European Equities: A Month in Review – December 2020

The Majors

It was another bullish month for the European majors in December, with COVID-19 vaccine news Brexit delivering further support.

The DAX30 rallied by 3.22% to lead the way, with the CAC40 and EuroStoxx600 gaining 0.60% and 2.48% respectively.

The gains were not as impressive as those seen in November, however, with lockdowns and a new strain of the virus testing investor sentiment.

After having seen 2 consecutive months in the red, however, a 2nd consecutive monthly gain consolidated November’s rebound.

Adding to support for the majors, was progress towards a U.S stimulus package.

A Brexit deal, a U.S stimulus package, with the promise of more, and COVID-19 vaccines delivered optimism towards next year.

On 30th December, the House of Commons voted 521 for and 73 against the Brexit Agreement ahead of Britain’s departure at 2300 GMT on 31st December. The House of Lords also passed the Bill.

Also on the political front, there was plenty of action in the wake of the U.S Presidential Election. In the end, departing President Trump failed to overturn the outcome, while managing to disrupt politics on Capitol Hill.

The Stats

It was a quieter month on the Eurozone economic calendar.

Key stats included prelim December private sector PMIs for France, Germany, and the Eurozone and consumer and business sentiment figures.

A pickup in manufacturing sector activity in Germany and a return to expansion in France’s manufacturing sector delivered support.

While the services sector continued to contract, the rate of contraction eased in both France and Germany.

As a result, the Eurozone’s Composite rose from 45.3 to 49.8 in December, according to prelim figures. The all-important manufacturing PMI increased from 53.8 to 55.5.

Containment measures across member states continued to weigh on service sector activity at the end of the year.

From Germany, the Ifo Business Climate Index increased from 90.9 to 92.1, with the ZEW Economic Sentiment Indicator rising from 39.0 to 55.0. Positive vaccine news delivered the upside for both in December.

A marginal fall in consumer confidence in Germany had a muted impact. The GfK Consumer Climate Index fell from -6.8 to -7.3. Lockdown measures across Germany weighed on the index for January.

From the U.S

Economic data delivered mixed results. Consumer confidence waned in December, with the CB Consumer Confidence Index falling from 96.1 to 88.6 in December.

Retail sales saw another decline in November, with core retail sales falling by 0.9%, following a 0.1% decline in October.

Prelim private sector PMI numbers for December also disappointed. The manufacturing PMI slipped from 56.7 to 56.5, with the Services PMI falling from 58.4 to 55.3.

While the jobless claims figures delivered mixed results throughout the month, the numbers remain skewed to the negative.

Initial jobless claims had fallen back to a low 712k in the week ending 27th November before jumping to 885k in the week ending 11th December. While easing back to 803k the following week, claims remained elevated amidst the 2nd wave of the pandemic.

Other key stats included core durable goods orders for November, which came up short of forecasts, and November’s nonfarm payrolls, which also disappointed.

In November, nonfarm payrolls rose by 245k, following a 638k increase in October.

From elsewhere, economic data from China continued to impress. Fixed asset investments, industrial production, and retail sales all saw a pickup in November.

On the trade front, the USD trade surplus widened from $58.44bn to $75.42bn, with exports surging by 21.1%.

At the end of the month, private sector PMIs for December reflected a slight easing in private sector activity but no by a significant margin. The NBS Manufacturing PMI fell from 52.1 to 51.9, with the Non-Manufacturing PMI falling from 56.4 to 55.7.

Monetary Policy

The ECB did test support for the majors by downwardly revising growth forecasts for 2021. Additionally, the ECB increased the PEP by €500bn. The downward revision came as EU member states reintroduced containment measures as a result of the 2nd wave of the pandemic.

From the FED, while the FED revised upwards economic forecasts, the promise of holding bond purchases and interest rates at current levels left a dovish tone.

In December, the FED left interest rates unchanged.

The Market Movers

For the DAX: It was a mixed month for the auto sector in December. Volkswagen rallied by 7.63%, with Continental and Daimler rising by 5.94% and by 2.08% respectively. BMW bucked the trend, however, falling by 0.96%.

It was also a mixed month for the banks. Deutsche Bank slid by 4.18%, while Commerzbank ended the month up by 7.14%.

From the CAC, it was another bullish month for the banking sector. Credit Agricole rallied by 6.72%, with BNP Paribas and Soc Gen ending the month with gains of 0.30% and 1.98% respectively.

It was a particularly bullish month for the auto sector. Peugeot jumped by 13.21%, with Renault gaining 7.23%.

Supported by COVID-19 vaccine news, Air France-KLM consolidated November’s 77.94% rebound with a 2.40% gain. Airbus SE followed November’s 40.17% surge with a 2.34% rise in December.

On the VIX Index

It was back into the green for the VIX in December to mark a 4th monthly gain in 5-months. Partially reversing a 45.9% slump from November, the VIX rose by 10.60% to end the month at 22.75.

COVID-19 vaccines and U.S politics, coupled with assured support from the FED delivered support for riskier assets in the month.

A continued rise in new COVID-19 cases supported the upside in the VIX.

In November, NASDAQ rallied by 5.65%, with the Dow and S&P500 ending the month up by 3.27% and by 3.71% respectively.

VIX 010121 Monthly Chart

The Month Ahead

We can expect another busy month ahead on the Eurozone economic calendar. Having taken a backseat of late, economic data will begin to have a greater impact on the markets once more.

Key through the month will be January private sector PMIs, retail sales, unemployment, and business and consumer confidence.

The markets will be looking for a continued recovery across the private sector and a pickup in consumer spending.

Both business and consumer confidence will need to improve to deliver support.

From the U.S, nonfarm payrolls, service sector activity, and consumer confidence will be key areas of focus.

Out of China, trade data and private sector PMIs will also provide direction.

On the monetary policy front, the promise of continued support will also influence.

Away from the economic calendar, expect COVID-19 news and vaccination updates and chatter from Capitol Hill to also provide direction. The markets are expecting the Democrats to deliver more stimulus. There is also the Senate race to factor in.

European Equities: A Month in Review – November 2020

The Majors

It was a particularly bullish month for the European majors in November, with COVID-19 vaccine news delivering a much-needed bounce.

After 2 consecutive months in the red, the CAC40 surged by 20.12%. The DAX30 and the EuroStoxx600 weren’t far behind, with gains of 15.01% and 13.73% respectively. For the DAX30, November’s gains reversed losses from the year to move into positive territory year-to-date. The CAC40 and EuroStoxx600 still have some way to go in order to reverse losses from earlier in the year, however.

While the news of a COVID-19 vaccine drove demand for riskier assets, Joe Biden’s victory in the Presidential Election added support for riskier assets.

On the negative side, however, was a reintroduction of lockdown measures by member states including France and Germany.

Towards the end of the month, the COVID-19 numbers reflected the effect of the lockdown measures.

In France, the number of new COVID-19 cases and hospitalizations were in decline allowing the government to ease lockdown measures going into December.

On the geopolitical risk front, last-ditch Brexit negotiations failed to deliver a deal, which left the majors in the red at the end of the month.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a disappointing set of numbers for November.

Service sector activity contracted in France, Germany, and across the Eurozone as a result of a reintroduction of containment measures.

France’s services sector suffered the most, with the PMI tumbling from 46.5 to 38.0. With Germany’s Services PMI falling to 46.2, the Eurozone’s Services PMI fell from 46.9 to 41.3.

While Germany’s manufacturing sector avoided a contraction, sector activity in France contracted. The PMI fell from 51.3 to 49.1, dragging the Eurozone’s Composite PMI down from 50.0 to 45.1.

In spite of the disappointing numbers, hopes of a COVID-19 vaccine fuelled economic recovery fuelled muted the effect of the PMIs.

Other stats were mixed in the month.

Consumer and business sentiment weakened in October as a result of the 2nd wave of the pandemic and lockdown measures.

Germany’s ZEW Economic Sentiment Indicator fell from 52.3 to 32.8, with the Ifo Business Climate Index falling from 92.5 to 90.7.

Things were not much better on the consumer confidence front. The GfK Consumer Climate Indicator fell from -3.2 to -6.7.

For the Eurozone, consumer confidence also waned, with the Eurozone Consumer Confidence Index falling from -15.5 to -17.6.

On the positive front, however, were 3rd quarter GDP numbers for France, Germany, and the Eurozone. The respective economies had made progress in recovering from the 2nd quarter economic meltdown before November’s lockdown measures.

From the U.S

Labor market stats pointed to a stalling in the labor market recovery. Initial jobless claims inched up to 778k after having eased down to 709k in the 1st week of November.

While new COVID-19 cases surged across the U.S and a number of states reintroduced containment measures, COVID-19 vaccine news eased any market tensions in the month.

As a result of the jump in COVID-19 cases, consumer confidence softened in November. The CB Consumer Confidence Index fell from 101.4 to 96.1, with the Michigan Consumer Sentiment Index falling from 77.0 to 76.9.

On the positive, however, were private sector PMIs. Both the manufacturing and services sectors saw activity pick up in November.

In November, the Markit Manufacturing PMI rose from 53.4 to 56.7, with the Services PMI rising from 56.9 to 57.7.

The divergence from the Eurozone stemmed from a decision by the U.S administration to keep the economy running.

Monetary Policy

The ECB monetary policy meeting minutes, Economic Bulletin, and Financial Stability Review talked of doom and gloom.

From the minutes and other ECB reports and from ECB President Lagarde commentary, the markets are expecting further policy easing, however.

While the ECB minutes stated that there should be no commitments made, the 2nd wave COVID-19 pandemic is likely to force the ECB’s hands. It remains to be seen how far the ECB will go with a COVID-19 vaccine on the horizon.

From the FED, the FOMC meeting minutes also provided few surprises. Both central banks were focused on the effects of COVID-19 on their respective economies.

The respective minutes followed decisions by both to keep rates unchanged in the month.

The Market Movers

For the DAX: It was a bullish month for the auto sector in November. Daimler surged by 26.99%, with BMW and Continental jumping by 23.99% and by 24.73% respectively. Volkswagen trailed with a 12.52% gain in the month.

It was also a bullish month for the banks. Deutsche Bank rallied by 17.04%, with Commerzbank ending the month up by an impressive 28.8%.

From the CAC, it was a particularly bullish month for the banking sector. BNP Paribas surged by 43.95%, with Credit Agricole and Soc Gen ending the month with gains of 42.63% and 43.38% respectively.

It was also a bullish month for the auto sector. Peugeot rose by 28.06%, with Renault jumping by 56.94%.

Supported by COVID-19 vaccine news, however, it was Air France-KLM that impressed the most with a 77.94% rebound. Airbus SE also impressed, surging by 40.17%.

On the VIX Index

It was back into the red for the VIX in November, ending a run of 2 consecutive monthly gains. Reversing a 44.18% surge in October, the VIX tumbled by 45.90% to end the month at 20.57.

