Will Trump debate in Iowa? This S&P debate more important!

trump pic

While many today are discussing the possibility that Donald Trump will not be present at the debate in Iowa, I humbly feel a bigger debate is at hand with the S&P 500. See below why I feel this way.

spx debate which trend is more important jan 27

CLICK ON CHART TO ENLARGE

For the past 2,005 days, the S&P 500 has created a series of higher lows and higher highs (Green channel above)

For the past 180 days, the S&P 500 has created a series of lower highs and lower lows (Pink channel above)

Which trend do you feel is more important per making portfolio allocation decisions at this time?

I suspect that many can create a solid debate on either side. Is this the only trend in play?

spx little to brag about sideways action jan 27

CLICK ON CHART TO ENLARGE

What about the sideways trend above? Bulls nor Bears have much to brag about the past couple of years, as the S&P 500 has chopped sideways inside of a horizontal channel.

Regardless of which side you are on, from a Power of the Pattern perspective, we humbly feel a really important test of triple support is in play right now!

What does the 2,005 day rising trend, the 180-day falling trend and the sideways chop have in common? Support is being tested, in each case mentioned above and support is support until broken.

Should support give way, three trend changes would be taking place at one time and we feel that would become important for portfolio construction. If support would give way, we suspect the new debate will become, “where is the next important support level!”

 

Risk “On/Off” indicator hitting 5-year support

on off switch pic

One of the more popular indicators for the “Risk On & Off” trade is the Discretionary/Staples Ratio (XLY/XLP).

When the ratio is moving higher, Discretionary stocks are acting stronger and the message would be; investors should be leaning towards the “Risk On” trade.

The opposite is true too, when the ratio is heading lower, Staples are acting stronger than Discretionary Stocks and the message to investors is; lean to towards the Risk Off trade.

Below looks at this Risk On/Off Ratio

discretionary staples ratio tests 5 year support jan 26

CLICK ON CHART TO ENLARGE

The Risk On/Off ratio has declined sharply of late, no doubt about it. The decline is concerning for the Risk On crowd.

The decline has taken the ratio to 5-year rising support. The pattern looks just like global markets, which are testing 5-year rising support.

90-Day trend is down, 5-year trend is up.

Keep a close eye on the Risk On/Off ratio as is testing key rising support.

Above support = Risk On Trade from a long-term perspective.

Below 5-year support = Negative message for the Risk On Trade!

I humbly feel what the Ratio does at support, will have a large impact on portfolios come summer.

 

 

Gold testing multi-year breakout level!

In the summer of the 2011, a rare set up was in place in the Gold and Swiss Franc markets. At the time the Power of the Pattern shared that Gold should be “Down for years to come.” See why we shared this near all-time highs in gold (HERE)

Since that post, the metals complex has its worst 3-year declines in history!

metals 3 year returns jan 25

CLICK ON CHART TO ENLARGE

We shared this table with Premium and Metals members at the first of this year. As you can see from the table above, Gold has just experienced its worst 3-year return in its history and Silver is not far behind, as it just experienced is 2nd worst 3-year decline in its history.

Are the hard times over for Gold & Silver? Has the trend changed for them?

The clear answer from the Power of the Pattern at this time is; the multi-year down trend remains solidly in play!

goldbreakoutattemptjan 25

CLICK ON CHART TO ENLARGE

This chart looks at Gold on a “Monthly Closing” basis, back to 1979. The decline over the past few years saw Gold come down to its 50% Fibonacci retracement level of its 1999 lows and 2011 highs at (A) above. At the same time it is testing the Fibonacci level, monthly momentum is reaching oversold levels. Last time monthly momentum was this low was back in the late 1990’s.

At this time Gold is now within 1% of 3-year falling resistance at (1) above. No doubt the trend is down at this time. Gold is being presented with another resistance test, to break from its solid bear market trend at this time.

If Gold can take our falling resistance, it would be a first in years. Could become an interesting development in golds trend lower!

Another tool we share with Premium and Metals members each week is our Silver/Gold ratio (See Below)

gold silver ratio jan 25

CLICK ON CHART TO ENLARGE

We have shared with members the above chart for the past few years. This ratio compares the price of Silver to Gold. The ratio remains in a downtrend for sure, as it continues to create a series of lower highs, below falling resistance line (1). The ratio is nearing the lows it hit three different times over the past 20-years.

Bottom line…Metals remain in a downtrend. Gold and the Silver/Gold ratio are both facing key falling resistance tests at this time. If Gold and the Silver/Gold ratio break falling resistance, the potential for a counter trend rally increases by a good deal.