I find this an interesting chart for Gold.
Every so often, you find a chart the ‘speaks to you’ about a particular ticker. For some reason or other, it is ‘in touch’ with whatever is driving that particular market over this set of times.
For whatever reason, this one “speaks to me” about Gold.
Usually, when trading gold, I use a very “fast chart”. This decision was made as Gold can be a very Fast Market. Sometimes it will open “gap down” or “gap up” by all of the prior week’s movement. It can drive you slightly nutty. (Since the Gold Fix is in London, they get the first bite at the apple and we get a “gap open”…)
For no good reason, other than trying out some different chart settings and a ‘broad sweep’ set of comparison tickers, I took a look at GLD on a 5 year weekly tick mark chart with an “unusual” setting for the SMA Stack. 24 / 48 weeks. That makes the first line a 120 day SMA and the second one a 240 day (using a 5 day trading week).
Yes, this is what I do on rainy days once my “bets” are placed. Having two major ones just placed Very Well last week, I’m not touching them until it’s time to take them off. So I have to watch, but can’t do anything… So I poke around looking for new ideas while trying not to be bored while trading. (Yes, believe it or not, boredom is one of the largest hazards of being a trader…)
So, take a look. You can clearly see the “pivot point” for Gold when it started pulling away from the other assets. But what is most enlightening is the “periodicity” with which gold has a ‘correction’ and the precision of the depth. At this “time scale” it is very clear what is happening with the gold market right now. It’s just a “regular shake out” of weak hands so the market maker can reload with inventory…
While we are getting a “bit late” in the run, and eventually there will be a “failure to advance” and the Gold Bull Market will tarnish… For now, the “rules” say: Bull Market in progress. “Steady Up” until a confirmed failure to advance is to be assumed. “Buy the dips”. And in this case, a “dip” is clearly defined as “on the 24 week SMA line”.
To me, that looks like “about 2 or 3 weeks” from now. With that in mind, you could move to a “1 year daily” chart for exact timing.
Also not the metronome like movements of RSI from 50 to 80; that MACD gives decent “exit calls” (though using Slow Stochastic – not on this chart – to set stop loss orders looks like a workable strategy too, and confirms the entry call); and note that DMI tells you a clear Bull Market Status. It is a slow indicator, so when “failure to advance” happens you will only get an inflection down in ADX / DMI+ a week or two late, but it “provides confirmation” of the other information.
Note, too that FXF, the Swiss Franc, has a “pivot” about a year back. It would be interesting to find out what was in the news when both gold and FXF made their “pivot” movements… But, at any rate, the Swissy is clearly lagging gold into this bull run. As the Swiss are generally good about their money, I would interpret that as either gold being overpriced, or the Swiss Franc under priced. I would not be at all surprised to see FXF approximate with gold again in the future.
Oil is interesting in that, for all the talk of how much prices have risen, you can see that the “jump” at the left/middle of the graph (when it hit about $120 / bbl IIRC) has never been reached again and it is largely a “dead money” long term vehicle. Good for “swing trades” but not so good for long term gains. Similarly, TLT, the 20 year treasury fund, is a good “counterweight” to the stock market (jumping up when the market crashes) but otherwise is mostly “dead money” for trades.
JJC, Copper, only starts to trade in the final months of 2007, so you can’t see what it does at the top of the last market run. You can see it, though, at the bottom of the crash. It turns up well before the market bottom. Copper calls a market bottom turn as an advance indicator. (I think it will be a lagging indicator at crash-tops, but that needs confirmation).
The only other thing to really note about this chart is how all of the various stock market indexes largely track together.
As a side bar, EWL, the Swiss Stock Fund, is trading rather well compared to the US market. Getting a bit of “lift” from the currency, I suspect.
Here is a live version of the above chart (with EWL added and Slow Stochastic for comparison), and just below it, a close up on the Swiss fund where you can see it’s been “market perform” this last year, and is now breaking down:
The EWL fund:
So EWL got a bit of a ‘lift’ during the US Market Crash (or put another way, never crashed as hard or far) and has long term been the better bet, but has not been a better gainer recently, as the US markets had more “aw shit” they could “make up”. A good example of “time scales”. EWL outperformed, but only on a longer time scale and with an event that has passed… From here, going forward, that currency “lift” will turn into headwinds on selling goods overseas – think chocolates, watches, and drugs. And Right Now it’s taking a header. DMI is “red on top” and MACD is “red on top”, below zero, and “Mouth down”. Even RSI has been “near 80” and is now “broken through 50”.
But worth remembering for “next time”. When things have a “toppy” look, move some money to Swiss goods…
It looks to me like having a “long view” chart up on GLD provides a needed “context” for comfort in the faster trade cycle up close. Why? “Why? Don’t ask why, down that path lies insanity and ruin. -E.M.Smith”…
Exploring why: I suspect there is some international banking group that makes decisions on something or other about then, but it could just as easily be some major banks that trade gold needing to “reload” their inventory… It looks like it’s about every January and July, so it could also be seasonal (Christmas) demand and / or related to when mines are not flooded… If you really care “why”: Happy Digging…
So for me, when trading GLD, I’m going to have both that long term chart AND my faster “trade chart” open. The better to know when the wind is at my back… Say, just after the 4th of July?