.

Similarly, the consumer discretionaries to consumer staples ratio (XLY:XLP) is consolidating. It means that it’s not giving clear signs of the upcoming directional move in stocks.

The Fundamental S&P 500 Outlook

As the coronavirus infection charts appear to have relatively stabilized, and the Fed offered ample support at a critical juncture, the stock market hasn’t sold off in a dramatic way since. Moving from the March 23 lows to the 50% Fibonacci retracement, it has overcome this resistance and taken twice on the 61.8% one. Last week, the 50% retracement held as support.

The above paragraph would speak in favor of a near-term trading range between the two retracements. But would that mean that no selloff below the lower one can happen? Absolutely not, the 2720 or even the low 2600s can get tested. And that needn’t to happen on very adverse corona-related developments. Faced with incoming data, the market can start to doubt whether we’re within sight / we’ve reached the bottom and the real economy is on the mend now. Continuing unemployment claims, retail data, manufacturing figures and similar would show. Or escalation in US-China trade tensions can drive the stock selloff similarly to the way it did early on Friday. Or the Fed playing the monetary interventions on-off game, can work to similar effect.

Still, having gone as high from the low 2200s, the risk of retest or breakdown below these lows, isn’t there at the moment. Not with all the implicit and explicit Fed support, the many fiscal stimulus measures, and crucially, not unless corona goes from we-have-flattened-the-curve to oh-it’s-exponential-again. Despite the relative complacency and the dangers it brings, we’re still far from the market pressing the panic button.

Reaching 2800, 2720 or the low 2600s wouldn’t count as panic. Considering this year’s swings, a move to these levels (especially the first two, but there’s potential for an overshoot to the 2600s) would constitute a relatively shallow correction, after which a slow grind higher could go on (barring catastrophic corona developments). After all, we’re in an election year.

What to do about the current S&P 500 pricing, what actions to take? For all the above-mentioned reasons (namely the credit-related ones), we’re expecting a push lower in stocks to happen most likely over this week, and in all likelihood still within May. With breakouts and breakdowns having failed recently (bringing about no directional move or momentum to trade), the choice of opportune entry and exit points is rising in importance.

Summary

Summing up, despite the bullish finish to Friday’s trading, the buyers don’t have yet the indicators on their side. Weekly ones including volume are mostly neutral, while the daily ones remain vulnerable to a downside move. As the credit markets portend, the stock upswing appears to have gotten a bit ahead of itself, and Tuesday’s Powell testimony coupled with yet another reduction in Fed’s purchases starting today, are likely to be the catalyst of renewed selling. Delivered with a sober assessment of the real economy prospects and uncertainties (yes, the Q2 Fed-projected GDP drop is now 35%), it could drive stocks back to the 2800s, and the HYG ETF breaking below the late April lows. This would strengthen the bearish case for stocks in the near term – just as the US-China trade tensions or anchoring the reopening rebound expectations do.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Just Who Would Trust Yesterday’s Stock Upswing?

Just when it appeared that the bears will get a third consecutive daily close lower, stocks rebounded from the 50% Fibonacci retracement. Having stabilized and adding to the intraday gains within the final hour before the closing bell, have the sellers been banished now?

That’s unlikely in our view.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Stocks opened with a bearish gap, going deeper below the 50% Fibonacci retracement. The bulls stepped in though, striving to repair the daily price damage.

This is how we have summarized their efforts some 75 minutes before the closing bell in our latest intraday Stock Trading Alert that day:

(…) The stock bulls continued to push higher, while the corporate junk bonds didn’t confirm the stock advance to such a degree. So, where are the stock advance engines and are they likely to go on firing?

Healthcare (XLV ETF), financials (XLF ETF) and consumer discretionaries (XLY ETF) are among the best performing sectors today – but still, they have only retraced certain parts of their yesterday’s downswing. Technology (XLK ETF) hasn’t managed to do that (Amazon, Microsoft, Apple and Alphabet are not today’s shining stars) while the stealth bull trio (energy, materials and industrials) continue lagging behind in their retracing attempts too.

But the stock index is still attempting to move higher, regardless of not having the key upswing drivers aligned behind the attempt. Smallcaps (IWM ETF) are also performing less than strongly, trading with a sizable upper knot and well below yesterday’s closing prices. This subtly points to the bear takedown risks being still very much present in the market.

Okay, these are the clues for the 500-strong index. But we are trading the index and have to respect its swing structure with the potential overshoots. And it tells us that should stocks (driven by the tech comeback later today) play catch-up and take prices above 2870, the risk of further gains in the lead up to tomorrow’s retail data would be there. That’s true regardless of the incoming data likely to be worthy of a horror show, and the market selling off in its wake.

The mentioned trio (healthcare, financials and consumer discretionaries) have indeed added to their intraday gains in the final hour of trading – during which neither technology (XLK ETF) nor smallcaps (IWM ETF) have exactly outshined them.

Tellingly, our overnight target of 2870 that would have the power to flip the very short-term outlook bullish, hasn’t been reached by a long shot. And as we see the futures having rolled over to trade at around 2820, we’re getting a real-time confirmation of the yesterday-presented bearish outlook for stocks – both in the regular Stock Trading Alert and its intraday follow-ups.

