"I hope you win the war you tell no one about." -Unknown The Golden Goose: As equity markets continue their roar higher, gold does not want to be left behind. On the MONTHLY chart below Gold can be seen acting well in October, a tough one for the equity markets and a response many would have thought logical given its traditional "defensive" status. That month gold rose almost 6% and for good measure last month tacked on another 2.2% and in December will go for a rare 3-month win streak (which would be just its second time since early 2020). The reason I am bullish on gold and keep in mind it has a recent correlation to the S&P 500 is the fact that it is not acting jittery at the very round 2000 number as it has in the past. It backed off there with dubious candlesticks with a spinning top in August 2020, a shooting star in March 2022, and back-to-back spinning tops again this April and May. The MONTHLY bull flag below shows a path to the very round 3000 number if it can CLOSE above 2100 on 12/29. Overall notice too how gold bottomed last November with equity benchmarks with a bullish engulfing candle (which ended a 7-month losing streak) at the rising 50 WEEK SMA. It recorded that same candle this October.
Not Recessionary: The industrial space as a whole has come to life during this one month plus market surge. And in particular a couple are screaming no recession forthcoming. The JETS ETF is now higher 4 of the last 5 weeks, albeit from a very low trajectory, but it signals a consumer willing to spend on discretionary items. More relevant may be the chart below of the IYT, which shows some possible good things on the horizon as we know goods need to be shipped and it shows up in the PRICE action. Railroads are acting well. CSX broke above a double bottom with handle trigger of 32.74 Friday. UNP, the top holding in the fund, is building the right side of a cup base. To be frank I was surprised to see UBER as the second largest component, although perhaps a smart idea by the selection committee to inject some growth into it. UPS, which I have always liked FDX more, recorded a bullish three white soldiers WEEKLY pattern this week. Overall the industrials over the last one month are holding in there with some of the best actors with the XLI up 10%. Give the group some respect.
"He Who Sweats More in Training Will Bleed Less in War" -Unknown Joining The Party? It is no secret that the small caps have been the laggard in 2023 with the Russell 2000 up just 2% in 2023 while the Nasdaq and S&P 500 are up 35 and 18% respectively (the Dow is higher by just 5% YTD). There has been some correlation in the last couple of months with the small caps gaining as the 10-year dropped as we know this group is very sensitive to interest rates. Several weeks back we thought the group was ripe for a move upward as it was testing a MONTHLY double-bottom breakout from November 2020. Keep in mind the Russell 2000 is concentrated mostly in financials and industrials so if its strength can continue it would point to a broadening out in improving breadth. There will be some headwinds for the IWM here as it faces a "cluster of evidence" here with an upside gap fill, 200-day SMA resistance, and the testing of the former breakdown of the bearish head and shoulders (to be fair the measured move toward 160 was achieved almost perfectly). A couple of CLOSES above the 200-day SMA should get bulls invigorated.
"Enjoy when you can, and endure when you must." - Goethe Familiar Territory: The S&P 500 is in a recognizable area, back where it was rejected for 6 sessions in mid-October near the very round 4400 number. My feeling is that an instrument is a bit more confident the second time around testing a level. If it could break through that would signal a couple of confidence factors. First off it would break the series of lower highs that started with the bearish engulfing candle on 7/27 at the round 4600 number. Secondly, it would finally negate the bearish head and shoulders breakdown in late September (we spoke of the measured move to the 4100 level a couple of weeks back). Look for some stability above the 50-day SMA next week which then could start a possible double bottom base. The brute buying force in my opinion was best seen in the futures shrugging off the AAPL debacle Friday Morning. Another affirmative signal came from the quick recapture of the 200-day SMA late last week. Is this going to work out the same as when the benchmark CLOSED below the secular line for the same 5-6 sessions in early March before regaining its composure and resuming its powerful uptrend into the end of August?
"A man should look for what is, and not for what he thinks should be."- Albert Einstein Size Matters: The above quote can be applied to how investors perceive markets. Remember the markets are always right and one should try to listen to what they are saying very closely, and not how they think they should respond. Below is the MONTHLY chart of the small caps, which many believe are good leading indicators and they have looked perilous all year. The IWM is lower by 7% YTD, trailing well below the Nasdaq and S&P 500 which are higher by 17 and 7%, and the Dow down by 2% in 2023 thus far respectively. It is 2 days premature to look at the MONTHLY chart but its pierce underneath the 50 MONTH SMA in October looks definitive and notice the last time that occurred in early 2020 PRICE collapsed. I am not saying there is another COVID situation around the corner, but technicals are technicals and they speak. It was glued to the secular moving average since last May and its inability to thrust off of it in hindsight was telling. Perhaps we can see a crescendo of selling into year-end for some capitulation and a possible bottom but this looks like a do-not-touch for the time being. Its daily chart has not responded to two doji candles this past week another sign of worry.
Market Needs Apple: Many market participants are shouting loudly that NVDA holds the key to the market whether it is able to hold the key round 400 number in a bearish head and shoulders neckline we spoke about earlier this week. But AAPL is still the largest company on the planet and holds sway. One may say, and I totally agree with this, that Apple has not really displayed much innovation in years, while NVDA certainly has. That being said like NVDA, AAPL is at a key technical level here as on the WEEKLY chart below it is testing the rising 50 WEEK SMA for the first time after a breakout, often a good initial entry in a strategy that was developed by William O'Neill. Volume trends are bearish as the stock has not recorded an accumulation week in 7 months and on its daily chart, it did just crack the 200-day SMA. There are plenty of technical stops placed around that secular line so let's see how it reacts in the coming weeks. If it can keep in the vicinity of the line that would be bullish, but the longer it swims below the less sanguine the message is.