The downside for the VIX came as pharmas released impressive COVID-19 phase 3 clinical trial results. Talk of a vaccine being available by mid-December supported riskier assets, which sank the VIX.

In November, the Dow and NASDAQ rallied by 11.84% and by 11.80% respectively, with the S&P500 ending the month up by 10.75%.

VIX November Monthly Chart

The Month Ahead

We can expect another busy month ahead on the Eurozone economic calendar. Much of the economic data, however, will likely take a backseat in the month ahead.

We would expect COVID-19 vaccine updates and any progress towards a COVID-19 stimulus package on Capitol Hill to be key drivers.

On the geopolitical front, there’s also Brexit for the markets to consider. In late November, last-ditch talks failed to deliver an agreement. The two sides have just one month left until the end of the transition period.

Key stats that will draw interest, however, will include private sector PMIs for December, unemployment figures, and consumer and business sentiment numbers.

From the U.S, private sector PMIs, labor market numbers, and consumer confidence and spending will also influence.

There are also stats out of China that will need to continue reflecting China’s post-pandemic economic recovery.

European Equities: A Month in Review – October 2020

The Majors

It was another bearish month for the European majors in October, with COVID-19 and U.S politics weighing on risk sentiment.

A particularly bearish final 2-weeks of the month did the damage as EU member states reintroduced lockdown measures.

New COVID-19 cases surged by record levels across EU member states forcing governments to respond. The reintroduction of lockdown measures is expected to drag the Eurozone economy back into the red for the 4th quarter.

From the U.S, a failure to deliver a fiscal stimulus package ahead of the U.S Presidential Election added to the market angst in the month.

With the U.S Presidential Election in the 1st week of November, there was also some uncertainty over the likely outcome.

Trump’s unwillingness to concede in a closely fought race was also a concern in the run into Election Day.

The DAX30 slid by 9.44%, following a 1.43% decline in September. Things were not much better for the CAC40 and EuroStoxx600, which ended the month down by 4.36% and by 5.19% respectively. In September, the pair had fallen by 2.91% and by 1.48% respectively.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was another mixed bag for the month of October. While the manufacturing sector saw activity pick up, service sector activity contracted at a faster pace in October.

With the Eurozone reintroducing lockdown measures, things are likely to get worse for the services sector before there is any pickup in sector activity.

The Eurozone’s Service PMI fell from 48.0 to 46.2, with the composite PMI falling from 50.4 to 49.4.

Other stats were also mixed in the month.

Consumer and business sentiment weakened in October as a result of the 2nd wave of the pandemic, Brexit, and the U.S Presidential Election.

At the end of the month, German unemployment figures impressed. The impact on the EUR and the majors were modest, however, with labor market conditions expected to deteriorate.

GDP numbers for the 3rd quarter were also impressive, though expectations of a 4th quarter contraction muted the impact on the majors.

In the 3rd quarter, the Eurozone’s economy expanded by 12.7%, recovering from the 2nd quarter 11.8% contraction. Year-on-year, however, the economy shrank by 4.3%, following a 14.7% contraction in the 2nd quarter.

Germany’s economy expanded by 8.2% in the 3rd quarter, with France’s surging by 18.2%. Concerns over the economic outlook for the 4th quarter softened the impact of the stats, however.

While the GDP numbers were upbeat, consumer spending figures for September disappointed.

In France, consumer spending slumped by 5.1%, with retail sales falling by 2.2% in Germany. Both reported numbers that reversed August figures ahead of lockdown measures introduced in October and next week.

Prelim inflation figures for October continued to reflect deflationary pressures at the turn of the quarter. For the Eurozone, consumer prices fell by 0.3%, year-on-year, following a 0.3% decline in September. The annual core rate of inflation held steady at 0.2%, however.

From the U.S

Labor market conditions saw a modest improvement, with weekly jobless claims falling to sub-800k levels

Private sector PMI numbers were positive for October, according to prelim figures. The all-important Services PMI rose from 54.6 to 56.0, with the Manufacturing PMI rising from 53.2 to 53.3.

At the end of the month, 3rd quarter GDP numbers also impressed, with the U.S economy recovering from the 2nd quarter meltdown.

While the v-shaped economic rebound was affirmed, the impact was modest as a result of the jump in new COVID-19 cases. The threat of new containment measures tested market risk appetite late in the month.

This was also reflected in consumer sentiment figures, with the CB Consumer Confidence Index disappointing in October.

Monetary Policy

For the ECB, there were no major surprises, with the ECB holding monetary policy unchanged.

ECB President Lagarde did assure the markets of further easing in December, however, which left the EUR at sub-$1.17 levels.

Ahead of 3rd quarter GDP numbers on Friday, the ECB President had also noted that, while 3rd quarter GDP numbers will likely impress, the Eurozone economy would likely contract in the 4th quarter.

The comments muted the impact of the GDP numbers on the European majors on the final day of the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in October. Volkswagen slid by 9.05% to lead the way down. BMW and Daimler also struggled, falling by 4.93% and by 2.92% respectively. Continental saw a more modest 0.39% loss in the month.

It was a mixed month for the banks, however. Deutsche Bank rallied by 11.76%, while Commerzbank ended the month down by 3.53%.

From the CAC, it was a mixed month for the banking sector. Soc Gen rose by 2.83%, while BNP Paribas and Credit Agricole fell by 3.65% and by 2.94% respectively.

It was a bearish month for the auto sector, however. Peugeot fell by 0.45%, with Renault sliding by 4.24%.

Air France-KLM followed September’s 21.56% slump with a 5.13% loss, while Airbus SE rose by 0.84%.

On the VIX Index

The VIX surged by 44.18% in October, marking a 3rd monthly rise in 7-months. Following a 0.15% decline in September, the VIX ended the month at 38.02.

Across the U.S equity markets, it was a bearish month as Presidential Election jitters and a surge in new COVID-19 cases weighed in market risk appetite. The Dow slid by 4.61%, with the NASDAQ and the S&P500 ending the month down by 2.29% and by 2.77% respectively.

VIX 31/10/20 Monthly Chart

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

After yet more mixed private-sector numbers for October, the markets will be looking to assess the damage stemming from the 2nd wave of the COVID-19 pandemic

Expectations are for economic conditions to see a marked deterioration as a result of new lockdown measures.

With the Eurozone entering the winter months, updates on COVID-19 will remain a key driver.

A continued rise in new cases and further lockdown measures would likely weigh on consumer and business confidence.

Consumer spending and business investment would then take a hit, all of which would be negative for the majors.

Upside could come, however, should there be progress towards an effective COVID-19 vaccination.

On the geopolitical front, there’s never a dull moment. Both Brexit and the U.S Presidential Election will be front and center.

Brexit talks continued through October, with the EU eager to make progress following Boris Johnson’s decision to end negotiations. UK fisheries remained the stumbling block going into November, with mid-November considered the ultimate deadline for any agreement.

European Equities: A Month in Review – September 2020

The Majors

It was a relatively bearish end to the quarter for the European majors in September, with the downside coming off a bullish month of August.

A final week reversal left the majors in the red for the month. The DAX30 had been up by more than 2% before a downward trend kicked in from mid-month.

The DAX30 fell by 1.43%, partially reversing a 5.13% gain from August. Things were not much better for the CAC40 and EuroStoxx600, which ended the month down by 2.91% and by 1.48% respectively. In August, the CAC40 and EuroStoxx600 had risen by 3.42% and by 2.86% respectively.

September’s pullback left the CAC40 (-2.69%) in the red for the quarter. The DAX30 and EuroStoxx600 rose by 3.65% and by 0.21% respectively, however.

Mixed economic data once more tested market sentiment towards the global and Eurozone economic recovery.

Fresh spikes in new COVID-19 cases across the EU sounded the alarm bells as the summer came to an end. Concerns over the reintroduction of more stringent containment measures to curb the latest spike weighed.

Negative sentiment towards Brexit and the chances of both sides reaching an agreement added further pressure in the month.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a mixed bag for the month once more.

Following disappointing August PMIs, September’s prelim PMIs delivered mixed results.

While manufacturing sector activity picked up, service sector activity contracted at the end of the quarter. With the ECB looking for a consumer-driven economic recovery, the service sector PMIs were a concern…

The Eurozone’s Service PMI fell from 50.5 to 47.6, with the composite PMI falling from 51.9 to 50.1.

Other stats were also mixed in the month.

Consumer and business sentiment saw marginal improvements in September. By contrast, deflationary pressures raised concerns, pressuring the European majors in the month.

At the end of the month, unemployment and consumer spending figures impressed, though provided little support. The pickup in new COVID-19 cases and further evidence of deflationary pressures countered the upbeat numbers.

Prelim inflation figures for September pointed to a pickup in deflationary pressures at the end of the quarter.

While economic data from the Eurozone failed to impress, stats from China continued to support the optimistic economic outlook.

From the U.S

Weekly jobless claims failed to continue to slide, raising concerns that the U.S economic recovery had hit a speed bump.

Non-manufacturing PMI numbers for August and prelim service sector PMIs for September also pointed to slower growth in the sector.

In spite of this, nonfarm payrolls continued to add, with the U.S unemployment rate falling to 8.4% in August.

Other positives in the month included a jump in consumer confidence and solid ADP nonfarm figures ahead of September NFP numbers tomorrow.

While the stats were somewhat mixed, Trump’s targeting of Chinese companies and chip suppliers continued to test market risk appetite.

There was some reprieve late in the month, with the court’s ruling to temporarily block Trump’s attempted ban on TikTok.

On the final day of the month, the 1st presidential debate also drew plenty of market attention… Ultimately, a disruptive debate weighed heavily on riskier assets at the end of the month.

Monetary Policy

On the monetary policy front, the FED was in action. Lower for longer was the message, with Powell highlighting economic uncertainty stemming from COVID-19.

Projections showed that interest rates would sit at close to zero until 2023, which caught the markets off-guard, weighing on riskier assets. There was also a revised framework, though much of the revisions had been telegraphed well in advance.

Later in the month, there was much the same from the FED Chair, who delivered testimony on Capitol Hill.

For the ECB, there were no major surprises, with the ECB also talking of economic uncertainty.

A hot topic in the September ECB press conference was EUR appreciation. The ECB President was quick to point out that the ECB does not target exchange rates. Lagarde did note, however, that price stability would continue to be monitored. The comments followed on from concerns raised over a pickup in deflationary pressures.

The Market Movers

For the DAX: It was a mixed month for the auto sector in September. Daimler led the way once more, rallying by 7.54%. BMW and Continental also found support, with gains of 2.08% and 1.19% respectively, while Volkswagen fell by 1.04%.

It was also a bearish month for the banks, however. Deutsche Bank slid by 11.08%, with Commerzbank ended the month down by 13.78%.

Another bank scandal contributed to the demise of the banks in the month.

From the CAC, it was a particularly bearish month for the banking sector. Soc Gen slumped by 16.64% to lead the way down. BNP Paribas and Credit Agricole weren’t far behind, with losses of 15.26% and 13.04% respectively.

