I hope you’ve all enjoyed a good week! I’m relieved to report World War 3 has not begun, and that things, in fact, appear to be ending the week in a calmer tone. At the time of writing, the VIX is down at 12.3, gold is $50 lower than the high seen on Wednesday, and today’s US jobs report saw unemployment held at the exceptionally low rate of 3.5%. It shouldn’t come as any surprise that the S&P 500 has set another intraday record high today, either. In all honesty, it has felt like a rather long week so I will aim to keep things short today with a couple of charts, to sum up, the action ahead of the weekend (my full analysis is, of course, available on-demand in the Trading Club video produced for our members on Wednesday).
Our Market Risk Checklist indicated a ‘risk-on’ move heading into January, with a score of +1.
As you can see, even against the backdrop of generally negative headlines surprising investors, the fundamentals captured by our process were sufficiently supportive to push the Industrials / Staples ETF ratio higher.
The bigger picture also looks good as our Business Cycle Checklist remains resilient at +2.5, indicating expansion and support for risk markets.
Here’s the chart taken from the slides I presented in our Trading Club video analysis earlier this week. The S&P 500 is just over 50 points higher since the time of recording and looks very great for bulls.
So why then has gold tested $1600 this week, having been as low as $1450 only last month? Our Checklist suggests that this is a consensus position which was due to correction before the face-ripping melt-up in the past couple of weeks...
Here you can see the print above $1600 at the time of recording on Wednesday, despite the negative score.
I emphasised in the previous week’s video that a close above 1531 (1527 at the time) would probably see a bullish continuation towards fibonacci extension levels targeting 1577, 1583 and possibly even 1627 before the upside momentum is spent and it looks possible to consider a short (without getting steamrollered). As you can see from the chart I used on Wednesday, my technical analysis has played out almost exactly, though I also made clear that remaining beneath 1531 would have kept the immediate short in play. For now gold has corrected sharply off the high, and is consolidating around the previous high / resistance at $1550 which keeps a bullish continuation in play towards my original final target of 1627 if this level holds as a base here.
Time will tell how this all plays out, but what’s clear is that things are becoming far more complicated in markets and it has never been more important to trade with a proven process. Recognising this as professional investors, we provide our Checklists for a range of markets at the Trading Club and update them for our members on a monthly basis with video updates each week tracking the evolution in markets.
If you would like to join us for our full analysis including new insights each week or learn from the ground up with online tuition from Lex in our Million Dollar Traders online course, then join us today and take your financial knowledge to the next level right away!
Have a great weekend,
James Helliwell | Chief Investment Strategist