Saturday, February 22, 2020

Gold Rallies as Fear Take Center Stage

Gold has rallied extensively from the lows near $1560 over the past 2 weeks. At first, this rally didn’t catch too much attention with traders, but now the rally has reached new highs above $1613 and may attempt a move above $1750 as metals continue to reflect the fear in the global markets.

We’ve been warning our friends and followers of the real potential in precious metals for many months – actually since early 2018. Our predictive modeling system suggests Gold will rally above $1650 very quickly, then possibly stall a bit before continuing higher to target the $1750 range.

The one thing all skilled traders must consider is the longer term fear that is building in the markets. Many traders are concerned about the global economy with the Coronavirus spreading economic worries throughout Asia, Japan, and Europe. We believe this fear will push precious metals continually higher over the next 24+ months with a real upside target above $2100 eventually.

Right now, skilled traders need to understand that wave after wave of higher price rotation will continue to happen in Gold and Silver. If you missed the $1450 level and missed the $1550 level, this is your time to attempt to find your entry point near $1650 or below that level. Ultimately, real fear has yet to result in a parabolic rally in Gold and Silver – but it is likely going to happen within the next 24+ months.



As skilled traders, our Fibonacci price modeling system is suggesting that any price rotation below $1550 would be an excellent buying opportunity. These levels really depend on where the current rally ends and what happens in the global markets over the next 60+ days.

Less than 7 days ago, we published this research article suggesting that our ADL predictive modeling system was telling us that Gold would rally above $1650 within 15 to 30 days. It is very likely this rally will start a multiple leg upside price advance in precious metals where Silver will finally breach the $20 to $21 level as Gold advances higher.

February 13, 2020: Predictive Modeling Suggests Gold Will Break Above $1650 Within 15 - 30 Days



Once fear really enters the markets, we’ll see huge sector rotation and a massive price reversion event take place. Historically, Gold and Silver will react to this move, but the parabolic price move in precious metals will come 4 to 6+ months after the reversion event in the global markets. So, from a historical standpoint, any entry-level near current price levels is exceptional.

Trust us, you really don’t want to miss this next move in precious metals. Our Fibonacci price modeling system and Adaptive Dynamic Learning modeling system are suggesting price levels above $2400 as an ultimate upside price target for Gold.

Join my Swing Trading ETF Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
The Technical Traders



Stock & ETF Trading Signals

Friday, February 14, 2020

2020 - A Close Look at What to Expect

Quite a bit has changed in the global markets and future expectations over the past 4+ weeks. Q4 2019 ended with a bang. U.S./China Trade Deal, U.S. signing the USMCA Continental Free Trade Agreement, BREXIT and now the Wuhan Virus. On top of all of that, we’ve learned that Germany and Japan have entered a technical recession. As Q4-2019 earnings continue to push the U.S. stock market higher – what should traders expect going forward in 2020?

Volatility, Sector Rotation, and Continued U.S. Stock Market Strength.

Our researchers have been pouring over our charts and predictive modeling tools to attempt to identify any signs of weakness or major price rotation. There are early warning signs that the US Stock Market may be setting up for a moderate downside price rotation within the first 6 months of 2020, but we believe the continued Capital Shift that has been taking place over the past 24+ months will continue to drive foreign investment into the U.S. and North American stock markets for quite a while in 2020 and 2021.

The interesting component to all of this, which should keep investor’s attention and really get them excited, is the chance that some type of foreign market disruption may take place in 2020 and 2021. There are a number of things that could potentially disrupt foreign market expectations.

First on the list is this virus event in China (that seems to be spreading rapidly). Second would be the news that Japan and Germany have entered a recession. Further down the list is the very real possibility that many Asian and foreign nations could see a dramatic decrease in GDP and economic activity throughout much of 2020 and 2021.

It is far too early to make any real predictions, but traders need to be aware of the longer term consequences of global markets entering a contraction phase related to a confluence of events that prompts central bank intervention while consumers, financial sectors and manufacturing and industrial sectors are pummeled. Imagine what the global markets would look like if 25% to 55% of Asia, Europe, and Africa see a dramatic decrease in economic output, GDP and financial sector activities (on top of the potential for massive loan defaults). It may spark another Credit Crisis Event – this time throughout the Emerging and Foreign markets.

