Since its intraday high (set in August), the price of the SPDR Gold Trust, the GLD, has fallen close to 15%. That's not enough to qualify for a bear market under the media's arbitrary and totally useless 20% standard. However, it is enough for bulls like me to get concerned. From a contrary point of view, that's probably a really bullish factor, but what are the charts saying?

The Long-Term Picture

To add some perspective, Chart 1 shows the inflation-adjusted price back to the 1970s. It recently rallied back to the extended line, joining the 1980 and 2011 peaks, then backed off. That's a perfectly normal phenomenon for an overstretched market running into resistance. No surprises there!

Chart 1

Chart 2 also monitors the trend from a longer-term perspective by tracking the quarterly price. A comparison of the two charts demonstrates the devastating nature of inflation, as the nominal price in Chart 2 is way above its 1980 and 2011 highs. Compare that to the inflation-adjusted series which, at its recent peak, was slightly below them. Over the very long haul, gold does represent a hedge against inflation, but there can be long periods, such as that between 1980-2011 and 2011-2020, where that hedge is barely working. Timing is everything!

But I digress. The green-shaded areas in Chart 2 tells us that, when the Coppock Indicator is experiencing a rising slope, it's a good time to own the yellow metal. Equally as important, downside reversals in the indicator tend to occur near primary trend peaks in the price. Right now, the Coppock is still accelerating to the upside, arguing in favor of the integrity of the bull trend.

Chart 2

Chart 3 features the monthly price, along with a PPO, using the 6/15 parameters. Once again, the green shadings indicate bullish periods. That's when the 6-month EMA is above its 15-month counterpart. There are two things I like about this approach: there are very few whipsaws (they have been flagged with the red and green arrows), and sell signals have usually occurred near the final peak, thereby protecting most of the profits. The last couple of months have seen the oscillator top out. However, it is still a long way from a negative zero crossover that would suggest a primary bear market.

There is one other point before we leave this chart, which lies in the fact that the price is very close to its 12-month MA. No timespan is perfect, but this one works reasonably consistently over a wide swath of markets. That makes it a key benchmark and is a prime reason why it's too early to give up on the bull market.

Chart 3

The Intermediate and Short-Term Trends

Chart 4 compares the price of the SPDR Gold Trust (GLD) to its short- and intermediate-term KSTs. The first thing to note is that the price remains above its 65-week EMA. Second, the correction has taken the form of a downside zig-zag, which to me has more of the characteristics of a counter-cyclical move than a pro-trend one. If gold is topping out, I would expect to see some range-bound action involving a test of the 2020 high followed by a move to new lows. That obviously hasn't happened yet. What does concern me is the fact that the intermediate KST has violated an up trendline and is still moderately overbought. If this is still a bull market, where downside corrective action is usually limited, that won't be a problem. Examples of a contained intermediate correction in an ongoing bull market occurred in the summer of 2019 and in the early part of this year.

Chart 4

Chart 5 suggests that correction, at least in terms of magnitude, may be over. Here is my reasoning. First, the RSI is bouncing from an oversold condition, which is a bull market characteristic. Second, the price violated its red support trendline and the 200-day MA. However, those breaks did not hold, as the price has now moved back above the line and MA. This cancels out the false upside move that developed at the red-dashed arrow in November. What's now required is a rally that surpasses the green down trendline and 50-day MA, which are reinforcing each other as a resistance zone around the $177 area. Only when that happens can we be more confident that the correction is over and the bull market set to resume.

Chart 5

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Editor's Note: This is an excerpt of an article originally published in Martin Pring's Market Roundup on Thursday, December 3rd at 1:02pm ET. Click here to read the full article, which includes charts 6-7 and a discussion of $GOLD in relation to Silver (SLV) and Platinum (PPLT).

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Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.

As much as people speak of gold's value as a safe haven, its performance in 2020 has done much to dispel that investment thesis. Recent months have seen gold and gold stocks underperforming the S&P 500. Is the pattern of new highs for stocks and new lows for gold near its end? Here are three tells that could indicate when gold stocks may be indicating upside potential.

As stocks sold off in late February, gold rallied to make a new high in early March. Soon after, the yellow metal plunged along with stocks, and both asset classes accelerated to their eventual bottom in late March.

After a strong rally into a bearish engulfing pattern in early August, gold has entered a fairly consistent pattern of lower highs and lower lows. A selloff in late September pushed the price down to its first Fibonacci objective (green horizontal lines) using the March low and August high as the framework.

Gold then moved higher to test resistance a number of times at the 38.2% retracement level, using the June low and August high (orange lines). November saw a failed breakout above resistance and a retest and subsequent failure at the September lows.

Now, gold has broken down through its 200-day moving average for the first time since March. A bounce higher this week took the price back up to the 1825-1850 range (pink shaded area) and I would not be surprised if this previous support level now becomes resistance.

