Gold Update

In August 2018, gold carved out the bottom outlined via this projection published in the August 29 Profit Radar Radar Report.

Gold appears to have finished the first leg of this rally on February 20 at 1,350, which was followed by a 70-point drop.

The March 10 Profit Radar Report featured this gold chart, which projected a rally to about 1,320 followed by a drop back into the 1,250 range.

Gold made it as high as 1,325. As the updated chart shows, price dropped below the short-term black trend channel today (red arrow).

This is the first indication trade should work towards our buy target. The coming days will hopefully bring further confirmation.

Popular gold ETFs include:

SPDR Gold Trust (GLD)

iShares Gold Trust (IAU)

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

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Is Gold Rolling Over Again?

I published the chart with the two CNBC headlines in the January 19 Profit Radar Report. It just illustrates nicely how the change of price affects sentiment and vice versa. A risk trend followers hate and contrarian investors love.

We bought gold at 1,140 (as per the November 5 Profit Radar Report recommendation) when no one wanted to own it.

Now, it’s more fashionable to own the yellow metal again.

This alone is reason to be cautious, but it’s not the only one.

The gold seasonality chart below, featured in the January 25 Profit Radar Report, shows that seasonality soured around January 22.

Although it’s a couple of days old, the assessment published in the January 27 Profit Radar Report is still fully applicable.

The easy money in the gold trade has been made. More attention and mental stamina is required now. Sunday’s PRR showed seasonality is turning bearish. Commercial traders (‘smart money’) have further reduced exposure.

The chart shows that current trade is important from an Elliot Wave perspective. Gold appears to have completed a 3 wave rally. There are now two options:

Gold will trace out a wave 4 correction followed by wave 5 higher. Target for a wave 5 high is around 1,xxx (reserved for subscribers of the Profit Radar Report).

Longer-term, a complete 5-wave rally will be followed by a corrective decline and at least one more rally leg.

Shorter-term, a wave 4 correction could become a pain to manage. Waves 4 tend to seesaw over support/resistance levels, therefore using the trend channel support at 1,275 as stop loss could kick us out at the wrong time.

A 3-wave rally is indicative of a correction and would translate into a relapse to new lows. This option is unlikely, but theoretically possible.

We can either take our profits and run or commit to endure a potentially painful correction in exchange for further gains. I like to keep things simple and recommend taking profits. Lets cash in gold around 1,295 and GLD around 124.20 for a nice 13.5% gain.”

Gold has since dropped to 1,255. The SPDR Gold Shares (NYSEArca: GLD, iShares Gold Trust (NYSEArca: IAU) and Market Vectors Gold Minders ETF (NYSEArca: GDX) also peeled away from their recovery highs. I still think gold, GLD and IAU will see higher highs, but it will take some patience to get there.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59%.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Once Largest ETF in the World Drops Out of Top 10

At one point in history, the SPDR Gold Shares (NYSEArca: GLD) was the world’s largest ETF.

Courtesy of a massive gold bull market and the accompanying hysteria, GLD’s assets mushroomed to $77.5 billion. That was in August 2011.

Back than, the S&P 500 traded around 1,100. Gold traded near 1,900. How the roles have reversed (Gold at 1,100, S&P at 2,050).

The SPDR S&P 500 ETF (NYSEArca: SPY) is now $205 billion strong, while GLD amounts to ‘only’ $27 billion, the 12th largest ETF in the world.

This data may be of some use to contrarians on gold bugs.

In fact, back in December 2013 I used official data from iShares and State Street on the SPDR Gold Shares, iShares Gold Trust (NYSEArca: IAU) and iShares Silver Trust (NYSEArca: SLV) for very insightful sentiment analysis.

The data (tons of gold/silver held, and trading volume) helped me come to the conclusion that gold and silver were still miles away from a major low (view original  SLV analysis or GLD analysis).

Unfortunately iShares does not offer that data anymore (I send an e-mail every month to bug them, but it hasn’t helped).

Other sentiment data and technical analysis triggered a buy signal (sent to subscribers of the Profit Radar Report) for gold in November 2014 at 1,140 (111 for GLD).

We’ve been holding on ever since, but gold needs to surpass strong overhead resistance to give the preferred bullish scenario some teeth.

The fact that GLD has fallen out of favor with investors is a check mark on the bullish side of the ledger.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Simon Says: 3 Most Contrarian ETFs to Own Right Now

Here are three contrarian picks for die-hard contrarians and those who missed the latest stock market rally. Two trades are true bottom pickers, one trade is 2x contrarian, which almost makes it a mainstream trade.

