Markets may consolidate for a while

October 22, 20124 Comments

A rectangle has been forming on the S&P500 since early September. When watching short termed consolidation patterns such as this one, pay attention to a short termed momentum oscillator like Stochastics. Its in its element here- where it can pinpoint short termed buy and sell points. Note the circled points on the stochastics indicator on the chart, and my corresponding buy/sell arrows above that. Each stochastics hook and crossover represents a change in direction, and return to the top or bottom of the rectangle.

Right now, this index is in danger of breaking its 50 day MA. However, strong support lies just underneath this moving average at 1420 (green horizontal support line, as noted in this blog last week). I suspect we’ll test near 1420 and bounce up – but a bad earnings report from influential stock Apple (AAPL) this Thursday or any combination of earnings announcement from the 100 + components that are part of this index set to report this week might change that picture.

Keith on BNN to talk about precious metals 

I was on BNN last Thursday and covered my take on gold and the TSX. We looked at a couple of indicators that gave us a heads up on gold’s  pullback (which I did advise readers of this blog on a month ago). We also covered my argument for a new buying opportunity on coming for gold as it approaches 1700 or around that level.

4 Comments

  • I’ve heard you on BNN recently and you were positive on both Gold and Silver in the coming weeks. Question: what equity vehicle (symbols) would you suggest is good for a retail client to purchase to participate?
    Is it the mining companies or the bullion itself?

    Also right after your show Walter Murphy from the US was on BNN and supported your thesis that gold will rise soon. He went so far as to put an upside potential out there of over $2000 for an all time high. Can you forsee that level of bullishness and if so all in one movement (ie w/o a major correction) or over a full 12 months?
    Thanks

    Reply
    • Hi Daddyo
      First, to play gold there are almost too many ways of doing it. Beyond the commodity/physical holdings- ETF’s are popular. HUG, MNT, CGL, GLD-N, IAU-US, are just a few plays on bullion. Also watch the gold stocks via XGD or the juniors through ZJG.
      As far as targets–my thoughts are a rise back to $1800– I will need to see a breakout from there before too optimistic for greater upside. I will likely sell some or all at $1800 –please note that I dont hold a position in gold yet–still waiting for a stochastics hook before buying. It may go to $1680 before bottoming- we’ll see.

      Reply
  • Keith, seems to me I heard you say that it is prudent to wait three days after a positive signal. Is that true?
    I looking at Rogers Communications today. We had a strong signal yesterday with what, on the surface, appears to be a positive earnings report this morning. And a big gap today. I am cautious around gaps, especially big ones.

    Reply
    • You are correct, Fred, in that gaps can be filled (up or down). I note that Rogers blew through the big wall of $40-ish which has contained it for so long. Now, as you mention, its important to see if it can hold for a few days. If it can hold at current prices for 3+ days, its actually quite bullish and the gap is unlikely going to be a downside target to be filled.

      Reply

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