I get questions regarding these commodities often enough that I thought I’d present their current technical picture. Here goes:
Gold
Gold has a big wall ahead of it before we can say it’s out of the consolidation that it’s been stuck in since 2013. Despite the recent excitement (in December I suggested it would rally on this blog) the commodity has a long history of hitting about $1360 and failing. Below is the updated chart I presented on my early December blog suggesting a rally. If you take a look at the current picture, the commodity looks to be getting overbought again. Yet, it is not quite at its $1360 ceiling.
My thoughts are that gold may still get to that target, but the indicators that I follow (moneyflow momentum, momentum oscillators ) along with that massive ceiling suggest little more upside beyond that. Only cumulative moneyflow looks to be turing positive enough to warrant a longer termed bullish outlook. And that is precarious.
Oil
WTI crude oil looks like it is bouncing off of an oversold level. Stochastics is hooking up, while the longer MACD indicator is also hooking up. It recently bounced off of $42 support on those oversold hooks. Cumulative moneyflow (first pane below price chart) has been raggedly moving up since 2016. The top pane (moneyflow momentum) may be hooking up from an oversold level. Significant resistance resides right around current prices at $55/barrel. However, with the other positives on this chart we may see WTI break through $55.
It’s going to take something fundamentally significant to give it that impetus, but the charts do provide some hope for that. Should a story develop for the commodity – we could see $70. Please note that there is a big “IF” there—regarding a fundamental catalyst. At this point, I’m not aware of anything big enough to move the needle—and I would be happy to read your thoughts on this potential in the comments section below.
Keith on Bloomberg/BNN TV Thursday January 24th, 2019 at 6:00pm
Keith appears regularly on BNN Bloomberg MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management. (Note: Times and Dates may be subject to change)
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10 Comments
hi keith:
with the markets going into a sell mode not long ago and all of a sudden a major comeback
how do you feel about markets today. Have we gone up to much to fast and do you think we will
retest lows again before going sideways etc. Have some funds to put in market but do not want
to get burned again watching market go down again . If you would purchase today with your own funds do you think you would probally allocate more to the u.s. market or the Canadian market.
thanks
Hans–funny you mention purchasing with my own money. All of my money is in the VT Equtiy Platform I manage for clients – so I do indeed eat my own cooking, and when I buy for the platform, I buy for me by default!
So, we sold a little bit of equity over the last week or so–we are up to about 20% cash. Indications are that the market is overbought, likely to have a neartermed pullback. Its a dicey play, and subject to change, but so far its been pretty constructive in how the market has moved back into its old trading range of 2018. Thus, I would be ok with buying so long as the S&P 500 remains ahead of 2540 –preferably over the next week on a pullback.
A move below 2540 is my stop-loss point
do you favour canadian market or u.s. market . How often do you trade throughout year as i get charged a redemption fees on mutual funds if i trade more than once a month. when would you sell canadian market if it gets to a certain number thanks
I think the CDN market might outperform.
Re funds–we do not use those products so its not a concern to us
Hi Keith,
I started following your blog since I saw you on BNN during the holidays. I like how you are straight forward, no nonsense and tell it the way it is.
I have a question regarding the fund you just mentioned “VT Equity Platform”, For what type of investor is it for and is there a minimum you have to purchase to get in?
Thanks in advance,
Bill
Hi Bill
Thanks for asking. The ValueTrend Equity Platform is a discretionary managed account that is called an “individually managed account”. It isn’t a fund – as you get your own account (not pooled with other investors like a fund) and you own the stocks that are held with a custodial service – in our case Raymond James Custodial. Stocks are not held in a pool with others – they are bought at your own ACB (vs. a fund or ETF where you inherit the ACB of their purchase prices). We actually have a few model accounts – the two main ones bing the equity and income platforms. They adhere to a model. So, if the model has (eg) 4% of BCE, you will have 4% of BCE – if it has 22% cash (as we do now) you have 22% cash. etc.
That out of the way, we have an approx. minimum of household assets (that means yourself, partner/spouse, family–and ALL accounts including RRSP, open accounts, corporate, TFSA, etc) of $500k. PM me using the “contact” button on the website if you want to learn more.
You were wondering what catalyst might cause oil to break above it’s stiff $55 resistance level.
How about a a successful end to the China, US trade war, or more cooperation among Opec members? If oil breaks above $55 I can see it running up to $66 based on what looks to be a possible head and shoulders bottom. If it is a positive development that propels oil higher and not just Opec cuts, I can see the stock market going higher on much the same trajectory as oil.
YOUR THOUGHTS?
Good input Bob – thanks
My thoughts re your suggestions are…no thoughts (at least, regarding a catalyst for a breakout) … which is why I asked for input like yours, and it is appreciated.
I am but a simple Technical Analyst – to me, I don’t know how or if or what a catalyst might be to inspire a chart breakout on oil, or anything else. But I do know that a breakout has powerful potential. And that, to me, is all that matters at the end of the day
Thanks again-remember-we’re all in this together!
Hi Keith, I am trying to understand the next set of technical rules going forward. I understood your analysis of the critical support region, and was able to use that to minimize my risk in December (for which I am grateful to you)…..but now that the market has had a substantial bounce through the upper level off the aforementioned zone, and I’m not sure how to use this broken chart. The markets are overbought and we can expect a pullback…I get that. What do you consider a buy signal to put your 20% into play. Is it staying above previous support of 2630 with RSI and full stochastics staying midrange/oversold? Thank you, Chris
Chris you’re a keen student of TA–love it! If you haven’t, may I encourage you to read my book Sideways? You might find it useful. Anyhow….
yes any pullback that brings you into the RSI/stochastics mid range becomes attractive. You never know how far a pullback goes, so there isn’t an absolute rule here. I can only tell you how we do things. If we see support held per 2540-ish, and a deep oversold oscillator sell with a hook up as markets bounce from about 2540–we might go all in. But if we get to say only 2600 and it looks like not much more downside momentum is happening, we will buy with 1/3rd or 1/2 of the cash. From there, we see what happens (a not-too-deep correction followed by a little hook could still turn down on you–or it could continue higher…so we take a middle of the road approach). We may buy as it rallies, or wait.
I’m patient. The downside of our approach is missing out and underperforming a bit. I don’t care. I hate losing money more than I hate missing the first part of the move.