If contrarian investing came with a label, it might as well be ‘no guts, no glory.’ It takes guts to bet against the crowd, but it can pay off big.

I use sophisticated software and crosscheck with basic media sentiment (headlines) to identify extreme sentiment delights for contrarians. Here are my top three choices:

Gold Anyone?

Gold prices have dropped almost $800 since September 2011, and according to many pros, gold will shed another $300 – $400. Here are a few recent doom and gloom headlines:

  • “A final purge to $700? What gold bulls surrender might look like” – Nov. 12
  • “Here’s why gold could be headed to $800” – Nov. 12
  • “Gold bulls beware: More pain coming” – Nov. 10

If gold is going to drop another few hundred bugs, why would anyone hold on to it? That’s the crux of contrarian investing. In the midst of extreme pessimism, there are not enough sellers left to drive prices much lower.

It appears that gold is at or near this point, often called the ‘puke point’. Gold ETFs like the SPDR Gold Shares (NYSEArca: GLD) and iShares Silver Trust (NYSEArca: IAU) are likely to surprise many to the up side.

Fill up The Car Honey

According to the U.S. Energy Department, low gas prices aren’t going away anytime soon. I don’t recall the Energy Dept predicting a 30% drop a few months ago, but that’s what happened.

According to one ‘pro’ interviewed on CNBC, gas may drop to $30.

Catching a bottom in oil prices is a bit like catching the proverbial falling knife, but simply based on investor/media sentiment, this slippery, oily knife is closer to the kitchen floor (a bottom) than the hand that dropped it (top).

The United States Oil Fund (NYSEArca: USO) and Energy Select Sector SPDRs (NYSEArca: XLE) are two ways to play a bounce.

The Ultimate 2x Contrarian Trade?

Back in May I noticed, and reported on, the unusual amount of bearish media coverage. Russ Koesterich (chief investment strategist at BlackRock), Wilbur Ross (billionaire investor), Carl Icahn (billionaire investor), David Tepper, Marc Faber and Peter Schiff predicted a serious correction or outright market crash.

In the spirit of no guts, no glory, I wrote back then: “Here’s a message for everyone vying to be the next Roubini: A watched pot doesn’t boil and a watched bubble doesn’t burst.”

Some of the recent headlines make we wonder if we’re in for a May/June repeat:

  • “Sentiment is ‘off the charts’ bullish” – Nov. 12
  • “Don’t get suckered by stock market winning streak” – Nov. 12
  • “Marc ‘Dr Doom’ Faber: I will soon be proven right” – Nov. 13

Yes, sentiment polls show excess optimism, but can it still be considered a contrarian indicator if everyone reads about it? Will two negatives make a positive?

Another factor to keep in mind is that actual money flow indicators do not confirm sentiment polls. Investors don’t seem to be putting their money where their mouth is.

Therefore, owning stocks into next year may be more of a true contrarian move than selling stocks. Instead of owning broad market ETFs like the S&P 500 SPDRs (NYSEArca: SPY), I would probably opt for certain sector ETFs that offer more up side.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Smart Money is Leaving Gold Just as the ‘Herd’ is Jumping in

From June 2 to July 10 gold prices surged 8.7%. Commercial traders were the first to get in on this rally and the first to get out. While commercials pulled out, the ‘herd’ (or dumb money) piled in. Could this be a significant gold high?

The greater fool theory may just be playing out in the gold market.

Commercial traders (often considered the ‘smart money’) have been pulling money out of gold while investors and speculators (often considered the ‘dumb money) are piling into gold and gold ETFs.

The most popular gold ETFs are the SPDR Gold Shares (NYSEArca: GLD) and iShares Gold Trust (NYSEArca: IAU).

The chart below plots the SPDR Gold Shares against the futures positions of commercial traders (Commitment of Traders report).

Commercials’ exposure to gold futures just dropped to the lower level since October 2012. This marked the onset of a nasty decline that accelerated in March 2013, the only other time commercials really scaled down their exposure (red lines).

Partially based on investor sentiment, the June 13 Profit Radar Report recommended to short gold (unfortunately, our sell stop was not quite triggered).

Various media outlets linked this week’s gold (and GLD, IAU) selloff with Yellen’s comments about inflation.

Those comments may have contributed to gold’s $50 drop, but it can’t be the only reason. If it were, it would imply that commercial gold traders (which started selling gold weeks ago) could actually read Yellen’s mind.

Is there another reason why gold prices sold off? Yes there is.

