General Market Analysis

General Market Analysis contains charts and commentary relating to all aspects of the financial markets including: US and Global stock and bond markets; gold & commodities; bonds & currencies; key market moving stocks; etc…

Dec 192014
 

CDE (Coeur Mining Inc.) has broken above the neckline of the IHS pattern, triggering the alternative entry or an add-on to the initial position taken around 4.20 (bottom of the right shoulder). Targets have been added with T3 & T4 only potential, not official, long-term targets at this time, pending a breakout of gold above the downtrend line and how silver trades going forward.

The ultimate success or failure of this trade (although it is already up over 20% from entry) will ultimately depending on whether or not my primary bullish scenarios for gold & silver play out in the coming months. Therefore, the potential 3rd & 4th targets are for longer-term traders & investors with a bullish outlook on silver & gold that took CDE at the bottom of the left shoulder, possibly adding here on the breakout, while employing wider stops. The initial targets (T1 & T2) are for typical swing traders and have a decent shot of being hit even if gold and silver only move back up to the top of their recent trading ranges before reversing.

As always, the price targets are set slightly below the actual resistance levels in order to help assure a fill, should prices reverse just shy of resistance. T4 is aligned with both horizontal resistance as well as the approximate price measurement of the inverse head & shoulders pattern (IHS). Those who established a long position towards the bottom of the right shoulder might consider raising stops to the 4.60 level at this point. Previous & updated daily charts below.   click here to view the live, annotated chart of CDE

Dec 182014
 

Q: Quite the rip going on yesterday and today. Thoughts?

A: Almost always some big swings on & immediately following Fed days. My confidence in calling the broad market isn’t very strong right now, especially following that out-of-nowhere Oct/Nov rip but fwiw, I still think the gains over the last day or so is just noise within the larger broadening top (aka- megaphone) pattern on the SPX.

Despite yesterday’s gains and today’s gap, the pattern is still very much intact although admittedly we still have some work to do in order to firm this pattern up, such as a continued move towards the bottom and preferably, no more new highs in the SPX. Weekly SPX as well as some other indices also look to be breaking down or rolling over. Additional commentary & price targets listed on these charts:

On an administrative note, I will be traveling on vacation this Sunday through the remainder of the year. I plan to check in on the markets from time to time although new trade ideas/updates and market commentary will be light over the next couple of weeks. There are several trades that have recent hit their final profit targets (CVX, TSLA, etc…) or exceeded their suggest stop (USO, SGG, etc..) and will be moved to the Completed Trades category asap. I hope to have the trade ideas updated before I leave but feel free to contact me today or tomorrow if you have a question or comments on any of the active trade ideas or any other questions.

-Randy Phinney

Dec 172014
 

Following the recent potential wash-out/bear-trap move below the 114.50ish triple-bottom support, GLD has been backtesting that support level from above, possibly building the energy to mount a sustained breakout above the yellow downtrend line (bullish scenario), while a solid move back below 114.50 & especially the 109 area would be bearish. While the longer-term trend is still down to sideways, the current short-term trend is up with GLD making a series of higher highs & higher lows over the last 5 1/2 weeks.

GLD 2-day Dec 17th

GLD 2-day Dec 17th

 

This is the fourth divergent high in the US Dollar Index over the last 4+ years. The three previous divergent highs resulted in significant corrections. Should those divergences play out for another correction, precious metals & commodities are likely Continue reading »

Dec 162014
 

I received the following question (late last night) regarding yesterday’s price action in precious metals & the CDE (Coeur Mining) trade idea, posted below:

Q: Wow, what a turnaround today. Was looking so strong in the early afternoon and they got dumped like all gold mining stocks. Curious as to your thoughts on it now.

A: My take is that the selling in the broad markets is starting to trigger forced selling/margin calls on both retail and the fully leveraged institutional traders which forces them to liquidate gold & silver (along with their long-side/bottom calling bets on crude). Hard to say how much more of that is left but my take remains that commodities and metals has a lot less downside at this point than do equities. I may be proved wrong but even if I’m right on the stocks down/commodities and metals up in 2015 call, just about everything gets sold during panic sell-offs. Therefore, it could get worse before it gets better in the metals & commodities although putting all that aside, CDE still looks fine from a longer-term technical perspective.

FWIW- I learned (the hard & costly way) years ago to keep my trading light during the month of December as trading volumes dry up which in turn opens the door to a few big “stop-clearing” counter-trend days in just about every asset class out there.

As long as gold remains above the 1180 (spot gold)/114.50ish (GLD-gold etf) levels I remain cautiously bullish on gold. Both yesterday & today (so far) have seen gold backtest that key support level following the recent fake-down (false breakdown) and break back above that level, which was defined by the mid & late 2013 lows as well as the early Oct 2014 reaction low (i.e.-triple-bottom). As previously stated, I view the fact that gold was able to reclaim the 1180 level as quite bullish (a bear-trap) although there is still quite a bit of work to be done in order to help solidify the longer-term bullish case for gold and with prices still precariously flirting with the 1180 level, it can (and most likely will) break either way sooner than later.