On top, today’s bearish plunge comes in anticipation of the upcoming retail sales figures, providing us with one more hint of which way stocks are likely to trade after the US market open. In short, expect the bears to reappear.

How did the credit markets perform during yesterday’s session exactly?

The Credit Markets’ Point of View

While high yield corporate debt (HYG ETF) refused to go much lower or higher since yesterday’s open, it’s relative stabilization on a daily basis seems to have ignited stocks more than justified. A bridge too far for the stock bulls? Looking at the shape of things, probably.

The high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) also hints at the prevailing bearish overtones. This ratio too is well positioned to exert downside pressure on the overlaid S&P 500 chart (the black line).

Key S&P 500 Sectors and Ratios in Focus

Technology’s volume on the upswing didn’t match or overcome that of the preceding downswing. Is the sector likely to catch up with more upside price action later today? Judged by the daily indicators, that’s unlikely.

The prospect of bearish upcoming performance in the short-term will serve to put pressure on the whole index – just as the performance of the stealth bull market trio will, and healthcare (XLV ETF), consumer discretionaries (XLY ETF) or financials (XLF ETF) can’t be counted on to save the S&P 500’s day.

Materials (XLB ETF) were the strongest ones yesterday, with energy (XLE ETF) and industrials (XLI ETF) lagging behind the attempts to retrace Wednesday’s declines. This doesn’t bode well for the the index as such, and their upcoming opening prices and performance later in the day would likely confirm that.

Yes, financials scored an upswing yesterday, but that didn’t flip the financials to utilities ratio (XLF:XLU) over to bullish. Coupled with its daily indicators‘ posture, this leading ratio maintains its bearish short-term outlook.

And so does the consumer discretionaries to consumer staples ratio (XLY:XLP). After retracing all the downswing since its February highs, this leading metric appears to be rolling over to the downside.

And we fully expect the upcoming retail data to put pressure on yesterday’s star performers, the discretionaries (XLY ETF). There is no other logical conclusion to be made as the V-shaped recovery is increasingly being recognized by the market place for what it truly is – a pipe dream.

 

From the Readers’ Mailbag

Q: the S&P is showing strong support at the 2720 range where you have put the target. However the Dow shows support at 23100 (which was breached today). How do you know which one to go by?

A: Yes, the 2720 area is a meaningful S&P 500 support zone as both the 50-day moving average and the late April lows are located there. The other indices such as Dow Jones Industrial Average or Russell 2000 give us valuable clues, but foremost, we have to focus on the S&P 500 itself.

Applied to the current situation, we see that DJIA rebound yesterday mirrored that of the S&P 500 – also in terms of volume relative to the preceding daily downswing. In latter stages of stock advances (and as the repeated showing at the 61.8% Fibonacci retracement shows, we think that’s a true description of the S&P 500 status), it’s not unusual to see broader-based indices (S&P 500) hold up ground better than the narrower ones (DJIA).

As for smallcaps though, that’s a different story. The Russell 2000 (IWM ETF) hasn’t performed as strongly as the S&P 500 did on the rebound (i.e. the backbone of US economy hasn’t been confirming the advance by leading higher relatively), which is yet another bearish piece to the puzzle. And odds are the unfolding puzzle will be resolved with another downswing before too long.

Summary

Summing up, despite the bullish finish to yesterday’s trading, the buyers don’t appear to be as strong as they project themselves to be. Unless we see a turnaround in the credit markets and renewed vigor among the formerly leading S&P 500 sectors and their ratios, Thursday’s session is likely to mark a temporary reprieve only. Should the HYG ETF break below the late April lows, the bearish case would get a new lease of life. Combining the technical and fundamental developments (the increased reflection of serious downside risks and overly rose-tinted glasses of the reopening and V-shaped recovery saga), the sellers are holding the upper hand currently. Our profitable open short position remains amply justified as stocks are likely to break down below the 50% Fibonacci retracement. The increasing US-China trade deal tensions only serve to add fuel to the fire – S&P 500 downswing catalyst.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Has the Stock Downswing Started in Earnest?

It turned out that the late Tuesday Kaplan and Kashkari pronouncements were an opening act in yesterday’s Powell appearance. Fed Chair’s realistic and grim assessment just served to put pressure to throw yet another lifeline to the real economy. While this is far from the last Fed’s word, the bulls didn’t really find anything to cheer. How good and timely that we’ve issued an intraday Alert to jump in immediately onto the short side of the market to take advantage of the just unfolding slide! As the Congress is split on the Democrat-proposed $3T bill, how far can it go on?

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Despite some encouraging signs of overnight stabilization, stocks gave up the gains just as the Powell speech went on. Diving on heavy volume, the 50% Fibonacci retracement provided support to the buyers yesterday. Given the sell signals of the daily indicators, we’re of the opinion that this support won’t likely hold for too long.

This is how we have summarized it in our yesterday’s intraday Stock Trading Alert:

(…) After the back-and-forth trading of recent weeks and all the signals favoring either the bulls or the bears at different junctures, the prevailing direction appears to be down now.

