Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Markets Outook for Gold, Stocks, Volatility, Euro and Bonds

Stock-Markets / Financial Markets 2011 Aug 23, 2011 - 04:19 AM GMT

By: Willem_Weytjens

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleOne month ago, the SP500 was trading at 1,345 points. Today it is trading at 1,128 points, or down over 16%.
One month ago, Gold was trading at $1,601. Today, it is trading at $1,891, or up over 18%.

We therefore look back at some historical developments in this report, in order to forecast future developments.


Let’s start with the SP500.

The SP500 retraced 38.20% of the rally from 2009 to 2011. The 50% Retracement level is often tested. This means we could see 1,020 on the SP500 over the next couple of weeks/months, where the market should find support.


Chart courtesy Stockcharts.com

However, nothing goes up or down in a straight line. After huge sell offs, we often see strong rallies.
The RSI was very oversold recently but has worked itself out of this oversold position over the last couple of days.
A lower low for the SP500 will likely be accompanied by a higher low for the RSI, causing positive divergence.
That’s a time you would want to buy stocks.


Chart courtesy Stockcharts.com

In fact, when we look back at the last 20 years or so, the markets often set strong bottoms when the RSI fell this low:


Chart courtesy Stockcharts.com

Will this time be different?
Let’s look at Volatility.

When the VIX-index climbed towards 45, the markets often bottomed (except during the financial crisis of 2008-2009)


Chart courtesy Stockcharts.com

This is confirmed by the VXO index. Over the last 20 years, the VXO approached the 50-level about 4 times. In 3 out of 4 times, the markets bottomed.
The only time when the markets did NOT bottom, was in 2008-2009, during the Financial Crisis, when the VXO went as high as 85!


Chart courtesy Stockcharts.com

When we look at the Equity Put/Call ratio, we can see that when this ratio climbed as high as 1.00, the markets often bottomed (at least temporarily). When the Put/Call ratio is high, it means the mass is expecting prices to decline, so they buy put options.
We all know that, when the mass expects something, it often pays to be contrarian.


Chart courtesy Stockcharts.com

So, although markets could go a bit lower, there is a pretty high chance that we are AT or CLOSE TO a bottom.

Let’s see what the bond market thinks about that.

The 30 year Bond yield is currently at a long term trend support line. The only time yields fell below this trend line was during the financial crisis of 2008-2009, when investors rushed into the perceived “safe” treasury bonds. Bond yields could possibly bottom here, unless the bottom falls out. Rising bond yields are often related to less risk aversion, and would in this case bode well for stocks.
If the bottom falls out, expect the financial Tsunami of 2008 to be repeated.


Chart courtesy Stockcharts.com

TLT, which is the ticker of the iShares Barclays 20+ year Treasury Bond Fund, has now hit its all-time high, reached in 2008.
The RSI on a weekly basis is almost as overbought as in 2008, so we could see a potential DOUBLE top being formed here.


Chart courtesy Stockcharts.com

Less Risk aversion, would probably lead to lower gold prices, as that is the hottest “safe haven” out there at the moment.
Do we see signs of a potential top in gold prices? Maybe. Price is currently at the long term uptrend resistance line, which was created by the tops of 2006 and 2008. Price is now 26.83% above its 200EMA, the highest since 2006, when it was as high as 33.5% above the 200EMA. If gold breaks out above this trend line, I expect price to explode, dwarfing recent gains. I have always said that I expect to see $50-$100 moves in a single day before gold would top. Well, maybe that time is right ahead of us.


Chart courtesy Stockcharts.com

Much of the above conclusions of course, depend on the potential outcome of the EuroCrisis, so therefore it’s a MUST to analyse the EUR/USD exchange rate.

We can see in the chart below that the EUR/USD retraced 23.60% of the rally from 2010 to 2011. As said before, the 50% level is often a target, so we should expect price to retrace to about 1.34. However, a breakout above the red resistance line could give us higher prices. This could be the result of positive developments in Europe, or worsening developments in the US.


Chart created with Prorealtime

When we look at the long term chart of the EUR/USD (based on the old Deutsche Mark), we can see a similar pattern today as in the ’80s and ’90s. If history is any guide, we could expect the EUR/USD to fall to roughly 1.00-1.10 over the next couple of years…

Chart created with Prorealtime

For more analyses and updates, please visit www.profitimes.com

Willem Weytjens
www.profitimes.com

© 2011 Copyright Willem Weytjens - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in