It was a mixed month for the auto sector, however. Peugeot rose by 7.86%, while Renault slid by 6.92%.

Air France-KLM stumbled by 21.56%, as a result of the spike in new COVID-19 cases, with Airbus SE falling by 9.83%.

On the VIX Index

The VIX slipped by just 0.15% in September to market a 4th monthly decline in 6-months. Partially reversing a 7.97% gain from August, the VIX ended the month at 26.37.

The VIX had seen 4 consecutive months in the green that had led to its recent high 85.47 in March before the downward trend began in April.

Across the U.S equity markets, it was a bearish month in spite of a visit to fresh record highs at the start of the month. The Dow and the S&P500 fell by 2.28% and by 3.92% in September, with NASDAQ sliding by 5.16%.

VIX 01/10/20 Monthly Chart

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

After yet more mixed private-sector numbers for September, the markets will be looking for private sector activity to pick up.

The key to any pickup will be a continued improvement in consumer and business confidence. While employment conditions have improved, the latest spikes in new COVID-19 cases ahead of the winter months is a concern. The COVID-19 numbers will influence as winter dawns on Europe.

A failure for economic data to reflect improving economic conditions will test market risk appetite at the turn of the quarter.

On the geopolitical front, there’s never a dull moment. Both Brexit and the U.S Presidential Election will be front and center.

Expect Trump to continue to target China over trade and the COVID-19 pandemic throughout the month that could test already frayed relations.

For the Pound, the EUR, and the European majors, the EU and the UK government will be looking for a last-minute agreement. Failure to reach an agreement in the month may well leave Britain without a deal, which would be market negative.

European Equities: A Month in Review – August 2020

The Majors

It was a bullish month for the European majors in August, though a bearish end of the month cut the gains from earlier on the month.

4 days in the red out of the last 5 left the majors with relatively modest gains for August.

The DAX30 gained 5.13%, following a 0.02% gain from July, with the CAC40 and EuroStoxx600 rising by 3.42% and by 2.86% respectively. The pair had fallen by 3.49% and by 2.98% respectively in the month prior.

There was plenty of action in the month, which ultimately provided the European majors with support.

While economic data influenced, geopolitics and fiscal and monetary policy were the key drivers in the month.

The German government announced extended fiscal support to combat the impact of the COVID-19 pandemic supporting the DAX30.

From France, the French government wasn’t far behind promising new measures in September to also support the economic recovery.

The measures from the respective governments muted the impact of fresh spikes in new COVID-19 cases across EU member states.

From the U.S, FED monetary policy pressured the European majors. Positive updates from the U.S and China trade talks added further support, however. China announced its willingness to stick to the terms of the phase 1 agreement, which eased tensions.

Tech was in the spotlight in the month once more, as Trump continued to target Chinese tech companies in the interest of national security.

All in all, however, the promise of more monetary support, unwavering fiscal support from member states, and talk of progress towards a COVID-19 vaccine were good enough.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a mixed bag for the month.

While July numbers impressed at the start of the month, with finalized PMIs revised upwards, August numbers were less impressive.

Private sector activity waned in August, according to the prelim numbers. The Eurozone’s composite slipped from 54.7 to 51.6.

Significantly, France saw its manufacturing sector contract in August. From an economic outlook perspective, the figures certainly questioned the market’s outlook on the v-shaped economic recovery.

Other stats were also mixed in the month.

While German business sentiment improved in August, consumer sentiment took a hit, delivering yet more uncertainty.

From France, consumer spending was also lackluster as consumer confidence held steady in August.

The stats supported the ECB’s uncertainty over what lies ahead from an economic recovery perspective.

Consumer confidence and spending remain key. While fiscal stimulus will support, consumers will need to go about their business to support the economy.

From the U.S

Weekly jobless claims were a test for the markets in the month. While claims were in decline early in the month, claims moved northwards in the 2nd half of the month. The figures suggested that the labor market recovery stalled mid-way through the 3rd quarter.

On the positive, was a further pickup in service sector activity and continued rise in nonfarm payrolls.

Of concern late in the month would have been an unexpected slide in consumer confidence in August, however.

Ultimately, it was yet another mixed set of numbers from the U.S, adding uncertainty to plague the markets at current levels.

Monetary Policy

On the monetary policy front, the FED was in action. A gloomy set of FOMC minutes weighed on riskier assets. The FED Chair and the FED’s revised monetary policy also weighed late in the month.

The promise of support for longer delivered monetary policy divergence favoring the EUR. A pickup in the EUR was an added negative for the European majors.

The Market Movers

For the DAX: It was a bullish month for the auto sector. Daimler led the way, rallying by 14.48%. BMW (+10.97%), Continental (+11.32%), and Volkswagen (+11.87%) also saw solid gains in the month.

It was also a bullish month for the banks. Deutsche Bank rose by 5.94%, with Commerzbank ended the month up by 11.82%.

From the CAC, it was a bullish month for the banking sector. BNP Paribas led the way, rising by 7.15%. Credit Agricole and Soc Gen saw more modest gains of 5.66% and 4.62% respectively.

It was also a bullish month for the auto sector. Peugeot rose by 5.35%, with Renault jumping by 18.84%.

Air France-KLM and Airbus SE also saw green, with the pair ending the month up by 8.23% and 11.01% respectively.

On the VIX Index

The VIX rose by 7.97% in August, delivering just a 2nd monthly gain in 5-months. Partially reversing a 19.62% slide from July, the VIX ended the month at 26.41.

The VIX had seen 4 consecutive months in the green before the downward trend began in April.

Across the U.S equity markets, it was yet another impressive run. The S&P500 and NASDAQ hit fresh record highs in the month, with the Dow also finding strong support.

For the month of August, the NASDAQ rallied by 9.59%, with the S&P500 and Dow seeing gains of 7.01% and 7.57% respectively.

VIX 01/09/20 Monthly Chart

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

After some mixed private-sector numbers for August, the markets will need some convincing in the month ahead.

An uptick in private sector activity, consumer and business confidence, and spending will be a must. Labor market conditions will also need to improve considerably to support any hope of a consumption-driven recovery.

A stronger EUR and any pick up in inflationary pressures would test consumption, however, putting pressure on the ECB. Prelim figures from the end of the month, however, point to a buildup of deflationary pressures suggesting the need of more support from the ECB.

Additionally, any failure by the ECB to pin back the EUR could make things a little testier in the month ahead.

From elsewhere, economic data from the U.S and China will also need to provide support.

On the geopolitical front, Brexit, U.S and China relations, and U.S politics will also influence.

We’re moving into the choppy time of the year and there are enough downside risks to test majors at current levels.

Technical Analysis Points to US Dollar Upside Potential – Part I

Article Highlights:

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

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

UNDERSTANDING GLOBAL CURRENCY “SHININESS”

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

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

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

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

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

REPEATING US DOLLAR CYCLES

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

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

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

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

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

 

Detailed 2020/2021 Price Forecasts for Gold & Silver

This research article may get a bit technical, so please excuse us in advance if we ramble on about Measured Moves, Fibonacci Price Amplitude Arcs, and other technical jargon.  Our goal is to share with you our expectations for Gold and Silver near the end of 2020 and out into early 2021.

ARCS, MEASURES & THE US DOLLAR

Our first observation to share with you today is the potential for the  “Measured Price Moves” in Gold and Silver to continue.  We’ve seen near-perfect price advances over the past 8+ months relating to these Measured Moves.  In Gold, the Measured Move equates to about $263.20.  In Silver, the measured move equated to about $5.40.

Recently, both Gold and Silver rallied beyond the projected Measured Move level, for Gold the level was $1,945 and for Silver the level was $27.50.  The extreme breakout in Gold and Silver pushed prices well above these levels and into extreme overbought levels.  This big move in metals was propelled by the decline in the US Dollar as well.  When the US Dollar declines, metals tend to move higher.

Additionally, we believe the decline in the US Dollar was partially related to the uncertainty related to geopolitical events and US policy events over the past few weeks.  The US government leads the world, in a lot of way, in terms of Congress and Fed policies and capital controls.  Uncertainty related to future expectations could cause the US Dollar and metals to move dramatically.

We also want to highlight the Fibonacci Price Amplitude Arcs on the following Gold and Silver charts (the Arcs and Circles).  Our research team believes the current price moves indicate that these upside Measured Moves in Gold and Silver are targeting the Fibonacci Price Amplitude Arc target levels related to price range expansion.  The Gold chart, below, shows how the price of Gold has move to and through each successive Fibonacci Price Amplitude level – recently clearing the 2.0x Fibonacci Price Amplitude Arc.

It is our belief that Gold will initiate another upside measured move, quite likely in correlation with a weaker US Dollar, that will target the $2,160 level next.  After that level is reached, a brief pause in price will happen before another upside measured move will target the $2,400 level.  This upside move is likely to happen before the end of January 2021.

Silver has also moved in a series of Measured Price Moves that correlate with Fibonacci Price Amplitude Arcs.  The current Measured Move level, near $27.50, was reached on August 6, 2020.  In fact, Silver rallied to a peak level of $29.91 the next day before peaking, rotating downward (retracing), and moving lower to close at $27.54 (almost exactly at our Measured Move Level).

When we add the Fibonacci Price Amplitude Arc analysis to these Measured Move structures, we quickly come to the conclusion that support near $27.50 should prompt another upside Measure Move targeting the $32.50 level.  Beyond that, we can clearly see targets near $37.50 and $42.50.  We do believe brief periods of congestion will take place throughout these upside Measured Moves – so pay attention to how price reacts near these targeted levels.  Additionally, pay attention to any future price weakness in the US Dollar as that will relate to the speed and volatility of the upside price moves in Gold and Silver.

GOLD-TO-SILVER RATIO PREDICTIONS

Our researchers posted the chart below many months ago related to the peak in the Gold-to-Silver ratio near March 19, 2020.  At that time, we suggested that a similar type of downside Pennant/Flag formation would setup, prompting a big breakdown in the extremely high Gold-to-Silver price ration.

The Gold-to-Silver ratio has recently moved from peak levels, near 125, to 73.1.  This downward ratio collapse is the result of the incredible upside price move in Silver recently.  Historically, this Gold-to-Silver price ratio should target levels near 55 (or lower) as Silver rallies to comparable price levels to Gold.  In 2010~2011, the Gold-to-Silver ratio fell to levels near 31.  This happened when Gold rallied to near $2,000 and Silver rallied to near $50.  Currently, Gold is trading just below the $2,000 level and Silver is trading near $27.50.  This suggests that Silver still has another $24+ of rally waiting to explode higher if the fear and uncertainty expectations are similar to 2010~2011.

Should Gold rally to $2,400 or higher, there is a very strong possibility that Silver could rally above $60 per ounce while Gold continues to move to near all-time highs.  In short, we believe this move higher in metals will likely continue as we head into the US Presidential Election and post-election transition.