Powell delivered his own version of the Fed has given its best shot and coupled it with a call for more fiscal action. The point that the markets focused on the most, appears to be that despite the swift response and pledge to do more (while ruling out negative interest rates), it’s the admittance of serious downside risks to the real economy and the fragile nature of the much-hyped recovery.

Both stocks and junk corporate bonds gave up on their efforts to reverse the preceding downswings, and stocks as the more vulnerable ones are leading on the way down. After all, should some of the reopening efforts backfire, what state of confidence would that leave the consumers and companies 6 or 8 weeks from now? The valuations would be even more extended than they have been already.

Thus, more twisting of the policymakers’ arms rules the day, and given the credit markets – S&P 500 sectors dynamics, won’t likely end all that soon.

Coupled with the Fauci testimony, second wave outbreaks around the world and outside the State of New York clusters of domestic infections, those were no good news for the bulls. It appears that similarly to the runup to the coronavirus plunge during February, stocks are first slowly, then more quickly coming to realization of the serious downside risks. Back then, the credit markets were showing non-confirmation of the stock advance to the all-time highs almost on a daily basis – eventually resolving with a slide, and the rest is history, as they say.

How do the credit markets look after yesterday’s session exactly?

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) went slowly but surely deeper into the red as the session progressed. The sizable volume behind the two-day downswing is a warning sign, pointing to more downside ahead. Selling into the Fed’s hands on the acknowledged tough times ahead, anyone?

Importantly, the junk bond ratio to short-dated Treasuries (HYG:SHY) confirms the above assessment. As the next likely step, the challenge of late April lows looms – and for the HYG ETF as well.

Key S&P 500 Sectors in Focus

Technology declined on heavy volume, but retraced a part of the move lower. The daily indicators though wouldn’t agree that a local bottom is in. As a result, we expect more downside action over the coming sessions, which is supported by volume picking up on the downside.

The healthcare (XLV ETF) bulls didn’t step in as strongly before the closing bell, and yesterday’s volume wasn’t as large as in case of tech, relatively speaking. But these are the two most resilient sectors that have been performing strongest in the race off the March 23 lows – and still, their current price action leans bearish.

Out of the heavyweight, finance (XLF ETF) has been the weakest – both yesterday and since March 23. With buyers nowhere to be seen and the daily indicators as bearish as they get, downswing continuation is the path of least resistance here.

The early bull market sectors (energy, materials, industrials) also took a beating on high volume yesterday. Industrials (XLI ETF) are the weakest among them, already trading below their late-April lows. The bearish outlook they give (i.e. the bull market hypothesis being put to this heavy a test), is confirmed by the Russell 2000 (IWM ETF) downswing, again on high volume giving it credibility.

In closing, it appears that stocks won’t shake of another several million new unemployment claims figure as gracefully as last week – and that‘s an understatement.

Summary

Summing up, the bullish case appears increasingly lost as stock attempt to break below the 50% Fibonacci retracement. And given the momentum, credit markets’ performance and sectoral dynamics, it’s likely that the bears will succeed. Should the HYG ETF break below the late April lows, the bearish case would get a new lease of life. Combining the technical and fundamental developments though, the sellers are holding the upper hand currently regardless – the unfolding downswing is well placed to go on lower still. Our open and increasingly profitable short position remains justified.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Were Stocks Rejected at Resistance for Good?

Right after the open, stocks took again on the 61.8% Fibonacci retracement, but retreated. Trading around the 2910 mark in a tight range, it appeared as base-building for the decisive push above the resistance. Instead, stocks fell through in the final hour of trading, coinciding with the Fed’s Kaplan and Kashkari tweets. Have they been a game changer?

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Opening again almost at the 61.8% Fibonacci retracement, the bulls’ attempt to move higher fizzled out. Stocks declined, but not profoundly. That came only with the latest Fed pronouncements. This is how we commented on them in our intraday Stock Trading Alert earlier today at 2:30 AM EST:

(…) The slide in stocks later yesterday may look to be a decisive start of a downtrend, but it lacked volume rising well above previous sessions. Then, let’s consider the context. What groundbreaking message did Fed’s Kaplan or Kashkari say? That more fiscal stimulus might be necessary, and that we need to get the virus under control so as to fix the economy. Well, both statements are more than kind of obvious.

Finally, the overnight price action is bullish – after the initial hit, we got another downswing attempt refused, and fast. The same goes for the one-hour old attempt to reverse the upswing from the overnight bottom.

Since then, the bears pushed the futures once again to 2850, but after stabilization, prices rebounded to 2870. As a result, the above observations still remain valid.

Notably, we’ll get the Fed Chair Powell to speak and take questions at the Peterson Institute for International Economics webinar – at the US market open. The timing is peculiar to say the least, bringing back the memories of April 09, which is when the $2.3T backstop bombshell was dropped, powering stocks higher in its aftermath.

While past events are no guarantee of the future, the similarities are there. Another surprise statement wouldn’t surprise us, as the Fed hasn’t been projecting the aura of strength and decisiveness for a few weeks now. Considering the pace of events, that’s quite a long time these days. And yesterday’s price action appears to be a call to do something, as in twisting the Fed’s hand. Has it been enough?