A massive surge in U.S. stock market valuation has taken place since the start of 2020. It is very likely that foreign capital poured into the U.S. stock market expecting continued price advancement and very strong earnings from Q4 2019. This valuation appreciation really started to take place in early 2019 and continued throughout the past 14+ months. We believe this valuation appreciation is foreign capital dumping into the U.S. markets to chasing the strong U.S. economic expectations.

We believe this surge into the U.S. stock markets will continue until something changes future expectations. The U.S. Presidential election cycle would usually be enough to cause some sideways trading in the U.S. stock market – maybe not this time.

The fact that Japan and Germany, as well as China very soon, have entered an economic recession would usually be enough to cause some sideways price rotation in the U.S. stock market – maybe not this time. The potential widespread economic contraction related to the Wuhan virus would normally be enough to cause some contraction or sideways trading in the U.S. stock market – maybe not this time.

There is still a risk that price could revert to middle or lower price channel levels at any time in the future. We’ve highlighted these levels on the charts below. Yet, we have to caution traders that the foreign markets may be setting up for one of the largest capital shift events in recent history. If any of these contagion events roil the foreign markets while the U.S. economic activity and data continue to perform well, then we could be setting up for a massive shift away from risky foreign markets/emerging markets and watch global capital pour into Safe-Havens (metals/miners) and pour into the U.S. stock market (U.S., Canada, Mexico).

We’ve authored numerous articles about how the foreign markets gorged themselves on debt after 2009 while easy money policies allowed them to borrow U.S. dollars very cheaply. We’ve highlighted how this debt is now hanging over these corporations, manufacturers and investors heads as a liability. The recent REPO market activity suggests liquidity risks already exist in the global markets. If these liquidity issues extend further, we could see a much broader market rotation within the U.S. and foreign markets.

Dow Jones Industrial Average – Quarterly Chart

Currently, the U.S. stock market appears to be near the upper range of a defined price channel. Near these levels, it is not uncommon to see some downside price rotation to set up a new price advance within the price channels. This INDU chart highlights the extended price channel trend, originating from 2008, and the more recent price channel (yellow) originating from 2015. Any breakdown of these channels could prompt a much broader downside price move.



SP500 – Quarterly Chart

This SPY chart highlights the extended upside price trend in the US stock markets. The SPY has recently breached the upper price channel level. It may be setting up a new faster price channel, yet we believe this rally in early Q1 2020 is more of a reaction to the very strong 2019 US economic data and the continued capital shift pouring capital into the U.S. markets. A correction from these levels to near $275 would not be out of the question.



Transportation Sector – Quarterly Chart

This Transportation Index (TRAN) chart presents a very clear price channel and shows a moderate weakness recently in this sector. The fact that the TRAN has consolidated into a middle range of the price channel while the other US stock market indexes continue to push higher suggests the valuation advance in the U.S. stock market is mostly “capital chasing strength of the U.S. economy” than a true economic expansion event.



2020 will likely continue to see more volatility, more price rotation, more US stock market strength and further risks of a reversion event. We believe forward guidance for Q1 and Q2 will be revised lower as a result of these new global economic conditions originating from Asia, Europe, and Japan.

If the virus event spreads into Africa and the Middle East (think Belt-Road), then we could see a much broader correction event. In the meantime, prepare for weaker future earnings related to the shut down of industry and consumer sectors throughout much of Asia.

If this “shut down” type of quarantining process extends throughout other areas of the world, then we need to start to expect a much broader economic contraction event. Minor events can be absorbed by the broader markets. Major events where global economies contract for many months or quarters can present a very dangerous event for investors.

Overall, we may see another 20 to 40+ days of “sliding higher” in the U.S. stock market before we see any real risks become present for investors. This means you should start preparing for any potential unknowns right now. Plan accordingly as this event will likely result in a sudden and potentially violent change in price trend.

Join my Swing Trading ETF Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
The Technical Traders



Stock & ETF Trading Signals

Stock & ETF Trading Signals