Gold is clear winner amid jumpy market conditions
Precious metals ETFs have gone wild the past two weeks. Last week we saw gold and silver prices drop sharply as the market shook out short-term traders’ stop orders before breaking out and moving higher. Also there is a disconnect between gold and the US dollar.
Energy commodities like natural gas and crude oil are moving in opposite directions and look to be picking up speed. Natural gas is losing pressure and oil is on fire.
GLD ETF trading – pivot trading low
Last week we had our pivot trading low generate another buy signal for gold. Trading pivot lows is a simple trading strategy. I call them low risk setups and take advantage of buying a stock, commodity or currency after a pullback to support and when a reversal candle is formed. This chart below clearly shows that when you are trading with the trend buying on the dips is generally a low risk play with great upside potential.
Precious metals ETF trading – gold bullion takes control
This is a chart (below) which shows the performance of gold stocks (red), silver bullion (blue) and gold bullion (green). As you can see, during the past two weeks while the market has been selling down, precious metals stocks have been hit harder than silver and gold commodities.
Because of heavy selling in stocks recently, the smart money had been going into commodities especially gold bullion. Gold stocks are a great play but this is telling us investors feel safer in physical bullion than stocks.
Gold is the best known precious metal and safe haven which is why it’s holding value better than silver and gold stocks. This week we are seeing gold become more valuable in several major currencies which means gold is actually making a real move higher.
USO ETF trading – breakout & bull flag
Crude oil has had some great breakouts this year and it looks like we are about to get another buy signal shortly. We had a breakout in October from the large pennant and are now flagging which is very bullish. We could see USO reach $50 in the next month or two.
UNG ETF trading – pivot low or waterfall sell off?
Natural gas is at a crucial level for a higher low bounce or another massive panic sell off. Trading right now with UNG is a 50/50 shot so we will just have to wait and let things unfold more before taking any action.
The stock markets, precious metals & energy trading conclusion:
The market is starting to feel a little squirmy as it tries to find support. Small-cap stocks continue to get crushed while blue chip (large cap) stocks are holding more of their value. Gold has broken higher this week while silver and precious metal stocks under perform their big sister Yellow Gold.
Crude oil is holding up nicely, and forming a three-week bull flag and showing signs of life while natural gas continues to get hammered.
The market has been jumpy the past two weeks because market participants are very uneasy about the future direction of the US dollar.
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Chris Vermeulen
