Is the DOW Chart Crazy?

by JDH on October 21, 2017

Last week I said that the market is the best it’s ever been.  This week it’s even better.  Here’s the DOW:

The DOW was up .71% on Friday alone, and more amazingly the Relative Strength Index is over 88.  That’s nosebleed territory.

In the last six months the RSI has exceeded 70 on two occasions, and both times the DOW entered a correction lasting about a month.  Of course the RSI breached the 70 level on October 1, and here we are 20 days later and it’s still rising, so instead of starting a correction, it just powers higher.

Crazy.

It would appear that low interest rates and massive money printing are doing the trick.

(Or perhaps the economy is fantastic, everyone is working, everything is great, and there are no worries, but I doubt it).

What does this mean?  Nothing goes up forever, and and RSI at this level is highly unusual, so I don’t think this is the time to be fully invested.  However, the market has acted crazy since the double bottom a year ago, so it would appear craziness can continue for a while longer yet.  I’m not jumping in what look likes the top, but presumably if the money printing continues forever, the stock market will go up forever.

GOLD

One would assume that with massive money printing, gold would be going crazy.  Not really.  On the first trading day of 2017 gold traded as low as $1,146, and it closed on Friday at $1,280, so that’s a year to date gain of over 11%, which is nothing to sneeze at.

Interestingly the low for the last two years occurred around the new year (it was around $1,050 as 2016 started), so it appears that gold will have another positive year, but nothing crazy.  The double top around the $1,376 level, which occurred in July and August of 2016, is the resistance level that must fall to indicate gold can run much higher.  The spike on election night in November 2016 spiked gold to $1,337, but that was short lived.

Gold managed to get all the way up to $1,357 on September 8, but that was it, and it promptly fell to test the $1,260 level.

So where does that leave us?

The long term trend is up, although obviously the line has a gentle slop, not a rocket shot to the moon like the DOW is doing.  As gold makes it’s stair-step move upward, the logical way to play it is to buy as it drops to support levels, and sell when you have a small profit.

That’s the key.  If you are playing for a 50% gain, it won’t happen.  But if you are playing something like NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, the prudent course is to take a 5% or 10% profit when you have it, sell, and then buy back in when the price eases off.

I wish I had taken my own advice.

I’m currently sitting on NUGT with an average cost of $33.79.  It’s currently sitting at $32.35.  It did trade over $35.40 on October 16, so I had I put in a sell order at $35.40 I could have pocketed over 9% for two week’s work.  Not bad.  Of course I’m greedy, and I want at least 10%, or more, so instead of grabbing the profit, I’m sitting on a small loss.

I’m not in a panic, because there is support at around $31, and again at $31.84 (the two red lines on the chart), so unless those lines are broken I’ll sit tight for another week and see what happens.  I see no reason why we can’t get back to the $35 level again in short order, at which point I cash in and count my pennies.

Of course there is always a chance that something big happens (perhaps in North Korea), at which point gold spikes and instead of pennies, I make a few dimes, or perhaps quarters.

I’d be fine with that.

Thanks for reading.  Perhaps I’ll have good news to report next week.

The Best It’s Ever Been

by JDH on October 14, 2017

The headlines tell the story:

Consumer Sentiment in U.S. Unexpectedly Surges to 13-Year High

Nasdaq rises to record close as Wall Street bets on strong earnings season

Everything is great.  Interest rates are low, unemployment is low, the economy is great.  Granted, the feds have pumped in a trillion or two dollars to keep the lead balloon aloft, but hey, until it crashes, all is good.

I’m not complaining.  I’m happy with where gold is at.

In September the price of gold finally exceeded the “Trump Bump” level of election night, and in 2017 gold has been a solid performer.

Between September 21 and 27 I accumulated NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, with an average cost of $33.79.  It closed on Friday at $35.26, so I am sitting on a small profit.  I considered taking some profits, but I have decided to “let it ride”.

Why?

Two reasons:

First, it’s possible that Trump or the Rocket Man will do something crazy, and that may cause gold to spike.  I don’t actually expect anything to happen.  Trump is a talker, a negotiator, so I assume that he assumes he can talk the USA out of a war.  I hope he’s right.  If not, I’m adequately positioned.

Second, this is a seasonally good time for gold, so I plan to ride that train for at least another week or two.  We’ll see.

That’s the plan.  More next week.

Gold, and a Toppy Market

October 7, 2017

Before we get to gold, how about that DOW? From 13,000 five years ago to 22,730 today, that’s more than a double.  With the Feds printing money like crazy, the correct answer over the last five years was buy, and keep buying.  The double bottom in the summer of 2015 and early 2016 was a […]

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Golden Week Begins

September 30, 2017

This week China closes for a week, for its Golden Week National Holiday.  (I assume it’s true; I read it on the internet). It appears that, for the last few years, the price of gold falls in the weeks leading up to Golden Week, and then bottoms and begins a recovery, which in the last […]

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Will Trump with the Nobel Peace Prize?

September 23, 2017

Occasionally I like to put a title on a post that makes people think “that guy is nuts”, or “that guy understands the term clickbait“.  Guilty on both counts, but for the record, how many wars has Trump started (this week)?  I’m not predicting he will win any prizes, but I do think his handling of […]

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Missile Launch, Terrorist Attack = S&P Record High

September 16, 2017

For the first time ever, the S&P 500 closed at 2,500.  Exactly 2,500.  As though someone was rigging the entire game.  Not that that’s possible. Why? I have no idea. It could be that Donald Trump is the greatest president ever.  That seems implausible, but the stock market is at record highs, so what other […]

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Gold: The Bull Market Resumes

September 9, 2017

It’s back.  Gold. On the late evening/early morning of November 8, Donald Trump was elected President, and the gold market spiked up over $1,340 an ounce.  The spike only lasted overnight, and once the world realized that the world was not going to end, gold collapsed, and was trading under $1,140 by Christmas. So, for […]

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Nothing Again

September 2, 2017

It’s the long weekend, the weather is supposed to be decent (unless you are in Texas), so I will keep this very brief and say nothing much of anything. Gold is at it’s high for the year, so the next resistance level is the magical level of $1,337, hit on election night on November 8, […]

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Gold: We learned nothing this week

August 26, 2017

Last week I asked a simple question:  Has gold hit a triple top, implying it will head down, or will Trump’s antics cause instability leading to a rise in gold? Answer: I don’t know, and I learned nothing more this week. The gold chart certainly appears to have formed a triple top.  After the spike […]

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Gold: Trump Explosion Higher, or Triple Top

August 19, 2017

This is an interesting chart.  Very interesting.  Tell me what you see.  Your choices are: A triple top at just under $1,300, indicating significant resistance at $1,300, so it’s likely that gold will retreat back to the $1,220 level, or A break out, since gold traded on Friday, intra-day, as high as $1,306.90, before closing […]

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