From a trader’s perspective, the upside price trend, and the bigger downside price move setting up in November 2020 Presidential election cycle, presents very real opportunity for huge gains if you know how to time these moves and prepare for the risks.  Right now, this market and the profits therein are fantastic opportunities for skilled technical traders.  As we suggested throughout 2018 and 2019, 2020 and 2021 are going to be incredible opportunities for skilled technical traders.  This is just getting started, folks.  Pay attention and avoid unnecessary risks.

Isn’t it time you learned how I and my research team can help you find and execute better trades?  Our incredible technical analysis tools have just shown you what to expect 6+ months into the future.  Do you want to learn how to profit from these huge moves?  Sign up for my Active ETF Swing Trade Signals today! If you have a buy-and-hold account and are looking for long-term technical signals for when to buy and sell equities, bonds, or cash, be sure to subscribe to my Passive Long-Term ETF Investing Signals.

Stay healthy and rest easy at night by staying informed through our services – sign up today!

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

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

 

European Equities: A Month in Review – July 2020

The Majors

It was a mixed month for the European majors, with a final week sell-off reversing gains from earlier in the month.

The DAX30 ended the month up by just 0.02%, while the CAC40 and EuroStoxx600 fell by 3.49% and by 2.98% respectively.

Disappointing economic data from the Eurozone and the U.S, together with a mixed bag on the earnings front weighed late in the month.

Away from the economic calendar, U.S – China tensions and a 2nd wave of the COVID-19 pandemic added to the market angst.

For the European majors, EU member state agreement on the structure of the COVID-19 Recovery Fund had provided some support.

Coupled with news of progress towards a COVID-19 vaccine and positive economic data, the DAX30 had been up by as much as 7% before falling back to sub-13,000 levels.

The Stats

It was a busy month on the Eurozone economic calendar. July’s prelim private sector PMIs and 2nd quarter GDP number were the headline stats of the month.

While June had delivered a less gloomy picture, July delivered a mixed set of stats for the markets to consider.

In the early part of the month, economic data from Germany continued to deliver positive numbers, with factory orders and industrial production seeing further upside.

Mid-month prelim July private sector PMIs from France, Germany, and the Eurozone had also given the majors a boost.

The Eurozone’s Composite PMI rose from 48.5 to 54.8, according to prelim figures.

Late in the month, however, 2nd quarter GDP numbers for France, Germany, and the Eurozone weighed on the majors.

Germany’s economy contracted by 10.10%, France’s by 13.80%, and the Eurozone’s by 12.10% in the quarter.

From the U.S

While nonfarm payrolls, the weekly jobless claims, and private sector PMI numbers had provided support early in the month, it was the weekly jobless claims, consumer confidence, and 2nd quarter GDP numbers that weighed late in the month.

2 consecutive weekly jobless claims increases and a 32.9% contraction in the U.S economy weighed on risk appetite at the month-end.

Consumer confidence also weakened in July as the U.S struggled with a 2nd wave of the COVID-19 pandemic.

Geopolitics and a failure by the U.S government to pass through the 2nd COVID-19 stimulus package was also market negative.

Monetary Policy

On the monetary policy front, there were no surprises as the ECB left monetary policy unchanged. There had been reports of discord amongst members ahead of the meeting.

The FED also left monetary policy unchanged, while assuring the markets of continued and unwavering support.

The Market Movers

For the DAX: It was a bearish month for the auto sector. Continental and Volkswagen slid by 6.49% and by 7.78% respectively to lead the way down. BMW and Daimler saw more modest losses of 4.14% and 2.64% respectively.

It was a mixed month for the banks, however. Deutsche Bank slid by 10.51%, while Commerzbank ended the month up by 9.63%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas and Credit Agricole fell by 3.53% and by 3.56% respectively, while Soc Gen slid by 12.30%.

It was also a bearish month for the auto sector. Peugeot fell by 5.80%, with Renault tumbling by 11.16%

Air France-KLM and Airbus SE also saw red, with the pair seeing losses of 13.49% and 2.38% respectively.

Corporate earnings contributed to the moves.

On the VIX Index

The VIX slid by 19.62% in July, delivering a 3rd month in the red out of 4. Reversing a 10.61% rise in June, the VIX ended the month at 24.46.

The VIX had seen 4 consecutive months in the green before the downward trend began in April.

Across the U.S equity markets, the S&P500 rose by 5.51%, with the Dow and NASDAQ gaining 2.38% and 6.82% respectively.

The FED and bank and tech stock earnings provided support amidst a rising number of new COVID-19 cases in the month.

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

An upward trend in the private sector PMIs through to August would need to continue to ease concerns of a further slowdown in the recovery.

The markets would need to continue to see a further pickup in both business and consumer confidence to support consumption.

Consumers would need to see improved labor market conditions, however, to fuel consumption and a service sector-driven economic recovery.

On the monetary policy front, expect the ECB to continue to assure the markets of further support.

From elsewhere, we continue to expect stats from the U.S and China to also garner plenty of attention and have plenty of influence.

Geopolitics and COVID-19 will also remain in focus. In July, Trump had looked to distract U.S voters, which led to a diplomatic spat with China. More of the same could be on the cards in the coming month.

On the Presidential Election front, Trump remains behind in the polls, which suggests more spin and distraction. In the final week of July, Trump had even tweeted a desire to delay the Presidential Election…

Precious Metals Fire Warning Shot Across The Bow – Part II

This second part of our multi-part article researching the massive upside price move in Silver recently should cause skilled technical traders to begin sweating a bit.  In our opinion, nothing moves metals more than fear and a move like this in Silver, recently, is a very clear indication that global traders fear the current global economic ability to sustain market valuation levels in the face of bigger and more sustained economic and COVID-19 virus crisis events.

WILL THE NEXT SHOT BE A DIRECT HIT?

A series of potentially destructive economic events are lining up over the next 6 to 12+ months and they all relate to the efficiency of the economic recovery many traders have banked their long positions on.  Will the COVID-19 virus subside before the end of 2020?  Will the US consumers/workers resume their ability to earn incomes?  Will the US and global businesses survive the contraction event taking place throughout the globe?  Will local city, state, and other entities survive the contraction in tax revenues, fees, and extended costs related to this massive destructive economic event?  Will the stock market continue to rally in the face of all of these issues and what other “unknowns” are about to befall us?

The reality of the situation is that Precious Metals have already fired a massive warning shot across our Bow and skilled technical traders need to start paying attention.  Precious Metals don’t move higher by 12% to 15% like Silver just did for no reason at all.  A massive new level of fear must have hit causing global traders to push Silver prices above $23 recently.  Silver, the “other precious metal” has been stalled below $19 for many months – even while Gold pushed well above the $1750 level and higher.  This big breakout in Silver is nothing more than a phenomenal warning for all traders and investors – BE WARNED: RISKS ARE SKYROCKETING HIGHER.

We want to highlight a few of our recent research posts to help you better understand what is happening with precious metals and what to expect in the future…

September 24, 2019: IS SILVER ABOUT TO BECOME THE SUPER-HERO OF PRECIOUS METALS?

May 29, 2020: METALS NEARING CRITICAL MOMENTUM FOR NEW PARABOLIC RALLY

July 13, 2020: GOLD & SILVER MEASURED MOVES

SILVER DAILY CHART

This Daily Silver chart highlights the series of “measured moves” our research team wrote about on July 13, 2020.  These $5.40 price advances seem to happen with some degree of regularity and we believe they will continue until an upside parabolic break out of this range takes place.  That means when an upside move extends beyond the $5.40 measured move level and price attempt to move dramatically higher, then the continuation of these measured moves may be over.

Ultimately, our earlier research into technical patterns in Silver suggests a $25.50 to $26 upside price target. Yet, broader market research suggests a move above $75 to $85 in Silver ($3750 to $4995+ in Gold) is not out of the question.  What would it take for Silver to rally above $70 per ounce you may ask?  Our research team believes a broader economic, credit, and consumer event would likely have to take place for Precious Metals to rally to these levels.  Fear drives a lot of price action in metals and when investors fear valuation levels or future expectations, they often hedge their portfolios by investing in Precious Metals.  When a big move happens, like what we’ve just seen in Silver, we interpret it as “fear has materialized”.  What are traders so fearful about?  They are likely fearful of the current high price levels in the US stock market and future expectations related to consumers, trade, credit/debt, and other factors of the global economy.

SPY MONTHLY CHART

We’ve been writing about the potential for a series of economic events to unfold over the next 6+ months where consumers, cities/states, and businesses simply collapse because of the lack of earning capabilities associated with the COVID-19 virus event.  Many years ago, we wrote that “isolated economic events that disrupt smaller segments of the markets are more manageable than prolonged destructive events”. We believe the current COVID-19 virus event will transition into a prolonged economic event where a 20% to 30%+ extended contraction in revenues for many businesses, consumers, and city/state/federal governments could produce massive future risks that are still somewhat “unknown”.

We’ve also written about Super-Cycle events and warned all of our followers in August 2019 to prepare for a massively destructive Super-Cycle event to take place late in 2019 and early in 2020.  We authored this research post in July 2019 warning all of our followers of the pending collapse in the US and global markets related to Super-Cycles and other technical patterns.  What we expect to happen now is an extension of the crisis event until a bottom is established.

This SPY Monthly chart highlights some of the research our team recently completed and also suggests that a broader market failure (downside price rotation) event may take place over the next 3+ months (prior to the US Presidential Elections), where new deeper lows may be established.  The GREEN ARCING LINE on this chart represents our proprietary Fibonacci Price Amplitude Arcs, an adaptation to traditional Fibonacci Price Theory, which suggests price levels are already 7% to 9% above major resistance.  If the US stock market falters near current levels and begins to move broadly lower, we should expect a series of moderately violent downside price moves to target the $208 level on the SPY while Gold and Silver extend their upside price advance.  Fear will drive metals higher while the potential downside price event in the SPY takes place.

SILVER WEEKLY CHART

Our next upside price targets in Silver are near $28 (a full 24%+ higher than current price levels).  These measured price moves act as a stair-step process for the price to consolidate/base, begin a moderate upside move, peak, then repeat the process all over again.  Beyond the $28 price target level, the next measured move target is $32.50.  If Silver reaches the $28 or $32.50 level, you can assume fear is very present in the global markets and Gold should already be trading above $2100 (or higher).  The combination of Gold and Silver moving higher in unison should be a very clear warning that global traders don’t trust the current valuation levels of the global stock markets.

This Weekly Gold chart highlights the next measured move targets for Gold.  Although Gold has yet to reach the current measured move target, we don’t believe it will take more than 3 to 4 weeks for Gold to print a price level above $1950.  After this big move in Silver, we are moderately confident that Gold will continue to rally as well.  The bigger question for Gold is what happens after $2000?  Will it rally to $3750 as we predict?  Will it rally to $5500 or higher?