Will the Fed banish the shadow of the doubts that lingers over the markets in recent weeks? Will fiscal policy ride to the rescue too? As we’ve seen yesterday both in stocks and bonds, the markets are calling for that. And we don’t expect the Fed to throw up their hands and say they gave it their best shot…

The Credit Markets’ Point of View

Opening with a bullish gap, high yield corporate debt (HYG ETF) modestly retreated in tandem with stocks. The sizable red candle was again born in the final hour of trading. Remember that the Fed’s vehicles to enter the debt ETF markets are ready now, and each successful debt rollover would support stocks. It makes a world of difference, having to pay just the coupon or the principal.

Such interventions work to push both stocks and bonds higher, at the cost of zombification of the economy (who in their right mind would backstop airline or cruise companies’ debt on currently prevailing terms?) and misallocation of capital. But that’s a story for another day.

Importantly, the junk bond ratio to short-dated Treasuries (HYG:SHY) confirms the above assessment. We have seen no downside reversal as both the ratio and the HYG ETF are trading solidly above the late April lows. As a result, the most likely resolution of this consolidation is to the upside.

Key S&P 500 Sectors in Focus

Understandably, both the heavyweight and early bull market sectors took a beating yesterday. The Russell 2000 (IWM ETF) also declined, and on higher relative volume than the S&P 500 did. While that’s bearish, the credit markets don’t support jumping to conclusions just yet. In other words, the bear market can’t be yet declared to have resumed just because reaching a 50% or 61.8% Fibonacci retracement after a historic selloff is a hallmark of bear market rallies.

Yes, that’s true despite the sizable reversal on meaningful volume in both technology (XLK ETF) and healthcare (XLV ETF), or the continuing underperformance of financials (XLF ETF).

Neither energy, nor materials slash industrials had a good day yesterday. While the early bull market trio seems to be running into headwinds, they have not rolled over decisively.

Summary

Summing up, despite the stock bulls being again rejected at the 61.8% Fibonacci retracement, the bullish case isn’t yet lost. How close to being over is the deterioration in the stock upswing internals? Credit markets hint at a temporary setback only. Our open long position remains justified, and needs to be tightly managed.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stocks at Resistance & Taking Their Time

Another day, another close at the 61.8% Fibonacci retracement. As yesterday’s session was preceded with quite a test of the bulls’ resolve, does it mark strength of the buyers, or their last gasp push?

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Yesterday’s bearish gap at the open was closed, and the bulls have been adding to their gains throughout the day. Stochastics continues to be positioned constructively for the upswing to continue, but the CCI shows signs of weakness – just as the volume examination thanks to yesterday’s lower reading increasingly does.

Having said that, short-lived moves either way wouldn’t be at all surprising here, as the index looks for short-term direction. Can the outlook be refined once we look at the credit markets?

The Credit Markets’ Point of View

High yield corporate debt (HYG ETF) didn’t lead stocks higher yesterday, and actually closed not too far from where it opened on Friday. The same is true about its ratio to short-dated Treasuries (HYG:SHY). As the early May move lower was rejected, yesterday’s downswing is mostly likely a sign of ongoing consolidation in the ETF.

Unless the instrument breaks out above its late April highs, the stock uptrend would be best viewed with caution. For now however, and judged solely by the chart, more upside in the HYG ETF appears to be the path of least resistance.

The upswing in the ratio of high yield corporate bonds to investment grade corporate bonds (HYG:LQD) would support higher stock prices. Right now, it’s attempting to overcome the late March and April intraday tops – highlighting the return of risk-on environment. But isn’t getting extended? This chart reflects the headwinds the bulls are likely to face on their journey north.

Let’s move to the key S&P 500 sectors next.

Key S&P 500 Sectors and Ratios in Focus

Technology (XLK ETF) didn’t roll over to the downside, quite to the contrary. Erasing opening losses, the leading sector closed at new monthly highs. But it has suffered a setback in the last hour of trading. Both the upper knot and increasing volume serve as warning signs for the sessions ahead. Not necessarily right for the upcoming one, but should we see more selling into strength, it would be reasonable to start questioning the technology upswing.

Healthcare (XLV ETF) rose strongly, closing near the daily highs. Coupled with the positive turning points in the daily indicators, the volume would support taking on the April highs over the coming sessions.

Financials (XLF ETF) are relatively lagging, trading well below their late April highs – quite a lot lower that the HYG ETF does compared to its previous highs. Regardless of Stochastics’ buy signal, the daily indicators aren’t positioned all that favorably for an upswing.

What would an upturn in financials need? Junk corporate bonds overcoming their local highs. Will they do that once the Fed has its vehicles ready to start actually buying them instead of offering forward guidance to such effect? Wasn’t actually the Friday’s action merely an attempt to frontrun the Fed, and yesterday’s weak performance a reflection that we haven’t seen a proof of their start in earnest? Will they deliver that in tomorrow’s Powell speech?

Financials don’t appear to be buying the rumor heavily, and that’s an understatement. Their upcoming performance will shed valuable light on the S&P 500 prospects.