The RSI is notably in a confirmed bearish range (red-shaded area). This means that, when the price bounces higher during the downtrend, the RSI never gets much above the 60 level. Given the downtrend in price, the bearish RSI range, and the retest of resistance this week, it appears that a continued down move to the final Fibonacci support level around 1675-1700 is a reasonable downside objective.

Now let's look at gold stocks, in the form of the VanEck Vectors Gold Miners ETF, and see how that relates to our take on the gold spot index.

Similar to the gold price, the GDX is in a confirmed downtrend of lower highs and lower lows since the August price peak. It recently broke down through its 200-day moving average and is now retesting this smoothing mechanism from below. If gold does continue lower to around 1700, then a similar move would take the GDX down to its own Fibonacci support level around 28.

This brings us to our first tell: the GDX would need establish a higher low. Charles Dow wrote that a downtrend is comprised of lower highs and lower lows. Once we confirm a higher low, that could indicate an influx of buyers and increased potential for further upside.

Second, we can see that the RSI is in a bearish range (red-shaded area). Note how that looks different than the bullish range that we saw in April through September of this year.

Our next tell would be the RSI rotating to more of a bullish range. You would need to see upswings that take the RSI to 70 or higher, as well as an RSI no lower than 40 on any pullbacks. That would suggests increased buying power and imply that investors are "buying on the dips" and betting on further upside. In addition, we can see the rotation from a period of outperformance (green arrow) to underperformance (red arrow) as gold stocks have lagged behind the broader equity indexes for the last four months.

Our final tell is an upturn in the relative strength line. This would suggest that investors are rotating into gold stocks enough to drive the price higher relative to other names.

In many ways, the chart of the GDX provides a clear example of an ETF in a bearish phase, with price breaking down through support on weaker momentum and deteriorating relative strength.

An improvement in these three characteristics would suggest much higher potential for price appreciation going into 2021.

RR#6,

Dave

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David Keller, CMT

Chief Market Strategist

StockCharts.com

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

I always credit John Murphy for all of my work regarding intermarket relationships. He's inspired me in a number of ways and I continue to look for relationships that can better increase my odds of calling the stock market correctly. The great thing about these relationships is that we can chart them...... and backtest them! There are 2 intermarket relationships that are flashing major BUY signals for the S&P 500 right now - and I wouldn't ignore them.

Transportation vs. Utilities ($TRAN:$UTIL)

This one just makes perfect sense to me. The stock market looks ahead and, if transportation stocks are performing well, that sends a very powerful bullish signal. Meanwhile, utilities are defensive and perform better when the market is nervous or undecided. Check out the following breakout in this TRAN:UTIL ratio and then check out that bottom panel, which shows the correlation between this ratio and the performance of the S&P 500:

The blue-shaded area shows very strong positive correlation between the TRAN:UTIL ration and the S&P 500. The red-shaded area shows very strong negative correlation between the two. I think it's pretty clear that the S&P 500 tends to move in the same direction as the TRAN:UTIL ratio. Currently, this ratio is screaming higher, clearing a few tops in the 14.3 area.

Copper vs. Gold ($COPPER:$GOLD)

Copper is the commodity that's tied to global economic demand. Gold is mostly unrelated to economic performance; in fact, it has a history of performing well when the stock market is very unsettled and volatile. If you study history, you know that the biggest S&P 500 moves occur when the COPPER:GOLD ratio is flying higher. Check this out:

First, the bottom panel once again shows the powerful positive correlation between the COPPER:GOLD ratio and the direction of the S&P 500. It's unmistakeable.

The green-shaded areas above highlight the surging COPPER:GOLD ratio. During periods of relative strength for copper, the S&P 500 soars. The opposite is true when this ratio downtrends. It's very difficult for me to be bearish U.S. equities while the COPPER:GOLD ratio is flying to the upside.

Conclusion

Based on these two relationships (and plenty of other bullish signals), we're remaining very aggressive on the long side. We will continue to focus on owning leading stocks in leading industry groups. Our portfolio results demonstrate that our approach is a winning approach. Here's a snapshot from our public home page at EarningsBeats.com, highlighting our performance:

Our Model Portfolio is now up 192.54% in just over 2 years. That's nearly a triple! It's a direct result of calling the market based on sound charting techniques and relationships, rather than listening to "click bait" media that called for The Great Depression 2.0 throughout 2020. It's also been the result of owning only stocks showing tremendous relative strength. CNBC shows us lips moving, nothing more. The charts here at StockCharts.com tell us what Wall Street is doing with their money. Which one do you want to follow, the lips or the charts?

I'd love to have you join our growing community at EarningsBeats.com. We have a free EB Digest newsletter that I publish 3x per week - on Monday, Wednesday and Friday mornings. There's no credit card required and you can unsubscribe at any time. CLICK HERE to enter your name and email address and join our community!

