I was on BNN’s MarketCall yesterday, where I gave my usual 3 top picks. Here is the clip of the opening comments regarding my view on the markets:
One of these picks was the iShares Global Gold Producers ETF (XGD-T). We don’t own it in our ValueTrend Managed Equity Platform yet—but we are considering a purchase. The ETF is basing – and that is the kind of setup that may be attractive upon one of the following conditions playing out:
- A trade off of the lower half of the trading range
Currently, XGD is basing. It’s been stuck between roughly $7.50 to $9.50. That’s not such a bad trade if you can catch a move off of the bottom, or lower part of the range. Given the relatively negative correlation of gold and the producers to the S&P500, it wouldn’t be too much of a surprise if the producers (and gold) sold off in a temporary market spike. Quick thinking traders might want to consider taking advantage of a trade should this ETF move near the bottom of its trading range.
- A breakout from the range, and the downtrend
Gold, and the producers, have shown comparative strength against the S&P500 of late- although the longer trend is still flat (see the middle pane demonstrating comparative relative strength). However, the greater trend for the sector and the underlying commodity has been bearish. I’ve drawn a trendline on the chart above (dashed pink line). That trendline actually extends back to 2011. A break in this trendline would be a double-hitter. That is, a move through $9.50 would punch through the longer trendline, while simultaneously punch through the near termed base described above. Intermediate termed investors might consider such a move, should it occur, to be bullish for the coming months.
Longer termed cycles suggest caution
I have noted a bearish longer termed cycle for commodities. Here is a blog on that cycle.
If you agree that the longer termed trend and cycles for commodities remains questionable, I might suggest that any trades on gold, or most other commodities, be viewed in terms of weeks or months, not years. For that reason, and others, I continue to remain longer termed cautious on the TSX, per this blog.
Next seminar: Oakville, Ontario for the Canadian Society of Technical Analysts
Wednesday February 10, 2016. 7:00pm. Admittance is free for first time CSTA attendees.
Location: Queen Elizabeth Park Community and Cultural Centre -2302 Bridge Rd, Oakville ON L6L 3L5
If you would like to book Keith to speak about technical analysis or portfolio management techniques, please contact Cindy McIntyre at firstname.lastname@example.org or call 1-888-721-8736