In fact, based on a combination of factors, the June 1 Profit Radar Report projected a gold rally to around 1,350 followed by a steep reversal.

The actual price projections, the reasons for the projection, and what’s next is discussed here:

Gold Chart at the Cusp of Breaking Down

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Despite Selloff – Gold is Holding Support … For Now

Various media outlets listed many ‘convincing’ reasons to buy gold (a few examples of recent media blunders are listed in the article), but the gold market did exactly the opposite. Why did gold drop and where will it find support?

On June 8, Barron’s reported that the gold speculators are back and the Financial Times observed that gold bulls feel no need to hedge their gold position.

On June 11, MarketWatch ran an article titled: “Why mining stocks point to gains for gold prices”.

On June 14, gold prices (and gold ETFs) fell 45 points or 3.5%.

What happened?

Gold ran into a triple barrier.

That triple barrier is made up of:

  1. Technical resistance
  2. A seasonal weak spot
  3. Bullish sentiment extremes

The July 13 Profit Radar Report pointed out that: “Gold is making progress towards our up side target. We are considering a small short position.”

What was the up side target and how was it determined?

The up side target was 1,350, determined by combining technical analysis, seasonality and sentiment.

The June 1 Profit Radar Report published this price projection (chart below, yellow lines) and stated:

“On Friday gold slipped into our support zone at 1,255 – 1,230. Gold sentiment is quite bearish, so the immediate down side may be limited. The yellow projection shows one possible route to get to 1,350+/-.”

In terms of time, the projection was off by a couple of weeks, but gold reversed rather violently when it neared the outlined cluster of technical resistance levels around 1,350. Since prices did not completely touch the resistance cluster, there is still a chance of another bounce to ‘complete unfinished business.’

The SPDR Gold Shares ETF (NYSEArca: GLD) chart below offers an updated look at the gold market, with some interesting technical nuggets (chart published on July 15 by iSPYETF.com).

  • GLD found support right at the June 19 gap up open. I’m showing the GLD chart, because this gap is not visible on the futures chart. Support held and gold (and GLD) should bounce as long as this support holds.
  • GLD is trading heavy, as trading volume during the selloff was elevated. This cautions of further weakness eventually. A close below 124.30 would likely trigger another step down.

Based on the actions of commerical traders, which includes actual gold miners and other insiders, gold may see more selling.

Here is what commercial traders are doing and why this may be concerning:

Smart Money is Leaving Gold Just as the ‘Herd’ is Jumping in

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Short-Term Technical Analysis for Gold

Gold is at one of those potential key juncture where technical analysis can really enhance the message of investor sentiment. Excessive optimism suggests some trouble ahead. Technical analysis for gold can help pinpoint when.

On February 7 gold prices exceeded trend line resistance (dashed red line) that capped every prior breakout attempt.

The breakout is highlighted by the blue oval.

On February 9, the Profit Radar Report stated that: “Gold is chipping away at trend line resistance. The odds now favor a spike higher as long as there’s no close below 1,254. Key resistance and possible near-term target is at the descending trend line/trend channel resistance around 1,340.”

The February 17 Profit Radar Report refined the up side target: “Ultimately gold may move higher towards 1,360 or even 1,400.”

Gold is close to the up side target and the March 16 Profit Radar Report warned of excessive optimism, so there are a few things worth considering:

1) On March 14 gold closed at a new recovery high. This recovery high was confirmed by RSI (yellow line), which is generally considered bullish.

However, prior highs (August and October 2013) were also accompanied by a new RSI high and didn’t prevent further declines.

2) On March 17 gold touched the upper side of an ‘old’ trend channel and reversed (gray circle).

3) Tuesday’s decline triggered a ‘bullish percentR low-risk entry (pink circle). The initial drop of percentR below the 80 line (pink oval) is generally considered an opportunity to buy as long as trade doesn’t close below that day’s low (1,351). The corresponding ‘failure level’ for the SDPR Gold Shares (NYSEArca: GLD) is 130.33, for the iShares Gold Trust (NYSEArca: IAU) 13.11.

A close below 1,351 will be a failed bullish low-risk entry. Over the past year, every failed low-risk entry resulted in further losses.

It may be too early to bury this gold rally (there is still a possible higher target – see March 16 Profit Radar Report), but sentiment strongly suggests that the next bigger surprise will be to the down side.

Here is a piece of gold (and GLD, IAU) sentiment analysis that may surprise you and put a smirk on your face at the same time.

Gold Rally – New Bull Market or Bull Trap?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.