Ultimately, the upside price peak levels in Gold will relate to the extent of the fear and uncertainty that is present as a result of the continued fallout from the COVID-19 virus event and the series of revenue/earnings-based contractions we believe are just below the surface right now.  Over the next 6+ months, we believe a series of new crisis events till unfold which will highlight just how destructive the COVID-19 crisis has been.  When consumers and businesses lose 25% to 35% of their earning capacity (or more) and more than 15% of the total US population has been displaced from work/business because of these economic shutdowns – one has to expect some type of economic contraction to take place.  Honestly, it would be foolish to think the US Fed can offset 150+ million US consumers spending activities, home buying, rentals, loan payments, and other activities.  25% of the normal US GDP levels represent over $5.5 trillion – that’s a big hit to the markets if it turns out to be real.

GOLD WEEKLY CHART

We urge all of our followers to stay very cautious and to properly position your portfolios to address the risks that we feel are pending.  Yes, the US stock market has rallied substantially recently, but if you were paying attention to Precious Metals and what was really happening to US businesses and US consumers, you’ll suddenly realize the US Fed and foreign investors piling into technology stocks is not the same things as a healthy and robust US economy (like we had in 2017 and 2018).

The ultimate peak in the US economy took place in January/February 2018.  After that peak, our proprietary price modeling systems continue to suggest the US stock market and economy has been contracting.  The longer-term Super-Cycles suggest the real bottom in the markets won’t happen until somewhere between 2021 and 2023.  We have a long way to go before we see where this ultimate bottom is really going to set up.

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

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

 

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

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

 

Gold During Covid-19 Pandemic and Beyond

What a crazy six months! Let’s look at the chart below. As you can see, over the first half of the year, gold gained more than 16 percent, rising from $1,515 at the end of December 2019 to $1,762 at the end of June 2020.

The beginning of the year was, as usual, positive for the gold prices. However, gold did not rally in January as it did in just like in the previous years. Instead, it shot up in February amid mounting worries about the COVID-19 pandemic. After a short correction at the end of the month, probably due to the initial stock market crash, the price of gold jumped to $1,684 at the beginning of March, in the aftermath of the emergency FOMC meeting, when the Fed cut the federal funds rate by 50 basis points.

Then, when the most acute part of the global stock market happened and investors were selling everything to raise cash, the price of gold plunged below $1,500, bottoming out on March 19. But the rapid spread of the coronavirus, radically accommodative response of the Fed (including slashing interest rates to almost zero) and the implementation of economic lockdowns pushed gold prices to above $1,740 in mid-April (for the first time since late 2012). There was a sideways trend in the gold market with a yellow metal trading between $1,680 and $1,750 until the end of June, when the price of gold jumped above the ceiling.

How can we judge the gold’s performance during the first half of the year and the global epidemic in particular? Well, on the one hand, gold bulls might be a bit disappointed. After all, one could expect that the most impactful pandemic since the Spanish flu of 1918, together with the unprecedented stock market crash, the deepest recession since the Great Depression, and the reintroduction of the ZIRP and quantitative easing would push gold prices much higher. The gain of 16 percent is great, but in the first half of 2016 gold gained even more.

On the other hand, gold performed much better than many other assets. Although its price declined in March, the drop was relatively mild compared to the stock market crash (see the chart below) or the collapse in oil prices. Gold is actually one of the biggest beneficiary of the coronavirus crisis, confirming its role as a safe-haven asset and portfolio diversifier.

We have to also remember about three important features of the recent crisis, which limited gains in the gold market. First, there was a fire sale to get cash – and during panic no assets are really safe. In the aftermath of the Lehman Brothers’ bankruptcy, the price of gold also declined initially. Moreover, in March 2020, the U.S. dollar appreciated significantly, which put downward pressure on the gold prices, as the chart below shows.

Second, the coronavirus recession was very deep, but also very short. It means that investors started quickly to expect a bottom and the following rebound, which weakened the safe-haven demand for gold. In other words, the coronavirus crisis was more like a natural disaster rather than financial crisis or recession triggered by fundamental factors (although the global economy slowed down even before the pandemic and the U.S. repo crisis showed that the American financial system is quite fragile).

Third, the Fed’s response was quick and very aggressive, much more radical than in the aftermath of the Great Recession. The U.S. central bank’s decisive actions and implementation of many liquidity measures and unconventional monetary policies (as well as Treasury and Congress’ actions) managed to quickly restore confidence in the marketplace, spurring the appetite for risky assets rather than safe havens.

OK. But what’s next for the gold market? Well, the key to this question might lie in the chart below. As one can see, there has been a strong negative correlation between the gold prices and real interest rates. In March, the panic was so great that investors were selling even Treasuries, which pushed the bond yields higher, and send the price of the yellow metal down.

Now, the real interest rates are at very low, negative level, which should support the gold prices. The record low was -0.87 percent, so there is still some potential for going negative, especially given the ultra dovish Fed’s monetary policy.

However, with yields at such low level, there might be limited room for further downward move. So, unless we see a high inflation (or a significant second wave of coronavirus infections, or a softening of the greenback, for example, because of the sovereign debt crisis), we won’t expect a significant rally in gold prices (or there might be ups and downs on the way). Actually, if the real interest rates rebound somewhat, the yellow metal may struggle.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

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

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

The Virus That Sent Crude Oil Prices on a Jolly Ride

COVID-19 changed global oil markets in Q1 and Q2 of 2020, sending crude oil prices on a jolly ride and disrupting global energy supply chains and oil traders.

Crude Oil began 2020 trading higher than $60 a barrel. Then came in COVID-19 the worst pandemic known to man, shutting down global demand for energy that the price of crude plunged below $0 for the first time in history. In Oil futures, contracts also went parabolic in late April due to a lack of available storage tanks to store crude oil thereby depressing the price of crude oil.

Though within several days crude oil prices rebounded, ending the first half of the year at $40 per barrel.

Crude Oil prices have rebounded in recent weeks with drivers returning to roads and suppliers curtailing production.

Behind the recent surge is the return of energy demand among major economies, as to loosen economic restriction and record production cuts by OPEC, allies including Russia.

As a result of these, there were many oil futures contracts outstanding to have oil delivered several months to the future date a rare market condition that has calmed oil traders ‘anxiety after April’s chaos.

America’s crude oil production also stuttered as energy companies were forced to close their productive wells, trend oil traders say could most certainly alter the shale boom that made the United States the world’s largest producer of gas and oil.

“However, rising cases of COVID-19 in some US states could keep oil prices in check and will most definitely temporary overly zealous bullish ambitions.

“From a trader’s perspective, there is always a concern when the data is too good; especially beneath the fog of the current Covid-19 headlines that suggest de-risking playbooks remain in play ahead of the US long weekend said Stephen Innes, Chief Global Market Strategist at AxiCorp.

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

 

European Equities: A Month in Review – June 2020

The Majors

It was another bullish month for the European majors in June, as the markets continued to recover from The Meltdown.

The DAX30 and CAC40 rallied by 6.25% and 5.12% respectively to lead the way, with the EuroStoxx600 gaining 2.85%.

Themes throughout the month included the reopening of economies across the EU and the U.S and stimulus…

Central banks and governments stepped in to provide much-needed support, as the markets digested post lockdown economic indicators.

Late in the month, a threat of U.S tariffs on EU goods and a pause in the easing of lockdown measures tested risk sentiment.

In the U.S, news of U.S states hitting pause on reopening questioned the more optimistic outlook on the economic recovery.

It was not enough to sink the markets, however. Continued support from the FED and other central banks propped up the markets late in the month.

While June’s gains may seem minor, the 2nd quarter rebound was more impressive. The DAX30 rallied by 23.9%, with the CAC40 and EuroStoxx600 rising by 12.28% and 12.59% respectively.

Optimism coupled with monetary and fiscal policy support and the easing of lockdown measures fuelled the gains in the quarter.

The Stats

It was a busy month on the Eurozone economic calendar. June’s prelim private sector PMIs were the headline stats of the month, which led to a less gloomy economic outlook for the Eurozone.

Following an uptick in May, further improvement in June was key to the upside in the European majors.

Supporting the uptick in service sector activity was a pickup in both business and consumer confidence. For the economic recovery, consumer confidence and spending remained key to supporting a service sector-driven recovery.

From the U.S

Private sector PMIs reflected a similar trend, with both the manufacturing and services sectors seeing a slower pace of contraction. This was coupled with a rebound in durable and core durable goods orders.

While retail sales also bounced back from April’s, there was evidence, however, that labor market conditions would likely take longer to recover.

In spite of May’s nonfarm payrolls impressing at the start of the month, the weekly jobless claims continued to report high numbers.

From an economic and service sector perspective, however, improving consumer confidence was key. At the end of the month, June’s CB Consumer Confidence Index jumped from 85.9 to 98.1.

Monetary and Fiscal Policy

In the June monetary policy decision, the ECB left interest rate and deposit rates unchanged, which was in line with market expectations. The ECB did crank up the size of the emergency purchasing program of bonds to €1.35tn and extended it by an additional 6-months to 30th June 2021.

Outside of the monthly policy meeting, the ECB also delivered a Eurosystem repo facility for central banks outside of the Eurozone. The move provided further support to the European majors late in the month.

Perhaps the FED’s move to begin acquiring individual corporate bonds was most impressive in June. Mid-month, the FED announced that it would purchase up to $250bn in individual corporate bonds. Named the Secondary Market Corporate Credit Facility, eligible bonds had to be rated investment grade as at March 22nd, 2020.

The Market Movers

For the DAX: It was another mixed month for the auto sector. Continental fell by 2.17% to buck the trend in the month. BMW and Daimler rallied by 7.47% and by 7.67% respectively, while Volkswagen rose by 2.16%.

It was another bullish month for the banks. Deutsche Bank rallied by 11.74%, with Commerzbank up by 13.31%.

Deutsche Lufthansa rose by a more modest 7.79%.

From the CAC, it was a bullish month for the banking sector. BNP Paribas and Credit Agricole rose by 9.64% and by 7.80% respectively. Soc Gen rallied by 11.87%, however, to lead the way.

It was also a bullish month for the auto sector. Peugeot and Renault rallied by 13.04% and by 11.78% respectively.

Air France-KLM and Airbus SE had a mixed month. While Air France-KLM fell by 0.74%, Airbus SE rallied by 12.03%.

On the VIX Index

In June, COVID-19 and geopolitics provided some upside in the VIX following the pullback in May.

The VIX rose by 10.61% in June to bring to an end 2 consecutive months in the red. Partially reversing a 19.44% slide from May, the VIX ended the month at 30.43.

The VIX had seen 4 consecutive months in the green before the reversal began in April.

Across the U.S equity markets, the S&P500 rose by 1.84%, with the Dow and NASDAQ gaining 1.69% and 5.99% respectively.

FED support and plenty of fiscal stimulus delivered the upside. Late in the month, U.S states began hitting pause on reopening as new COVID-19 cases began to spike.