 

Happy trading!

Tom

Bitcoin and, more broadly, cryptocurrencies, are back to the forefront of financial markets. A lot of new participants are entering the crypto-space and they are all looking to get a piece of the bitcoin-pie.

So what can we learn from the Bitcoin chart when we want to get an idea about its future price movement?

Bitcoin vs... yeah, vs what?

The first thing that we need to realize is that Bitcoin, or any other cryptocurrency for that matter, can be expressed in many different fiat- or other cryptocurrencies. Just like there is no (single) price for the USD, there is no single price for Bitcoin.

Currencies are always expressed in "another" currency. The USD, for example, can be expressed vs the Euro, the Japanese Yen, the British Pound etc... and it will be a different price against each of them. Likewise, Bitcoin can be expressed in USD, EUR, JPY etc., but also vs. other crypto currencies. This is an important consideration you want to be aware of when looking at (crypto)currencies, Bitcoin in particular.

Over time, markets will find "conventions" or generally accepted ways of expressing things. With regard to the price for Bitcoin, it seems that BTC/USD (Bitcoin expressed in USD) is accepted as "the" price for Bitcoin.

As very little "fundamental" data is available for Bitcoin, the price discovery is a very pure process of supply and demand which, as always, is driven by fear and greed. This makes Bitcoin and the crypto markets very suitable for technical analysis.

So what can the charts tell us about the potential future of Bitcoin? Lets' start by looking at a long-term chart of Bitcoin vs. the USD. The chart below shows the historical price development of BTC/USD since early 2014.

Figure 1Price Swings Are Off the Charts, A Log Scale Is Needed

The one thing that is immediately clear is that the price swings are huge. This is one of the reasons why a lot of new market participants are attracted to Bitcoin trading.

Returns are shooting "off the charts" in a very short amount of time. Unfortunately, that goes both ways, up and down. Risk and return still go hand in hand - it is no different in the crypto space.

On the first chart, one could easily think that bitcoin did not move much from 2014 – 2017 and only really started to move at the start of 2017.. Don't be fooled. For markets like this with very big price moves over a long period of time, it is often better to use a Log-chart, which uses a logarithmic scale for the vertical price axis. These charts "magnify" the seemingly smaller moves and put things in proper perspective.

Figure 2This chart is the same as in Figure 1, but now uses a log scale. It becomes immediately visible that the 2014-2017 period was not boring at all. We see a more-than-70% decline from the peak in 2014 to the lows in 2016, followed by a 270% move back to the 2014 high. That resistance area around $670 kept BTC/USD under pressure for a few months before it broke higher.

That break was the start of the mega 2700%, rally from $670 to $19,900. We see all the time in markets that previous highs act as "resistance". People who bought at that level were facing a loss since the entry, and they are more likely to be relieved to be able to get out of that position without a loss, thus creating supply.

There are also people who recognize this resistance and will try to take advantage by selling (short) Bitcoin, anticipating a decline from that peak level. If and when such a level is then taken out following strong demand, we often see an acceleration of the move, initially driven by stronger demand but accelerated by additional demand coming from short sellers who need to cover their losses, plus sellers who have no position anymore and want to get back into the market again.

This buying frenzy process lasted for a year and a half and ended at the $ 19,900 top at the end of 2017, from which an > 80% drop followed to the $ 3,200 area. After being in the news on a daily basis, the world, or at least the newswires, pretty much forgot about Bitcoin.

This sequence of events repeated again, albeit a bit less spectacularly, in 2019, with a 340% rally followed by another 70% drop into 2020.

Figure 3Out of the 2020 low around $ 4,000, Bitcoin rallied over 400% to current levels. On the way up, the market faced overhead resistance between $ 12-14,000 where the market stalled mid-2019, and again briefly in mid-2020.

Breaking Beyond $ 12k Ignited a New Rally

The weekly chart below shows in more detail how the market peaked near $14,000, but had three peaks put into place around $12,000.

Figure 4Taking out that barrier caused the acceleration we saw in October and November. And here we are in December, pushing against all time high levels around $19,900 - and Bitcoin back on the news wires.

What does all this mean with respect to the potential future price move(s) for BTC/USD?

First of all, a market that is pushing against the highest prices ever recorded is not bearish. As a matter of fact, it is a (very) bullish characteristic. Also, the series of higher lows and higher highs that are visible on both the monthly and the weekly charts are characteristics of a bull market.

As described above, these levels, where former peaks were formed, are usually levels where extra supply comes to the market. When the market will be able to absorb this supply, followed by more demand and a break to new all-time-highs - especially when it is a nice round number like $20,000 - a further acceleration is very likely. We have seen it happen before!

