Commodities Countdown

$GOLD Looks Lower - But Wait, There's More - Webinar Link 2016-12-08


Gold has been consolidating for the last two weeks. On Friday, $GOLD resumed its slide lower. With the daily RSI so weak, $GOLD continues to underperform. There are a few other correlations to watch as we come into the Fed meeting this week.

One of the things that is important this week, is a look back at the action for $GOLD in December 2015. Gold made a meaningful bottom last year in December. But it was also a period of a major change since 2007. The Federal Reserve raised the Fed rate for the first time in 10 years. While it was only a 1/4% increase, it was meant to send the signal for the end of a deflationary cycle. It was also a recognition that the Fed wanted to start increasing interest rates to get back to a more normal interest rate environment. While the interest rate increase was well telegraphed to the market, $GOLD ended a 4-year slide right there. We expect a rate rise this week from the Fed. Will history repeat?

Looking at the RSI and the SP500 Relative Strength in purple on Chart 1, they don't look ready to turn up this week, but we should definitely be on the watch for a change in trend.

Below is a simple chart comparing GLD, GDX and GDX:GLD. It looked like a potential buy signal forming on the ratio this week, but it failed at resistance and turned down.

Back in August, when everyone was so very bullish on Gold, I did a few blogs and one specific webinar where I spent almost 1/2 hour discussing why gold miners looked like they were going to get shafted. This is a link to one blog that also includes a link to the webinar and another blog article. Greg on Gold August 2016. If I got a couple of things right this year, it was getting in and out of Gold on a timely basis to keep most of the gains. But more importantly, the charts had some very timely information and we followed it. So one lesson for me is to repeatedly check my own analysis and understand what went right and why. A couple of clues were very accurate.

  • SCTR rallying out of last place above 5 or 10 (buy) can trigger a potential trade entry, SCTR weakening after long uptrend (Sell).
  • Relative strength breakout to 3 month highs (buy) and 3 month lows (sell) were good signals.
  • GDX:GLD ratio breaks out (buy) or breaks down (sell).

Lastly, the $USD has impacted the move in Gold significantly. I covered this off in the most recent webinar. Here is a link to the webinar. Commodities Countdown 2016-12-09.

Commodities Countdown LIVE! with Greg Schnell - 2016-12-08 17:00 from on Vimeo.

I do want to bring up one other thing.

When I visited Martin Prings Studio in Florida back in August, we had a great presentation about the $SPX, $USB, TLT,$USD and $GOLD. Here is a link to Martin and Greg live from Florida. Martin was calling for a major stock market rally as we moved from Zone 3 to zone 4 in Martin's 6 cycle business model. For the cost of $0.50 a day, our basic membership gives you fantastic insites to the big picture. It includes Martin Pring and John Murphy, two of the most published authors on Technical Analysis.

Greg Schnell and Martin Pring Live From Pring Studios!-2016-08-23 from on Vimeo.

Perhaps you can join me on the Canadian Technician Webinar 2016-12-13. If not, here is the Webinar Archive link to catch the recording. Webinar Archives.

We'll have to see if we can keep this exuberance going!

Good trading,
Greg Schnell, CMT, MFTA.

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. Based in Calgary, he is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is also the author of Stock Charts for Dummies (Wiley, 2018). Learn More
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