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

An upward trend in the private sector PMIs through to July would need to continue for the markets to find a further upside.

The markets would also need to see a further pickup in both business and consumer confidence to support consumption.

Consumers would need to see improved labor market conditions to fuel consumption and a service sector-driven economic recovery.

On the monetary policy front, the ECB will need to continue to assure the markets of further support. Brussels and EU member states will also need to be on the same page vis-à-vis distribution of funds to support COVID-19 stricken economies.

From elsewhere, we continue to expect stats from the U.S and China to also garner plenty of attention.

Geopolitics and COVID-19 will also remain in focus. In June, Trump looked to distract U.S voters, by threatening the EU with tariffs. There had also been the talk of the U.S – China trade agreement being “over”.

With Trump on the back foot, election wise, expect more of the same if not more in the month ahead. Politically, the U.S President couldn’t have got things more wrong in June. Racism also took center stage, with protests and riots gripping the U.S following the unlawful killing of Floyd George.

If that’s not enough to keep the markets busy, it’s also corporate earnings season…

Gold Price Forecast – A June Top Followed by A July Drop

Several weeks ago, I noted that gold was repeating its 2016 and 2018 consolidation patterns. In line with our forecast, gold reached $1796.10 on Wednesday, and an interim top is becoming likely. Next, we are looking for a breakdown in July, followed by the next great buying opportunity.

As a technician, I am continually on the lookout for recurring or repeating patterns. In April, I noticed gold was setting up for a repeat of the 2016/2018 consolidations. Meaning, as long as gold stays below $1800, then a decline back towards $1500 is likely.

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Gold Price Forecast

Typically, intermediate consolidations last anywhere from three and four months. If prices peak around $1800, this is what I will expect over the next several weeks.

1) A breakdown below $1660 in the last half of July.

2) A bounce off the 200-day MA and failed attempt to recapture $1660 – $1670.

3) A final decline towards $1500 and the next great buying opportunity.

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Gold Big Picture

Longer-term, I am are very bullish on gold. The above forecast dovetails nicely with our larger 10-year pattern. To maintain symmetry (on the right side), gold should consolidate between $1500 and $1800 into 2021 before breaking decisively above $2000. Ultimately, I think gold could reach $8,000 – $10,000 later this decade.

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Conclusion

Fundamentally the case for gold has never been better; prices are in a bull market. However, as volatility increases, attempting to time each swing will become increasingly more difficult. One mistake could cripple your trading account. Consequently, I shifted to a long-term accumulation strategy aimed to reduce stress and improve long-term gains.

Our Gold Cycle Indicator is at 440 and within maximum topping. A cycle peak is becoming likely.

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AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

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

 

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

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

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

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

NASDAQ MONTHLY CHARTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

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

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

Gold, Silver, Miners and USD Video Analysis 19.06.20

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

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

European Equities: A Month in Review – May 2020

The Majors

It was a bullish month for the European majors in May. The DAX30 rallied by 6.68% to lead the way, with the CAC30 and EuroStoxx600 gaining 5.64% and 3.00% respectively.

Through the early part of the month, economic data and lockdown measures had weighed on the majors. There was also disappointment over the COVID-19 aid package and rising tensions between the U.S and China.

Sentiment shifted, however. The DAX30 reversed a 3.65% loss from the 1st half of the month.

Economic data, an easing in lockdown measures, and progress towards a COVID-19 vaccine delivered the rebound in the 2nd half of the month.

While member states eased lockdown measures through May, a downward trend in new coronavirus cases continued until a marginal rise at the end of the month.

The trend allowed governments to announce plans to remove border controls, which drove demand for travel and tourism stocks.

Banks were also on the move as hopes of a pickup in economic activity provided support.

In the final week of the month, the EU announced a €750bn recovery fund that also gave the majors a boost. For the European majors, the lion’s share of the gains came from the final week. The recovery fund will not only support the economic recovery but also pour cold water on any doubters of the EU project that had come into question…

The Stats

It was a busy month on the Eurozone economic calendar. While the numbers continued to reflect a dire economic environment, the stats did suggest that the economies had seen the worst in April…

Key stats in the month included April’s final and May’s prelim private sector PMIs and business and consumer confidence figures.

The Eurozone’s composite PMI increase from 13.6 to 30.5 in May, according to prelim figures.

According to the prelim May survey:

  • The Composite Output Index rose from 13.6 to a 3-month high 30.5.
  • Service and manufacturing sector activity hit 3-month and 2-month highs respectively.
  • While service sector activity contracted at a slower pace, it was still the 3rd steepest decline on record. Social distancing and lockdown measures continued to weigh on businesses including hotels, restaurants, and travel tourism.
  • Jobs continued to be cut at an unprecedented rate, with both sectors contributing.
  • Inflows of new business fell to the 3rd greatest extent ever recorded. In spite of this, the smallest decline in new business in 3 months suggested that the downturn had bottomed out.

The key take away was that April had been the bottom and economic activity should pick up as economies reopen.

Consumer and business confidence improved, as a result, supported by the easing of lockdown measures. There was no major rebound, however, as labor market conditions remained a concern across member states.

The ZEW Economic Sentiment Index for the Eurozone jumped from 25.2 to 46.0 in May. By contrast, the flash consumer confidence index saw a more modest increase in May, rising from -22.0 to -18.8.

While the markets were able to brush aside particularly dire GDP numbers, they are also worth highlighting.

The German economy contracted by 2.2% in the 1st quarter, with the Eurozone economy contracting by 3.8%, quarter-on-quarter.

From the U.S

While there was plenty of influence from the private sector PMIs, it was labor market numbers that drew the greatest attention.

Unprecedented increases in weekly jobless claims weighed on risk appetite early in the month. A downward trend late in the month provided support, however, in spite of claims continuing to hit the 2m mark…

Monetary and Fiscal Policy

In April we had seen the market’s disappointment as EU member states came up short with a €540bn COVID-19 Bailout Fund.

It was a different story in May, however, with the €750bn beating market expectations… Combined with the EU Budget also announced in the final week that delivered in excess of €2trn to support the economic recovery.

More than 60% of the total €820 Recovery Fund would be made available as grants, with the remainder available as repayable loans.

On the monetary policy front, there was no monetary policy decision within the month of May. The ECB did release the financial stability review and economic bulletin, however.

Both continued to paint a gloomy picture of the economic outlook, with ECB Lagarde pointing out that the economic meltdown was likely to be closer to the ECB’s worst-case scenario…

The Market Movers

For the DAX: It was a mixed month for the auto sector. Continental rallied by 15.47% to lead the way, with and Volkswagen and Daimler rising by 4.13% and by 6.50% respectively. BMW bucked the trend, however, with a 1.81% loss.

It was also another bullish month for the banks. Deutsche Bank rallied by 12.13% following a 16.35% jump from April, while Commerzbank saw a more modest 3.76% gain.

Deutsche Lufthansa managed to reverse April’s 4.66% loss, with a 14.55% gain. A 17.13% rally in the final week delivered the upside for the month.

From the CAC, it was another mixed month for the banking sector. BNP Paribas and Credit Agricole rose by 12.52% and by 7.42% respectively. Soc Gen bucked the trend for a 2nd month with a 7.22% loss.

It was also a mixed month for the auto sector in May. Peugeot fell by 1.99%, while Renault rallied by 11.54%. A 17.17% surge in the final week delivered the upside, which came off the back of plans for Nissan and Renault to strengthen ties.

Air France-KLM and Airbus SE saw red for a 2nd month, however, with losses of 12.57% and 2.04% respectively.

On the VIX Index

In May, market fear continued to melt away, with the VIX falling by 19.44%. Following on from a 36.22% slide in April, the VIX ended the month at 27.5. The VIX had seen 4 consecutive months in the green before the reversal began in April.

After April’s best month since the 1980s, it was a relatively bullish month for the U.S equity markets in May. The S&P500 and Dow saw gains of 4.53% and 4.26% respectively, with the NASDAQ rallying by 6.75%.

For the NASDAQ the 6.75% gain completed the current year recovery, with the index up 5.76% year-to-date. The Dow and S&P500 still have some way to go, however, with the pair down by 11.06% and by 5.77% respectively.

Through May, the majors found support from the continued easing of lockdown measures. It wasn’t plain sailing, however, with geopolitics and some quite dire economic data testing the markets in the month.

The S&P500 managed to recover a 3% loss from earlier in the month to close out the month in the green.

For the VIX, while the easing of lockdown measures weighed, the sheer number of unemployed also limited the downside.

VIX 30/05/20 Monthly Chart

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

While we had seen the PMIs and business and consumer confidence as the key drivers, May and June stats will have a material influence.

The markets will need to see employment conditions improve and confidence across businesses and consumers to rise.

For the June PMIs, a fall back from May’s finalized figures due out in the week ahead will be a test for the majors.

This would support a pickup in consumption to spur a service sector fueled economic recovery. It is worth noting that, prior to the COVID-19 pandemic, the ECB had looked towards the services sector and consumer spending for economic support. We can expect this to continue.

On the monetary policy front, the ECB will need to continue to assure support on Thursday. Perhaps more significantly, however, will be the progress by Brussels to disperse funds from the COVID-19 recovery fund.

From elsewhere, expect stats from the U.S and China to also garner plenty of attention.

Geopolitical risk will also likely remain a key driver, however, with tensions between the U.S and China unlikely to ease any time soon. We may even see the markets begin to consider the U.S Presidential Election.

In relation to COVID-19, that downward trend in new cases will need to persist to the point of no new cases. Progress towards a vaccine would also support a more marked pickup in economic activity that would support riskier assets.

Small-Cap Stocks (Russell 2k) Is Headed For A Double Dip?

Our research team believes the Russell 2000 is leading the way in terms of technical analysis and future expectations.  While the NASDAQ has rallied as a result of US Fed stimulus and foreign investor activity, the Russell 2000 has set up a very clear price resistance level near $131~132 that presents very real potential for a double-dip downward price trend in the near future.

Monthly IWM ETF Chart

The resistance level near $131~132 suggests the IWM may rotate downward, creating a right-shoulder, and likely attempt to move down to the $96 previous lows.  If this resistance area can’t be breached by further upside price activity, then the price will likely attempt to rotate lower and rests multiple levels as price collapses back below $100 again.  The lack of upward price activity in the Russell 2000, and other market sectors, suggests the rally is isolated to the NASDAQ and certain other symbols – not broad-based.

Daily IWM ETF Chart

This Daily IWM chart highlights the multiple levels of support below the current price levels.  Each of these may act as some form of a soft floor in price as price attempts to move lower.  Again, the lack of price to attempt to rally above the RED Resistance level on this chart suggests the Russell 2000 may have found a top and may begin to “rollover” as momentum diminishes.

If stocks are set to fall something else should start to rally. Check out my trade idea on silver!

Concluding Thoughts

Technical Traders watch for these types of patterns because they provide an A or B type of scenario for profits.  Either, A, upper Resistance will be broken and the IWM will really past $140 and attempt a further upside price rally..  or, B, this resistance level will hold price below $140 and present a very real downside price opportunity where price may attempt to fall well below $110.