Neither energy, nor materials slash industrials had a good day yesterday. The early bull market trio seems to be running into headwinds. While they’re not rolling over, they aren’t enthusiastically leading higher. Unless reversed, that’s likely to turn into a headwind for the stock market advance over the coming sessions.

Summary

Summing up, stock bulls closed again at the 61.8% Fibonacci retracement, but the internals of the stock upswing appear to be deteriorating. Credit markets are not performing as strongly as expected on a very short-term basis, while technology and healthcare are the sectors left to carry the torch. The smallcaps haven’t continued with their Friday’s chase of higher prices either. This spells an increasing likelihood of the stock upswing being put to test over one of the nearest sessions. We’ll keep monitoring the evolving attempt to push higher still, assess its health and take appropriate trading decisions.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

S&P 500 Bulls Again At Resistance – Now What

Friday’s key data point were the non-farm payrolls. Horrendous and coming in at minus 20,500K, they surprised on the upside. After their release, stocks continued adding to their overnight gains, closing at the 61.8% Fibonacci retracement. Our previous bullish points turned out correct, but the key question is how strong is this rally? Can it power through this key resistance that is reinforced by the early March bearish gap?

S&P 500 in the Medium- and Short-Run

We’ll start this week’s flagship Stock Trading Alert with the weekly chart (charts courtesy of http://stockcharts.com ):

Stocks entered last week’s trading on a weak note, extending previous Friday’s losses in the overnight session to reach the 50% Fibonacci retracement. As Monday progressed however, the bulls cleared off the proximity of this support. The downswing attempt failed, and stocks closed sharply higher last week.

Yes, the weekly indicators are getting tired, but they are still far from flashing sell signals. Importantly, the weekly volume doesn’t show increasing commitment of the sellers, and accounting for the upside momentum, it doesn’t stand in the way of further gains. Apart from the below-mentioned resistances, the 50-week moving average is nearby – can the bulls make it there?

Let’s finetune the perspective on the daily chart.

S&P 500 opened on Friday with another bullish gap, and the uptrend continued throughout the day. The daily indicators are still constructively positioned, and the volume is just about right for an upswing. As the stock bulls closed the day at the 61.8% Fibonacci retracement, how strongly positioned are they to overcome the resistance where they failed not too long ago?

These were our Friday’s thoughts regarding the anticipated reaction to the non-farm payrolls:

(…) The point is that stocks have risen like phoenix from the ashes, and continue taking bad news in their stride. That’s what bull markets do, by the way.

Knowing that this hypothesis will be put to test over the coming weeks, let’s dive into the credit markets.

The Credit Markets’ Point of View

Opening with a bullish gap, high yield corporate debt (HYG ETF) continued leading stocks higher throughout the day. With its late April highs in sight, the daily indicators are in favor of the debt ETF’s upswing to continue. The rising volume coupled with the daily upswing attests to the increasing involvement of the bulls. In short, more upside appears to be the path of least resistance.

The ratio of junk corporate bonds to short-dated Treasuries (HYG:SHY) is also rising. Again, this shows that stocks are well-bid, and bullish spirits are just there at the moment. In other words, we’re rather in the risk-on than the risk-off environment.

The ratio of high yield corporate bonds to investment grade corporate bonds (HYG:LQD) also supports the above assessment.

As for the stock market to Treasuries ratio, this metric also reflects the stock upswing. Will it be able to overcome the late April highs? Judged by the credit markets’ performance, it’s not out of the question.

Let’s check the key S&P 500 sectors and their ratios – do they agree?

Key S&P 500 Sectors and Ratios in Focus

For the fourth consecutive day, the tech sector opened with a bullish gap on Friday. Adding to its opening gains, this leading sector closed solidly up. A word of caution though – while it’s reaching a new highs, Friday’s daily volume could have been higher. As a result, digesting recent gains wouldn’t suprise us in the very short-term.

Despite the risks being still skewed to the upside, let’s remember no market goes up or down in a straight line.

Let’s quote our Friday’s observations as they’re still valid today:

(…) Healthcare (XLV ETF) isn’t performing as strongly, but it isn’t breaking down either. The sector appears just consolidating. Should we see higher volume with yesterday’s candle, that would be bearish – but it wasn’t there. Thus, consolidation appears to be the most probable scenario here.

Helped by the rising HYG ETF, financials (XLF ETF) rose on Friday. First though, they had to repel the selling pressure – they did, and closed almost unchanged from their opening prices. It must be said that their performance could have been stronger, but they aren’t moving in perfect daily synchro with the debt markets.

The question is whether they’ll catch up over the coming sessions. Despite the lower daily volume, they can still do that – in late April, we’ve seen similarly low volume coupled with trading not too far from the swing lows, resolved with an upswing.

Let’s move on to the stealth bull market trio of sectors (energy, materials and industrials). Can it be said they’re leading higher?

While oil didn’t travel far since Wednesday, the energy sector (XLE ETF) recorded gains over the same period. That’s encouraging, but it hasn’t yet overcome its late April highs. As it’s positioned favorably to take on them, will the upswing attempt be supported by the other two sectors?

