Homework

 Over the past 2 months I have received one specific question about Gold , Silver, and Miners often enough to know that it’s important to the readers here. Even though I answered that question in separate emails, I have already done the homework, so why not share it here in the weekend report to benefit everyone?  First, a market review…

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SPX – This is the area that I have been pointing out for the markets to prove themselves.

Now a look at the SPX WKLY chart…

SPX WKLY – This actually looks bullish so far, and the MACD curled upward, but it needs to recover the 10ma wkly next.  A year end rally will improve the chart,  a drop into the year end will look like rejection.

NASDAQ –  The daily chart did recover the 50 & 200 sma,  but the end of the year may reveal if it has real strength or weakness.

IWM –  This has lost support, regained support,  tagged the 200sma and was rejected, and now broke down through the 50sma and is approaching it again.  Looks rather weak, huh?  So the markets are questionable going into 2016. 

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USD –  I have mentioned weakness in the dollar lately, and that was a BIG one day drop in early December. Thursday it closed below the 50sma and may drop further to the 200sma.  This still looks weak so far.

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WTIC–  Oil got interesting this week. It is bullish short term  ( And maybe longer term).  I said weeks ago that OIL was struggling at the 20sma and the macd couldn’t cross higher, so I was watching those areas on a daily chart.  Oil closed above the 20sma Thursday with a macd cross on day 8 of a new daily cycle.  Note: The RSI  DID NOT turn higher, it went sideways on the bounce, so I am watching that short term.

 

WTIC WKLY –  On a weekly chart,  Oil looks like it could have put in an ICL. We see a high volume capitulation type candle 2 weeks ago and a possible shake out/ recovery  move that usually results in short covering rally. Was that a shake out?

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Also the OIL BIG PICTURE indicates that this may be THE LOWS. That Relative Strength says a lot about minimal downside left . 

 Some of the Energy stocks have been slaughtered and traders are catching bounces of what could turn out to be 100-200+% if Oil has bottomed. I will be looking for higher lows as possible low risk set ups.  Look at LGCY as an example:

 

NATGAS –  On Dec 18 – Natgas had run very low and deep and I had mentioned that it is due to put in an ICL timing wise. I pointed out a possible run up to $2.08  ( 20sma) , a dip,  and then another leg higher. The dip is a buy.

 

NATGAS – NATGAS has run quickly to $2.10.  Now it looks like it could run to resistance near $2.20 before pulling back, but I think that the pullback will be a higher low and a buy. The green line is the 10sma which will be curling up soon.

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GOLD SILVER & MINERS  ( And some homework)

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GOLD –  We have a sideways consolidation at the lows. The RSI is rising quickly though price isnt, that can be bullish. The COT is strongly Bullish, and…

 

Miners have taken the lead again. Often that is viewed as bullish.

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GDX DAILY –  GDX broke above that blue trend line that I have been pointing out. It may break through the 50sma or we could see a brief gap fill and then a move higher.  Miners are a buy at this point, using a semi-close stop under that trend line. Obviously individual Miners have stops based on their buy points,  like SA loosely below the 50sma, etc.

GDX WKLY – Nice weekly reversal and I am pointing out that we have higher lows since the September lows.  Higher highs in time would become quite bullish too ( above $16.90).  If we get a series of weekly higher highs and higher lows, I think it will draw in a lot of buyers who view this as the start of an uptrend.

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THE HOMEWORK

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  As mentioned,  I have been repeatedly asked the question , “What will Gold do in a rising interest rate environment.“

  I would say there are various factors to consider, but I did do some homework to add weight to the answer that I have been giving.  I have been saying that I remember in 2004 when the FED would surprise the markets with a rate hike, it was bullish for Gold once the dust settled.  Here is my homework  in behalf of that answer.

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 I want to first note 1 difference and 1 similarity, which will also be proven here.

  1. Gold was already in an uptrend after putting in the lows in  2001  (different than now). 

  2.  The FED said in 2004 that inflation was NOT a concern  ( But they raised rates 4x).  Same as now.

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Please note that this article discusses a rate hike June 30, 2004, and then AUG 10, 2004, from the lowest rates in 40 yrs.

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Please note another rate hike SEPT 21 , 2004

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Please note November 10,2004 …  a 4th rate hike in 2004.

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So now we know that the Fed raised rates in  JUNE, AUG, SEPT, NOV 2004 –   what did that do to the markets?

 

I swear that almost Every article that I read is saying that rate hikes are USD Bullish, right?  It wasn’t in 2004.

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SPX –  The markets had a mixed reaction when the Fed raised rates. Markets dropped and got jumpy at first, but overall they were higher after the 4th rate hike. 

 

The one we’ve all been waiting for…

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What happened to GOLD when interest rates were hiked after being held down for 4 years?  Gold actually popped with each rate hike.  Basically  Gold went higher from May to Dec, with normal pullbacks.  Interest rate hikes did not kill Gold, even when the Fed said , “We are currently not concerned about inflation.”  They say that today too.

MINERS –  GDX was not around back then, but we used the HUI & XAU to track Miners. I see normal cycles,  maybe you’d see a 1-2-3-4-5  if this was a weekly chart, but any way you look at it,  rate hikes did not “kill Miners”. The HUI went from $170 to almost $250 from July to Nov 2004. That’s a rise of about 50% with 4 rate hikes.

 

   In conclusion:  That really only answers the question  “What might Gold & Miners do with interest rate hikes?”.   They can and have risen in the past.   However,  current conditions are bit different.  Gold had already bottomed and been trending higher in 2004,  so what WILL happen this time remains to be seen.  SO FAR, we had a rate hike in December and Gold didn’t really flinch, it looks poised to move higher.  And with this above information , at the very least,  you can laugh out loud if you read 1 more article that says that Gold will surely get crushed in a rising interest rate environment, and it is always  Uber bullish for the $USD.   I say if they’re going to write an article about it, tell them to please…

‘Do your homework’.  🙂

 

 Big Picture:  Another area that we will have to do our homework is in the Commodities sector.  I think that several areas could possibly be currently lining up for some  big % moves in 2016.  Look at 3 year charts of X, CENX, AKS, etc for example.  If Commodities run higher,  these will do very well, but it will take a little more time to see if things continue to line up this way.  Double bottoms or higher lows will begin to form in Commodities, Precious Metals, etc.  when their final lows are in  ( they may be in already in some areas).  The trades / investments  could be very good.   The $USD may be double topping,  that should push Commodities, Precious Metals, and OIL higher as the USD drops.  The changes that are developing could become major turning points, so we’ll keep monitoring the big picture as well as the short term trades.   Thanks for being here and enjoy the rest of your weekend.

 

~ALEX