Pegging a price target after such a break is difficult, but when history is our guide, a doubling of BTC/USD to $ 40,000 seems to be a conservative estimate. When we get another one of those 300-400% moves... we all can do the math.

A Pause First?

Figure 5

As this $20k area is definitely heavy on the supply, we may see some short-term weakness. Markets may need a bit of time to absorb the additional supply before actually breaking higher.

One of the things we see at shorter-term (daily) charts when a market is approaching a long-term resistance area is a so-called "negative divergence" between price and the RSI (Relative Strength Index), which is a technical indicator (oscillator).

Usually, this RSI peaks and bottoms together with price. When that does not happen anymore, a divergence is building. In this case, price has formed successive higher peaks recently, while the RSI put lower highs into place. This is called a negative divergence and often signals a pause in the rally or an upcoming decline.

With the longer-term perspective of a bull market in place for Bitcoin, and a potential break beyond $20k around the corner, such a setback has to be seen as temporary and a little breather before jumping higher.

Relative Rotation Graph Shows Strength for Bitcoin

Another, more out of the box, method of looking at (cryptocurrency) markets is through a Relative Rotation Graph®, or RRG® as they are commonly referred to.

This visualization plots multiple securities, in this case cryptocurrencies, against a common denominator on one graph, which allows users to track the relative positions of all members of a universe against a benchmark and against each other.

As all relationships are relative, you will notice a rotational pattern taking shape around the center, in this case the USD, of the graph.

Figure 6This RRG shows the rotations for a group of cryptocurrencies against the USD. The tails moving in a North-East direction indicate that these coins are improving and in an uptrend against the USD. As you can see, Bitcoin ($BTCUSD) is right at the forefront together with Ripple ($XRP).

This is another sign of strength for cryptocurrencies in general and for Bitcoin in particular!

#StaySafe, --Julius

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This article was originally published on Watson News on 12/4.

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My regular blog is the RRG Charts blog. If you would like to receive a notification when a new article is published there, simply "Subscribe" with your email address.

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For many investors, uncovering that best-of-breed stock that goes on to far outpace its peers can be elusive. With the tools I'm going to share with you today, you can get started setting up a system that's designed to locate and help you trade that next big winner.

Based on a proven system developed by William O'Neil, let's begin with one of the first important ingredients: Making sure your stock is in a strong area of the markets. This means it's in an industry group that's outpacing the markets – ideally due to high earnings and sales within its industry, as well as strong growth prospects going forward. Below is the chart of Semiconductor stocks (using ETF SOXX) that are in a clear uptrend, as cutting-edge Semi chips have been in high demand.

DAILY CHART OF PHLX SEMICONDUCTOR ETF (SOXX)

As you can see, these chip stocks pulled back in late October as uncertainties hit the markets. However, they quickly reversed, with a gap-up on volume following election results that centered on having a split Washington for the next 4 years. This bullish action revealed the Semiconductor group's strength relative to other areas of the market.

From here, you'll want to look for a stock in the Semiconductor group that's exhibiting leadership characteristics. These would include the stock advancing higher than its peers, with an even higher probability of being a leader if the company had recently reported strong quarterly earnings or sales.

Lam Research (LRCX) below exhibited just these characteristics, with a 5% gap up the day after the U.S. elections after having recently reported 3rd quarter earnings that were 78% better than last year.

DAILY CHART OF LAM RESEARCH CORP. (LRCX)

Once a leading stock exhibits bullish action such as a breakout on volume, you'll need a trading plan to time your entry. Oftentimes, that will be a pullback of the stock to its 10-day simple moving average. However, in bullish periods of faster momentum, such as now, you'll want to convert the 10-day to a shorter term, 5-day MAV (red line above).

As you can see, a pullback to this shorter-term simple moving average has been an ideal entry point for LRCX. This use of a shorter-term MAV has been ideal for fast-moving stocks in non-growth areas of the markets as well, where momentum has been strong - such as leading Oil stocks.

Screening the markets instead of relying on charts alone will help you get in front of these stocks earlier. For more insights, you can view my The MEM Edge video titled "How To Uncover And Successfully Trade Winning Stocks" from StockCharts TV. If you haven't seen this 30-minute show, take a look, as the information shared will truly enhance what I've reviewed today.

Lam Research Corp (LRCX) is one of many winning stocks from my MEM Edge Report. Subscribers were alerted to LRCX in late October following their release of earnings, and we've been providing ongoing entry points ever since. The stock is currently extended by the looks of its RSI, and we're keeping an eye out for secondary buy points should LRCX pull back.

Use this link here to take advantage of a 4-week trial of my top performing MEM Edge Report. Each week, many of the suggested stocks from our list post performances that put them in the top quartile of the markets. In addition, our market and sector analysis will provide you the confidence to take action during this current bull market.

 

Warm Regards,

Mary Ellen McGonagle, MEM Investment Research