While materials (XLB ETF) also acted strongly on the day, they’re trading below the late April highs. Similarly to financials, there is some catching up to do if the stock bulls aim to move higher still.

Virtually the same notes apply to industrials (XLI ETF) as well. As a result, unless these three early bull market sectors keep overcoming their Friday’s highs, the S&P 500 is likely to consolidate its recent gains in the short term.

Do the leading ratios support the cautious tone?

Considering Friday’s strong gains in the index, the financials to utilities ratio (XLF:XLU) could have moved higher. Once it does, the stock advance would be driven more by the risk-on sectors.

The consumer staples to discretionaries ratio (XLY:XLP) could have also performed stronger on Friday, given the stock upswing. Both of these charts reveal a certain rotation in the S&P 500 – just like the strong performance of defensive tech stocks such as Apple (AAPL) or Microsoft (MSFT) does. Considering that the XLY:XLP ratio has made it back to its February levels already, some back-and-forth moves aren’t (and wouldn’t be) too surprising.

Briefly said, a short-term consolidation of recent gains would be favored by both sectoral ratios. And what about other metrics?

The copper to gold ratio would favor continued stock upside in place of consolidation or downswing. It carries no screaming sell implication just yet. Should it keep trading higher, it would actually help drive materials (and by extension also industrials and energy) up over the coming sessions.

That would be the key element if this S&P 500 rally is to go on. The broader the advance, the better for the prospects of further gains. When we see warning signs of more than a few sectors rolling over to the downside, we would know that the whole index would roll over eventually as well – and sooner rather than later.

With the above in mind, let’s overlay the S&P 500 moves with the key smallcap index, the Russell 2000.

While the two don’t move in perfect lockstep on a day-to-day basis, the Russell 2000 index (IWM ETF) sends valuable signals of either confirmation or non-confirmation of the S&P 500 move over the selected time period.

Having recovered just as steeply from the late March lows, the IWM ETF early April plunge turned out a bear trap. During the stock struggles with the 50% Fibonacci retracement, IWM went sideways, only to spurt higher as stocks raced to the 61.8% Fibonacci retracement. On the stock selloff early last week, IWM made a higher high – that’s a bullish sign of buying pressure returning to the smallcaps.

Should IWM continue catching up relative to the S&P 500 (after all, they haven’t retraced as much of the downside move), that would support the stock upswing to continue – regardless of whatever S&P 500 consolidation we might get over the very short-term.

This works just like the Dow theory or the credit market cues – it’s a process of catching up that shows which way the non-confirmation will be resolved. And such times can take not only weeks, but months. Currently, the IWM signal gives a gentle nod to the bullish camp.

Summary

Summing up, stocks again proved resilient in the face of Friday’s grim employment data. While the key metrics of the debt markets (high yield corporate bonds and its ratios) continue supporting the stock upswing to go on, the stocks to Treasuries ratio spells short-term caution. The message of key S&P 500 sectors is mixed but still with bullish overtones. While we might not see such a strong weekly close this Friday as we did the previous Friday, the risks at the moment continue being skewed to the upside. That would be especially true should the smallcaps continue catching up relatively to the S&P 500. Accounting for the premarket developments (bearish gap and upswing rejection, we’ve already closed the long position and taken respectable profits off the table).

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Dollar Short Reduced; Swiss Franc Long Raches 2016 High

The risk-on seen during the previous weeks paused with the S&P 500, U.S. 10-year Notes and the dollar all trading softer. The dollar was nevertheless in demand against most of the ten IMM currency futures tracked in this, not least against the euro and Japanese yen. Exceptions being the Aussie dollar and the Swiss franc which reached a level of longs last seen in 2016.

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Hedge funds and other large speculators bought U.S. dollar for a second week to May 5. Buying against ten IMM currency futures were broad based resulting in the gross dollar short being reduced by 17% to $6.7 billion. The two exceptions being the Aussie dollar and the Swiss franc, with the long on the latter rising to the highest since 2016.

Biggest changes weighing the most on the sell side was the euro, which was sold for a second week, and the Japanese yen long which retraced after reaching a 13 months high a week earlier. Selling of the Mexican peso resumed despite rising 1.7% against the dollar.

Leveraged fund positions in bonds, stocks and VIX

The speculative short position in the C’Boe VIX futures was cut by 41% to 19k lots, an almost 15 month low. The reduction occurred despite a 4.6% rally in the S&P 500 Index driving a 12% drop in volatility. Interestingly the reduction was almost entirely driven by short positions being closed, potentially a sign of fading optimism that the stock market rally can continue.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.
This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Right Now, the Bullish S&P 500 Ride Goes On No Matter What

Yesterday, we’ve pointed out the many bullish signals going for stocks, and saw them open higher, and extend their gains. Well, that was true about the first half of the session, as the S&P 500 returned to trading close to unchanged before the closing bell. Is the upswing over now?

In short, we doubt that.

S&P 500 in the Short-Run

Let’s start with the daily chart analysis (charts courtesy of http://stockcharts.com ):

Yesterday’s volume wasn’t too high or too low – it’s actually quite consistent with what you would expect to see during an unfolding uptrend. As a result, the upswing has a pretty good chance of continuation – especially when you consider that stocks made another closing high yesterday. True, it’s still below the previous high, but we haven’t seen any sign of a reversal.