Our concern is that the initial downside price move in the markets, as a result of the COVID-19 virus event and global shutdown event, was followed by a Fed-induced “relief rally” that may be ending.  Most of the time, these big impulse moves result in a “relief recovery” before further trending takes place.  We believe the relief recovery is nearly over and the global markets may be setting up for a much bigger trending move.

If you are using our free public research for your own trading decision-making and/or using it as an opportunity to find and execute successful trades, please remember you are the one ultimately making the decisions to trade based on our interpretation and free research posts.  We, as technical traders, will continue to post new research articles and content that we believe is relevant to the current market setups.

If you want to improve your accuracy and opportunities for success, then we urge you to visit www.TheTechnicalTraders.com to learn how you can enjoy our research and our members-only trading triggers (see the first chart in this article).  If you are managing your retirement account or 401k, then we urge you to visit www.TheTechnicalInvestor.com to learn how to protect your assets and grow your wealth using our proprietary longer-term modeling systems.  Our goal is to help you find and create success – not to confuse you.

In closing, we would like to suggest that the next 5+ years are going to be incredible opportunities for skilled traders.  Remember, we’ve already mapped out price trends 10+ years into the future that we expect based on our advanced predictive modeling tools.  If our analysis is correct, skilled traders will be able to make a small fortune trading these trends and Metals will skyrocket.  The only way you’ll know which trades to take or not is to become a member.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

Gold Investors Shouldn’t Be Losing Focus

The recent volatility in most markets was really extreme, which means that it was easy to lose focus on the things that matter the most in case of the gold market. It was relatively easy to keep one’s focus as far as the fundamental outlook for gold is concerned – it’s quite obvious that the economies around the world are in deep trouble and that the various QEs and money-printing mechanisms are likely to be inflationary, which together is likely to result in stagflation – which gold loves.

On the other hand, it was easy to lose focus with regard to one of gold’s key short- and medium-term drivers – the USD Index. If the USD Index soars, then gold is likely to plunge in the short run, regardless of how favorable other fundamentals are.

Consequently, in today’s free article, we’ll discuss the situation in the USD Index, with emphasis on two key similarities.

The USD Index was previously (for the entire 2019 as well as parts of 2018 and 2020) moving up in a rising trend channel (all medium-term highs were higher than the preceding ones) that formed after the index ended a very sharp rally. This means that the price movement within the rising trend channel was actually a running correction, which was the most bullish type of correction out there.

If a market declines a lot after rallying, it means that the bears are strong. If it declines a little, it means that bears are only moderately strong. If the price moves sideways instead of declining, it means that the bears are weak. And the USD Index didn’t even manage to move sideways. The bears are so weak, and the bulls are so strong that the only thing that the USD Index managed to do despite Fed’s very dovish turn and Trump’s calls for lower USD, is to still rally, but at a slower pace.

We previously wrote that the recent temporary breakdown below the rising blue support line was invalidated, and that it was a technical sign that a medium-term bottom was already in.

The USD Index soared, proving that invalidation of a breakdown was indeed an extremely strong bullish sign.

Interestingly, that’s not the only medium-term running correction that we saw. What’s particularly interesting, is that this pattern took place between 2012 and 2014 and it was preceded by the same kind of decline and initial rebound as the current running correction.

The 2010 – 2011 slide was very big and sharp, and it included one meaningful corrective upswing – the same was the case with the 2017 – 2018 decline. Also, they both took about a year. The initial rebound (late 2011 and mid-2018) was sharp in both cases and then the USD Index started to move back and forth with higher short-term highs and higher short-term lows. In other words, it entered a running correction.

The blue support lines are based on short-term lows and since these lows were formed at higher levels, the lines are ascending. We recently saw a small breakdown below this line that was just invalidated. And the same thing happened in early 2014. The small breakdown below the rising support line was invalidated.

Since there were so many similarities between these two cases, the odds are that the follow-up action will also be similar. And back in 2014, we saw the biggest short-term rally of the past 20+ years. Yes, it was bigger even than the 2008 rally. The USD Index soared by about 21 index points from the fakedown low.

The USDX formed the recent fakedown low at about 96. If it repeated its 2014 performance, it would rally to about 117 in less than a year. Before shrugging it off as impossible, please note that this is based on a real analogy – it already happened in the past.

In fact, given this month’s powerful run-up, it seems that nobody will doubt the possibility of the USD Index soaring much higher. Based on how things are developing right now, it seems that the USD Index might even exceed the 117 level, and go to 120, or even higher levels. The 120 level would be an extremely strong resistance, though.

Based on what we wrote previously in today’s analysis, you already know that big rallies in the USD Index are likely to correspond to big declines in gold. The implications are, therefore, extremely bearish for the precious metals market for the following months.

On the short-term note, it seems that the USD Index has finished or almost finished its breather after the powerful run-up. While the base for the move may be similar to what happened between 2010 and 2014, the trigger for this year’s sharp upswing was similar to the one from 2008. In both cases, we saw dramatic, and relatively sudden rallies based on investors seeking safe haven. The recent upswing was even sharper than the initial one that we had seen in the second half of 2008. In 2008, the USDX corrected sharply before moving up once again, and it’s absolutely no wonder that we saw the same thing also recently.

In fact, on March 23rd, just after the USDX closed at 103.83, we wrote that “on the short-term note, it seems that the USD Index was ripe for a correction.

But a correction after a sharp move absolutely does not imply that the move is over. In fact, since it’s so in tune with what happened after initial (!) sharp rallies, it makes the follow-up likely as well. And the follow-up would be another powerful upswing. Just as a powerful upswing in the USD Index triggered gold’s slide in 2008 and in March 2020, it would be likely to do the same also in the upcoming days / weeks.

Please note that the 2008 correction could have been used – along with the initial starting point of the rally – to predict where the following rally would be likely to end. The green lines show that the USDX slightly exceeded the level based on the 2.618 Fibonacci extension based on the size of the correction, and the purple lines show that the USDX has approximately doubled the size of its initial upswing.

Applying both techniques to the current situation, provides us with the 113 – 114 as the next target area for the USD Index. A sharp rally to that level (about 13-14 index points) would be very likely to trigger the final sell-off in gold, silver, and mining stocks.

On a short-term basis, we just saw a daily move lower in gold, while the USD Index declined and reversed before the end of the day. This – by itself – is a sign of gold’s weakness, but it’s a sign of strong weakness, when one takes into account gold’s recent technical development.

Namely, gold recently moved above its declining resistance line – the upper border of the triangle / pennant. A decline in the USD Index was a bullish factor for gold and it should have easily held ground. Namely, it should have rallied further and confirmed the breakout. Gold didn’t manage to do that. Instead, it declined and invalidated the breakdown. This is a profound sign of weakness.

Interestingly, while gold showed weakness, silver showed daily strength by rallying higher despite a move lower in gold. That’s exactly what we quite often see right before big declines in the precious metals market.

The above is the most important short-term technical development in gold, so we don’t discuss it separately from this point of view, but we would like to draw your attention to the following monthly gold chart.

In 2008, after the initial plunge, and a – failed – intramonth attempt to move below the rising support line, gold came back above it and it closed the month there. The same happened in March 2020.

During the next month in 2008, gold rallied and closed visibly above the rising support line. The same was the case in April, 2020.

In the following month – the one analogous to May 2020 – gold initially moved higher, but then it plunged to new lows and finally closed the month below the rising support line. We might see something very similar this month.

Speaking of this month in particular, let’s check how gold usually (seasonally) performs in May.

In short, gold usually tops in the first half of the month, and bottoms in its second half. It then recovers, but moves to new highs only in June. This more or less fits what we expect to see later this month also this year.

All in all, the outlook for the USD Index is bullish, which is likely to trigger a decline in the price of gold. Ultimately, gold is likely to recover and soar in the following years, but the opposite seems more likely for the following weeks.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. It also includes the fundamental analysis of the Great Lockdown with the emphasis on the dramatic changes on the US jobs market, as well as technical discussion of silver, mining stocks, USD Index, platinum, and palladium. They say that the partially informed investor is just as effective as partially trained surgeon… You might want to read the full version of our analysis before making any investment decisions.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

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 are 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 deemed 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.

 

Technical Analysis Points To Key Reversal Of Global Markets

Recently, we received a number of email messages and comments regarding our recent Bitcoin article and how we attempted to explain the market trend/technical analysis.  It appears we were not making our interpretation very clear for our friends and followers.  This article should help to clear up our interpretation of the major market trends and our advanced technical analysis tools and utilities.

As purely technical traders, there are certain things we want to make clear.  First, we do pay attention to what is happening to the fundamentals and global economic data when it posts.  We’ve authored many previous articles stating our belief that “capital is like a living/breathing entity which attempts to survive (generate ROI with little risk) in various global market environments”.  In order for us, as technical traders, to identify real opportunities for superior trades, we must be aware of what is happening in the “environment” that surrounds us.

A perfect example is a recent collapse in oil.  We continue to read articles of how thousands of traders believed super-low oil prices were a GIFT and these traders piled into long trades expecting oil to rebound higher.  This happens when technical traders fail to understand the environment in which the instrument is trading within.  At this time, the supply side for oil vastly outweighs the demand-side – so the environment is skewed towards much weaker price activity.  The chance that any moderate price recovery would take place is minimal until the supply glut is diminished.

One of the easiest ways to think of a truly technical trader is that we don’t care if the price goes up or down, we just care that our technical triggers and indicators present clear opportunities that are superior to more traditional methods of trading.

To accomplish this, we believe we must understand the environment in which we are trading and the technical conditions that are present within the charts.  Technically, the price may be going up within a defined bearish/downtrend. This does not mean the upside price move is a technically valid “trade trigger”.  The opposite may be true for a move down in a bullish trending market.  Without proper confirmation of the overall technical bias, environment, and shorter-term technical triggers – one might as well throw a dart at a wall and hope for the best.

In our view, we issue many published research reports for our friends and followers to read and review every week.  We show both bullish and bearish potential outcomes and depending on which way the market breaks we will execute trades in that direction. What we do not do, is trade based on forecasts/predictions. Instead, we follow the price.

Our interpretation of the technical triggers, economic data, forward expectations, and other setups are designed to help you learn how we conduct our research and to help you find opportunities in the markets.  Our members receive this same research and more – they receive our hand-selected trade triggers.  These are the best technical setups/trade triggers known as BAN Trades (Best Asset Now) so we can find that provide superior opportunities for skilled traders.

This chart, below, shows our historical results for the past 2.5 years.  You’ll notice that we do sometimes take losses – yes.  You’ll also notice the consistency of the profits – yes.  We hope you’ll also notice that we work very hard to make sure our member’s success is the first priority in everything we do.

