Not Liking This SPY S&P 500 vs GLD Gold Chart

Not much to say about it, really, other than to me it looks ugly. It looks very much like intervention by {someone} to prop up a narrative and not at all like normal market actions. SPY is rising, but with nothing real behind it, and GLD has topped, while the news is pushing it.

This is a 2 year chart, so shows both context and to some extent recent detail. It is a daily chart, so more detail oriented than the weekly tick mark charts that emphasize long term trend, still, with 2 years on it, you can visualize the trends.

SPY vs GLT and TLT 2 year daily chart Aug 2016

First off, price of the main ticker, SPY, is rising, and all the normal trend following indicators say it ought to continue to rise, yet the strength indicators say “there’s no there, there”. So what the heck does that mean? Usually, that means the trend is ending or over. But with The Fed at Zero (or close enough for all practical purposes) does “usually” apply?

So the SMA Simple Moving Average stack is “normal” for a rise. Price over slowest over longest. The MACD is going sideways in a sort of an almost weave as it does in long duration trends, and is above the zero line so positive trend. Yet it is “red on top” that means exit or get ready to exit (put in stop loss orders or buy puts). Downward sloping indicating a weakening trend too.

ADX / DMI has blue over red (above black) all of small size, showing a confusion in the trend. The “positive” blue headed to nothing (trend up ending / ended) and with black ADX line at 15 and dropping indicating “no trend”… After a run up, no trend precedes drop… and red headed upward to take over the trend (i.e. “down soon” implied). (Click to embiggen the chart. There’s a tiny upturn in red in August).

Then there is volume. Just look at how weak it is under the latest up days. Volume dries up on rises before drops. (Look back at last Christmas / New Years and the August / October before that. Volume dries up, then prices drop. The market is a volume seeking mechanism as that is where commissions are generated.) Very much not good.

Now, some months back (June 16) I said the trade was to be in gold. It has been rising nicely for a while, but the last two months has not gone through a new high. Lows are rising, but not highs. Someone is selling at a price and putting a lid on rises. Looks like Gold needs a new look in more detail. It does have long stretches of near flat wobble, then jumps up in a few days, so this could be ‘toppy’ or just another waiting sideways.

Now also this graph has TLT on it. Long term bonds in a fund. (Why anyone would buy near zero bonds in a flat market facing a Fed Rate Hike “soon” is an interesting question, but clearly someone has been. Until the last couple of months…) It now has the same “spike and dribble” shape as the recent gold prices. So what the heck is going on? To me, it looks like prices have hit a top and big money is selling at that point.

But what the heck are they buying?

Whatever it is, it doesn’t look to me like it is on this chart. So I need to do a broader brush look at global assets. Big Money is looking for a return, and it isn’t seeing it in bonds, nor is gold interesting at this price, and stocks are just way too much risk for the tepid return. So is it all just running for cash, or for something / somewhere else?

While I’d not immediately abandon the whole gold trade, I’d start scaling out of it. Same thing for bonds (the odds of any rate decrease that would raise the value of existing higher premium bonds is near zero). Stocks look like a possible short “soon”. That mostly leaves real estate and commodities as places to look for play. Commodities not likely in a flat global economy and real estate a maybe.

OK, I have my work to do. This is just a heads up at best. A first glance “What The?” that says to go spend time figuring it out.

But I’m really not seeing anything in the US market to be happy about. Maybe from a ROW Rest Of World perspective the strong dollar makes it worth the near zero coupon on the bonds, but even there I’d be surprised as a straight currency trade would be as good. Then again, a lot of folks, like me, rarely or never trade currencies.

With that, I need to go digging and see what else turns up.

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