That’s why there can be no talk of a head-and-shoulders pattern reversal. First, the right shoulder isn’t completed – and we haven’t seen a breakdown below the neckline of this potential pattern-in-progress either. As it’s not completed, it carries no implications – and in our opinion, taking on the 61.8% Fibonacci retracement is more likely than breaking below the 50% one. So much for the bearish pattern.

But today, we’ll get the non-farm payrolls data, and they’ll be horrendous, you might say.

Yes, they will be indeed ugly. Uglier than ugly. But we’ve seen this story on Wednesday already – the market took a hit initially, but refused to decline for much longer. Accompanied by the credit market signals, this has made us enter into a long position, and we’re still profitably riding it this very moment. The point is that stocks have risen like phoenix from the ashes, and continue taking bad news in their stride. That’s what bull markets do, by the way.

Let’s recall our yesterday’s notes – they might turn out handy later today should we get a really bad number:

(…) It would be easy to jump to conclusions and cry that the sky is falling – but would that be justified? As they say, don’t throw the baby out with the bathwater.

The measured way of dealing with such a curveball would be to ask whether the outlook has changed.

Should the outlook as we assess it in its complexity indeed change, we’ll make an appropriate decision.

Preaching to the choir, we went on to write these timeless thoughts:

(…) What is the lesson here?

As for each and every trade, it’s to interpret the signals in their entirety – that’s the only way to get odds in your favor as much as reasonably possible.

As for trading performance over the long run, it’s to dutifully and attentively listen to the market’s many messages on a daily basis – with an open and flexible mind. It’s only over a long enough period of time and with sufficiently large a trade sample collection, that you see the edge you’re working with bring fruits. Christmas doesn’t come regularly in trading, and it would be foolish to jump out of the window because of any single trade.

Coupled with a money management lesson, you must give the edge enough breathing space to work its magic, and risk only as much (or even better, as little) so as to mount the next trade where the odds are again in your favor. And after that, the next one – regardless of the preceding day‘s result. And so on – trading is a marathon, not a sprint.

With that in mind, let’s dive into the credit markets now.

The Credit Markets’ Point of View

Opening with a bullish gap, high yield corporate debt (HYG ETF) gave up most of its intraday gains during the day, taking a dive in the last 30 minutes of trading. While the long upper knot looks sinister, the outlook again hasn’t changed – they haven’t broken below their recent lows.

The ratio of junk corporate bonds to short-dated Treasuries (HYG:SHY) has performed slightly worse yesterday, driven by rising Treasuries across the board. Yes, not only the short-term ones (SHY ETF) went up, the same goes for long-dated ones (IEI ETF) too.

Again, unless we get a break below the recent lows, this charts’ outlook hasn’t changed either.

Let’s move to the key sectors next.

Key S&P 500 Sectors and Ratios in Focus

Another day, another new closing high in the tech sector (XLK ETF). Regardless of the upper knots of recent days, technology just continues to open higher the next day. While yesterday’s volume has been heavier that the days before, it would be premature to talk about a reversal. As things stand currently, technology continues to lead the S&P 500 upwards.

Healthcare (XLV ETF) isn’t performing as strongly, but it isn’t breaking down either. The sector appears just consolidating. Should we see higher volume with yesterday’s candle, that would be bearish – but it wasn’t there. Thus, consolidation appears to be the most probable scenario here.

Supported by the bullish action in the HYG ETF early in the day, financials (XLF ETF) also opened with a bullish gap and extended gains. Unlike junk corporate bonds though, they haven’t given them up before the session was over, which is a bullish sign for the sector – and thanks to its ratio to utilities (XLF:XLU), also for the whole index.

As for the stealth bull market trio of sectors (energy, materials and industrials), their performance was somewhat mixed yesterday. Both energy (XLE ETF) and industrials (XLI ETF) opened higher, gave up their intraday gains, and closed virtually unchanged on the day. Only materials (XLB ETF) did better and held onto around half of their regular session’s gains.

Overall though, their message is bullish – and it’s also supported by yet another monthly high in the consumer staples to discretionaries ratio (XLY:XLP). By the way, this leading indicator is already trading well above where it was throughout each and every day in March.

Summary

Summing up, stocks again proved resilient in the face of grim employment data yesterday. While high yield corporate bonds wavered in the final 30 minutes of trading, their outlook hasn’t been invalidated – they continue to support the stock upswing. Coupled with the sectoral performance and key ratios, it’s likely we’ll see stocks shake off today’s bad employment data, and continue their grind higher. Our open and increasingly profitable long position remains justified.

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Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Coronapocalypse and Gold – How High Is Too High for the Yellow Metal?

$2,000, $5,000 or even the Jim Rickard’s $50,000 as the next target for gold. How realistic are these figures – could we see the yellow metal at $5,000 or even higher amid the coronavirus crisis? We invite you thus to read our today’s article and find out how high gold prices can go in this downturn.

Coronapocalypse and Gold – How High Is Too High for the Yellow Metal?