2020 has been a slow year for overall portfolio gains simply because of the market crash and extreme volatility. My #1 goal is to trade when risk is manageable, and the market is predictable. Don’t get me wrong, we have made money on the SPY, over 20% in TLT, 9.5% in GDXJ, and yesterday we locked in 11% on natural gas, so we are trading. But position sizes are small in comparison to our overall portfolio value so we don’t get oversized portfolio growth. When indexes, sectors, and commodities are moving 10-90% a day, it’s a time when position sizing becomes curial for survival.

You will not notice the market crash this year had no impact on our account because we did one of the best trades during the unexpected and unpredictable crash, we moved to 100% cash. Our results are based on a $20K account and over the past 2.5 years we are averaging 33% ROI with very little drawdowns.

Now, back to technical analysis…

Our research team believes the markets have set up a massive downside price advance (creating a much deeper low that confirms Fibonacci price theory and aligns with our Fibonacci Price Amplitude Arcs), which sets up a very unique technical pattern.  Until the price is capable of establishing a series of new higher-high points through consecutive upside price advances AND until the Weekly and Monthly charts confirm a new high price breakout – technically speaking, we’re still in a bearish price trend.

Weekly S&P 500 (SPY) Chart

This Weekly SPY chart, below, shows you three key technical factors that tell us there is a greater risk of a breakdown in price than any upside price trend continuation…

A.  The recent low/bottom price level broke below the December 2018 low price level (new lower low).

B.  The GREEN ARC price level is a massive 1.618 Fibonacci Price Amplitude Arc that suggests massive resistance exists at this level.  Price moving above this level then falling back below it suggests a “scouting pattern” type of event took place and FAILED.

C.  Recent price activity has rallied from recent lows too, again, reconfirm the GREEN ARC resistance level.  We believe this Fibonacci Price Amplitude Arc will present a major price ceiling as Q2 and Q3 economic data pushes forward – driving the price lower over time and eventually targeting the RED support level near $208 in July or August.

You may remember that we’ve been suggesting a bottom will not complete until sometime after July or August 2020 in previous research posts.  Now you know where we derive these projections and expectations, we use technical analysis and our advanced predictive modeling tools to “see into the future”.  Believe it or not, we’ve already mapped out SPY price activity 10+ years into the future.

Weekly Transportation Index (TRAN) Chart

This TRAN Weekly chart also helps to confirm our technical analysis research.  We are deploying the same types of technical analysis tools on all of these charts to show you how our research team attempts to identify trends and opportunities.  You can see the heavy LIGHT RED Fibonacci Price Amplitude Arc near the peak in February 2020.  This Arc represents a massive price resistance channel.  You may also notice the thinner ORANGE Fibonacci Price Amplitude Arc that touches recent lows?  This arc acts as Support in its current form.

Our proprietary Adaptive Fibonacci Price Modeling System is drawing a CYAN projected target level from recent lows where the heavy CYAN line is displayed on this chart.  Additionally, a previous BLUE target level is also displayed on this chart which originated from the recent PEAK in February 2020.  Now, pay attention to where the TRAN price has found recent resistance and stalled…  RIGHT AT THOSE LEVELS.

We believe the failure of the SPY and TRAN to move above the ARCs and Fibonacci price targets suggests a critical upward price trend failure.  A failure of this nature will prompt a new downside price move in the near future as price must always attempt to establish new price highs or new price lows based on the Fibonacci Price Theory (technical analysis).

Monthly Dow Jones Industrial (INDU)

This last chart, the Monthly INDU, is probably the most impressive one so far.  Clear Fibonacci Price Amplitude Arcs suggest massive resistance near the February 2020 peak levels.  A very clear downward price channel originating from the February 2018 lows and transitioning across the December 2018 lows and into current lows.  An Adaptive Fibonacci Price Modeling System target price (CYAN) near 8108 (very near current price levels) and a very clear technical price pattern (Dojis) suggesting a potential top or price reversal is setting up.  Lastly, the recent deep low price stalled very near to the historical YELLOW DASHED price channel that spans the 2000 and 2007 price peaks.

Pulling all of this technical analysis together with simple Fibonacci Price Theory suggests that until the markets can prove to us that price is capable of establishing we upside price structures, the recent deep new price low (near 18,265) suggests future price action may collapse even further and attempt to establish a new, deeper, “new price low” before the real bottoms set up in the markets.  On this INDU chart, it suggests that a “deeper price low” may result in a move well below the YELLOW DASHED price channel from 2000/07 and attempt to move to the RED Fibonacci Price Target level near 14,000.

Concluding Thoughts:

Obviously, we are still very bearish in terms of the current overall market trend.  No technical analysis technique has shown us that the intermediate and longer-term trends have changed direction to Bullish.  Yes, our Daily systems did identify a bullish trigger within this bearish trend on the SPY which we executed successfully for our members.  There is an opportunity to take a bullish trade within a bearish price trend when technical analysis confirms the trigger and it is executed properly.

If you are using our free public research for your own trading decision-making and/or using it as an opportunity to find and execute successful trades, please remember you are the one ultimately making the decisions to trade based on our interpretation and free research posts.  We, as technical traders, will continue to post new research articles and content that we believe is relevant to the current market setups.

If you want to improve your accuracy and opportunities for success, then we urge you to visit www.TheTechnicalTraders.com to learn how you can enjoy our research and our members-only trading triggers (see the first chart in this article).  If you are managing your retirement account or 401k, then we urge you to visit www.TheTechnicalInvestor.com to learn how to protect your assets and grow your wealth using our proprietary longer-term modeling systems.  Our goal is to help you find and create success – not to confuse you.

Our researchers will generate free research on just about any topic that interests them.  As technical traders, we follow price, predict future price moves, tops, bottoms, and trends, and attempt to highlight incredible setups that exist on the charts.  What you do with it is up to you.  Visit www.TheTechnicalTraders.com/FreeResearch/ to review all of our detailed free research posts.

In closing, we would like to suggest that the next 5+ years are going to be incredible opportunities for skilled traders.  Remember, we’ve already mapped out price trends 10+ years into the future that we expect based on our advanced predictive modeling tools.  If our analysis is correct, skilled traders will be able to make a small fortune trading these trends and Metals will skyrocket.  The only way you’ll know which trades to take or not is to become a member.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

ADL Predictive Modeling Suggests US Stock Market Recovery In Q4 2020

Our research team has put together these charts of our ADL modeling system (Advanced Dynamic Learning), which shows a very clear upside price recovery starting to take place in late September or early October of this year. The ADL system also suggests the recovery may last through most of Q4:2020 before the markets collapse again in early 2021.

This predictive modeling system has become somewhat of a hit with our members and our followers.  We continue to get requests from members for selected ADL research related to Oil, the NASDAQ, or other symbols. The idea that we can attempt to see into the future with a certain degree of accuracy would certainly appeal to any trader/investor.

These updated ADL charts show that the US stock market may stay under some downward/sideways pricing pressure until last September 2020 – prompting a Q4 “Santa Rally”, before the markets appear to find a new extreme weakness in early 2021.  This suggests a brief uptick in consumer activity and economic engagement centered around the November 2020 elections and the 2020 Christmas Holiday season, then back to a more contracted economic mode in early 2021.

YM Monthly Chart

This YM Monthly chart highlights our ADL predictive modeling system’s results from a September 2019 origination point.  The one thing we want to add about the ADL system and the current Covid-19 virus event is that our ADL system attempts to map historic price activity into “DNA markers” and uses those DNA markers to attempt to identify and predict future price activity.  Obviously, there has been nothing like the Covid-19 virus event in recent history.  Thus, the ADL predictive modeling system is attempting to apply price DNA to an event that is unprecedented in 80+ years of price history.

Our researchers believe the ADL system will be able to pick up inherent price rotations and trends that relate to existing price DNA markers, yet the scale and scope of the price moves related to the current Covid-19 event may be much larger and more volatile than the ADL predictive modeling system is capable of indicating.  For example, take a look at the YM chart below and realize that price moved well beyond the ADL predictive price markers on this chart.  This is not an anomaly in price, this is an extreme moment in time that the ADL predictive modeling system is incapable of modeling accurately.

Thus, as we are showing you the ADL predictive modeling results, remember that extreme volatility related to the global market event could push the price 6% to 15% further away from these predicted price levels very easily as volatility increases.  Thus, a bottom shown on this chart near 24,000 with the ADL system could actually result in a price bottom near 22.460 or 20,400 (6% to 15% below the projected price level).

Monthly NQ Chart

This Monthly NQ chart shows that the tech-heavy NASDAQ may provide a more stable sideways market rotation over the next 6+ months than the S&P500 or the Dow Industrials.  The ADL system is suggesting that the NQ will likely move lower over the next 3+ months before recovering back to the 9,000 price range in September/October 2020.  Again, we see moderate weakness in price in early 2021 for a short period of time before price attempts to resettle near 9,200 in Q2:2021

This suggests the NASDAQ will continue to attract foreign investment and show more restrained price volatility than the Dow or the S&P.  Again, pay attention to the extreme volatility in the markets and how the price has extended 5% to 15%+ beyond the ADL predictive price levels.  Until the volatility subsides, continue to expect this extreme price rage volatility.

Our ADL system accurately predicted the month gold started a new bull market last year which Eric Sprott talked about, and we predicted the month oil was going to crash as well.

Concluding Thoughts:

Overall, it appears September/October of 2020 is setting up for a moderate US stock market price recovery. Until then, it appears we have a bit of additional price rotation and volatility to contend with.  The interesting take-away from all of this is that our original expectation for a price bottom near or after June or July 2020 seems very accurate.

Technical traders should wait for the price to confirm these predictions before taking any actions.  This is a great market for skilled short term traders to find opportunities.  But it is also very dangerous for traders to chase trends.

The next few years are going to be full of incredible opportunities for skilled traders and investors.  Huge price swings, incredible revaluation events, and, eventually, an incredible upside rally will start again.

I’ve been trading since 1997 and I’ve lived through numerous market events.  The one thing I teach my members is that risk is always a big part of trading and that’s why I structure all of my research and trading signals around “finding profits while reducing overall risks”.  Sure, there are fast profits to be made in these wild market swings, but those types of trades are extremely risky for most people – and I don’t know of anyone that wants to risk 50 or 60% of their assets on a few wild trades.

I’m offering you the chance to learn to profit, as I do with my own money, from market trends that I hand-pick for my own trading.  These are not wild, crazy trades – these are simple, effective, and slower types of trades that consistently build wealth.  I issue about 4 to 8+ trades a month for my members and adjust trade allocation based on my proprietary allocation algo – the objective is to gain profits while managing overall risks.

You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.

I offer membership services for active traders, long-term investors, and wealth/asset managers.  Each of these services is driven by my own experience and my proprietary trading systems and modeling systems.  I have a small team of dedicated researchers and developers that do nothing but research and find trading signals for my members.  Our objective is to help you protect and grow your wealth.

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.

Chris Vermeulen
Chief Market Strategist
Technical Traders Ltd.