As per yesterday’s update on gold, I believe that the 1250 area is an important overhead resistance level, defined by both the downtrend line as well as horizontal resistance. Any solid & sustained break above that level would considerably strengthen the longer-term bullish case for gold while a break below the recent lows around 1130 would likely usher in a new wave of selling. Although my read on the charts is for an upside resolution of this recent trading range, trading is likely to continue to be difficult with large prices swings as gold chops around in what I refer to as “no-man’s land”, which is a battle ground between the bulls and the bears.

Silver has moved sharply lower over the last two days, moving back below both the 16.05 horizontal support/resistance level which it had just recently broken above, as well as the downtrend line (see previous daily chart or click the link to the live chart of $SILVER on the “Live Chart Links” sidebar). However, for now, both silver and gold are clearly in short-term uptrends which began with the Nov 5th lows (and uptrend simply being a series of higher highs & higher lows).

Again, I remain “cautiously” bullish on silver & gold at this time primary for a few reasons: 1) Both are still trading not far above multi-year lows within a larger downtrend. Despite the short-term uptrend, it is much too early to say with a high degree of confidence that the recent rise off the Nov 5th lows is anything more than a counter-trend bounce. 2) Both gold & silver have yet to take out their primary downtrend lines which are generated off their respective 2011 highs, i.e.- both silver & gold are trading below significant resistance. 3) Although my scenarios on the US Dollar, Euro, & Yen appear to be playing out as all three appear to have recently reversed trend, as with gold & silver, it is still too early to say with a fair degree of confidence that these are anything more than brief, counter-trend moves in these currencies.

Dec 122014
 
$GOLD daily Dec 12th

$GOLD daily Dec 12th

I’ve mapped out my preferred scenario in this updated daily chart of $GOLD (spot gold prices). My current expectation is for a reversal around 1250 followed by either a relatively shallow pullback (first set of arrows) or a deeper pullback to around the 1180 level before prices move higher to breakout above the downtrend line and move considerably higher. The latter scenario has the potential to form a very symmetrical Inverse Head & Shoulders Reversal Pattern which would project to around the 1340 level.

Of course I’m open to all possibilities, including both a more immediate breakout above the downtrend line (which aligns with my call for a near-term pullback in the $USD) as well as one more new low in gold before a more lasting bottom is in place. As such, this chart will be updated as any significant technical events develop.

click here to view the live, annotated daily chart of $GOLD

Dec 122014
 

The EUR/USD is attempting to break above the bullish falling wedge pattern. A move to any of the above targets (T1-T3) would likely give a boost to commodities & precious metals. Likewise, the USD/JPY (US Dollar/Yen) pair looks poised to drop about 9% from yesterday’s highs. With the Euro & the Yen comprising the bulk of the US Dollar index, if my analysis is correct, that long overdue correction in the dollar has finally begun. That, coupled with the fact that Silver & Gold have both recently broken above the previously highlighted resistance levels adds to the near-term bullish case in the precious metals & mining sector.

Dec 102014
 

My commentary on the broad market has been unusually light in recent weeks as I’ve had little interest or desire to trade typical equities, other than a couple of recent short trades, instead focusing on select commodities & precious metals. Although I haven’t posted many updated charts lately, I have kept the US broad market charts ($SPX, $COMP, $RUT, etc…) found on the Live Charts page updated. In doing so, I’ve been monitoring what appears to be a possible broadening top, aka- megaphone pattern in the S&P500 as well as some other large caps indices such as the DJ Composite and the Wilshire 5000 Composite Index.

 

The recent price action over the last couple of trading sessions has helped to validate those potential topping patterns as prices have begun to impulsively roll over after the third (which is often the final) tag of the top of the pattern. Given, there is still a lot of work to be done technically to make a case for a lasting trend reversal but despite the cheers from the mainstream media that cite cheap oil as the latest reason to extend this aging bull market, I’m still not buying it.

In addition to the recently discussed deterioration in the market internals from the Dec 2nd “Extreme Market Breadth Divergences Persist post, I also continue to monitor the building divergence… or more accurately, convergence or unusual correlation, between US Equities and High Yield Credit Spreads. This is another rare but fairly reliable indicator that although all seems rosy in the stock market & the economy, there may be substantial problems brewing under the hood. The chart of the $SPX vs. JNK shows the historically tight correlation between US stock prices and junk bond prices while highlighting the recent disconnect or divergence between the two. The JNK vs. TLT chart highlights the recent plunge in high yield bond prices, despite both a rising stock market AND falling interest rates (hence, TLT has risen in price).

Some of divergence between the two may also be attributed to a flight-to-safety but with the stock market printing new all-time highs, there is a major disconnect somewhere as normally, stocks are sold while treasuries when investors are concerned about risk. Are the credit markets over-reacting or is the stock market ignoring some deterioration in fundamentals or some other underlying risk that is getting buried under the “cheap oil!!” headlines? Maybe it’s neither and simply one more in a long line of central bank induced distortions in the financial markets that will ultimately dissipate or moderate through a reversion to the mean (e.g.- stock trade flat for a while while credit spreads moderate). Only time will tell but until these abnormal & potentially ominous developments in the credit markets disappear, the potential for a significant (10%+) drop in equities remains elevated at this time.

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