The first quarter of 2020 was clearly positive for the gold market, as the chart below shows. The yellow metal gained 6.2 percent from December 30, 2019 to March 31, 2020, moving from $1,515 to $1,609. In April, the bullion went up even further to $1,693, increasing gains to 11.7 percent in 2020 (as of April 17).

Chart 1: Gold prices (London PM Fix, in $) in 2020.

The obvious reason for this bullish move was the COVID-19 pandemic and the resulting shutdown of the global economy. As a result of the coronavirus shock, most of the major drivers of the gold prices improved. In particular, the real interest rates, as measured by yields on the 10-year inflation-indexed Treasuries, dropped, plunging into negative territory. As one can see in the chart below, gold prices behaved like a mirror image of the real government bond yields.

Chart 2: Gold prices (yellow line, left axis, London PM Fix, in $) and real interest rates (red line, right axis, in %, yields on 10-year inflation-indexed Treasuries) in 2020.

Moreover, the risk premium also surged, which supported safe-haven assets such as gold. As the chart below shows, credit spreads greatly widened, while the CBOE Volatility Index skyrocketed.

Chart 3: CBOE Volatility Index (green line, right axis, index) and ICE BofAML Option-Adjusted Spreads (red line, left axis, %) from January 2 to April 16, 2020

Some people complain that gold’s performance has been rather shy given the depth of the negative economic shock. Well, it’s true that gold has not rallied so far, but achieving almost 12-percent gain when almost all assets plunged makes gold one of the best performing asset in 2020, if not the best.

Gold prices did not soar further because of two factors. First, just as in the immediate aftermath of the Lehman Brothers’ collapse, investors started to liquidate gold holdings in order to raise cash. But when the dust settles and the sell-off inevitably ends, the yellow metal will have a cleared path upward.

Second, the US dollar appreciated amid the coronavirus crisis, as the chart below shows. The greenback is also seen as the safe haven during crashes, so investors switched their funds from all over the world and put them into the US-dollar denominated assets. Given the strong negative correlation between the greenback and gold, the appreciation of the dollar exerted downward pressure on the gold prices. However, gold and greenback can both appreciate during the financial crises, as it was the case in early 2009. Importantly, the surge in the US fiscal deficit and public debt may weaken the dollar in the longer run.

OK, we know what happened, but what’s next for the gold market? Will the price of gold quickly rally to $5,000 or more, as some analysts claim? No. It’s true that the Fed’s balance sheet is going to balloon, and the money supply will soar, but there is no correlation between the money supply and gold prices. As you can see in the chart below, the broad money supply has been rising since the 1970s (the data series we got unfortunately starts only in the 1980s), when Nixon closed the gold window, but the price of gold has not – instead, the yellow metal experienced bull and bear cycle.

Chart 4: Gold price (yellow line, left axis, London PM Fix, in $) and the US M2 money stock (red line, right axis, in billions of $) from January 1981 to March 2020

The ratio between the fiat money supply and gold’s supply is no simple formula for gold’s fair value. You see, the claims that the soaring money supply could push gold prices to a dozen or even tens of thousands dollars are based on the assumption that the global economy will return to the gold standard (then, the price of gold would have to indeed increase to “replace” the value of all demonetized paper money), which is highly unlikely, no matter whether we sympathize with the idea (we do) or not.

Let’s move now to the aftermath of the Great Recession. The price of gold increased 244 percent, from $775 on September 15, 2008 to $1,895 on September 5, 2011. So, if history replays itself, the price of gold could increase to about $4,140. However, it was not a quick rally, it took three years for gold to reach the peak. And history never repeats itself, but only rhymes: remember that it always easier to rise when you start from lower levels.

Does it mean that we are bearish on gold? Not at all. Of course, there is a risk for gold outlook that the pandemic will be quickly contained and the economic growth will swiftly rebound. However, we think that the V-shaped recovery is unlikely. Social distancing will not disappear in one day. You see, the pandemic is not confined in time and space like a hurricane or a terrorist attack. The coronavirus will linger through the year (or even longer, according to Michael Osterholm, an infectious-disease epidemiologist at the University of Minnesota). The problem is that people still do not understand that this epidemic is not a matter of just weeks.

And there are significant downside risks for the economy, which – if they materialize – could push gold prices even further up. In particular, there might be a feedback loop in the financial system that could culminate in a systemic financial crisis. We believe that many analysts underestimate the possibility of further repercussions, hoping for a quick rebound. Remember 2007? Economists believed then that the problems would be limited to the subprime mortgage market and wouldn’t affect the whole economy. Yeah, right.

However, even if the quick recovery happens, the low interest rates, dovish central banks and high debt will stay with us, which would support the gold prices. Thus fundamentally, the coronavirus crisis is very positive for the gold prices, and the outlook for the yellow metal in 2020 has clearly improved compared to a few months ago.

If you enjoyed the above analysis and would you like to know more about the links between the coronavirus crisis and the gold market, we invite you to read the May Market Overview report. If you’re interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts. If you’re not ready to subscribe yet and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits – Effective Investments Through Diligence and Care

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Trading Alerts.