Gold, Long Term

For several years I've been following the accelerated long term uptrend in gold which started in 2008.  For good price and volume trading data, I've been using GLD, the gold etf, since it tracks (one tenth of) the price of gold very closely and since its volume data captures the sentiments of gold traders.  From time to time, I've shared with friends my monthly bars chart of GLD which contains the Midas S curves and TopFinder (TF).  But before today, I hadn't looked at it for many months.  So, after yesterday's big drop in gold, this morning I pulled up this chart to see what it can tell us.  Here it is, updated through yesterday, but otherwise not altered in any way:

The TopFinder, TF2, followed the uptrend, and ended at the end of July 2011.  Immediately after that, price popped up into what I call an Overhead Consolidation, a formation that I explain in detail in our book.  Briefly, it is one of the forms of a consolidation that can follow the end of a TF.  

Notice that in late 2011, price broke and closed below S4.  If one were not using the TF, that event would've signaled the end of the uptrend, five months after the TF signaled it.  

Yesterday's price drop drove the April price bar well below both S3 and S2.  The month isn't over yet, so we don't know where this bar is going to close.  If it closes below S3, then we're in a new long term downtrend in gold.  However, if it closes above S3, then that bar will be what the Wyckoff folks call a Spring, which is actually bullish.  I'll revisit this chart and post it again here after the end of the month.

S&P Short Term - End of Uptrend

In my last post here I noted that since we are in the late stages of the short term uptrend of the S&P 500, we should watch closely for a break and close below S4, which would signal the end of the trend.  That event happened yesterday, as shown on this daily bars chart.

I have begun the resistance curve R1 from this trend's high of last Thursday.  For the moment, price is confined between R1 and S3.  As long as it remains so confined, all we can say is that we're in a consolidation.  A break and close either above R1 or below S3 would indicate the start of a new trend in that respective direction.

S&P Short Term - In A Well Behaved, Maturing Uptrend

This is the daily bars chart of the S&P 500 since last October, updated thru yesterday.  I call this "short term" to differentiate it from that of the weekly bars or longer time frame chart.

This shows an uptrend that started mid last November.  I call it "well behaved" because each pullback in price - late December, mid February and just last week - has settled down to and turned right around at the then highest Midas support curve in its hierarchy of curves.  From last week's low we launch S4, the next curve in the hierarchy.  Yesterday price broke very strongly above the previous high of this uptrend, showing that this uptrend is alive and well and just chugging right along.

This is a classic, text book example of an uptrend being followed by a hierarchy of Midas support curves.  Typically, such an uptrend will spawn a hierarchy of four support curves, plus or minus one, before it ends; rarely more than five.

Since this uptrend is now into S4 of its hierarchy, it is likely late in its life, hence my calling it "mature". At the point after S4 starts, one should pay close attention to it, watching for a pullback that penetrates and closes below S4.  When that happens, that's the signal that the uptrend has ended.

Some may wonder why I have not fitted a Midas TopFinder (TF) to this uptrend to get a projection of when it will end.  A TF only is applicable if the trend is accelerated, which means the first significant price pullback turns around far above S1.  Clearly, we don't have that here, so the TF cannot be applied.  We'll know the uptrend has ended once price breaks and closes below the highest S curve.

Update on AAPL, Intermediate Term

A few weeks ago, in my old now-deceased blog, I posted an analysis of the intermediate term view of Apple's stock (AAPL).  I showed that since its peak last September, it has been in an accelerating down trend, that price had broken below important support, that the head & shoulders pattern projected a downside target price of 313, and that the Midas BottomFinder (BF) projected that it was about two thirds complete in terms of cumulative volume.

This chart shown here (weekly bars) updates what has happened since that last post.





We see that price pulled up a bit in late March, hit the R3 resistance curve, and then turned down again.  That pull-up in price provides another potential place to which to fit the BF.  In my first post, the BF was fit to the pull-up of early December, marked by the upper arrow here.  In the chapter of our book on fitting the TopFinder/BottomFinder, I advise that when there are two significant pull backs in price, one should attempt to fit the TF/BF curve to both as long as the fit isn't too far off from either one.  In my original fit to the Dec. peak only, a duration D of 34 million shares of cumulative volume was needed.  Now I'm finding that a compromise fit to both of these peaks (the two arrows) requires a duration D of 38 million shares.  Doing so I see that the down trend is now 71.4% complete, and I have accordingly adjusted the projected horizontal location of the end of the downtrend.  Assuming that the average weekly trading volume rate continues as it has been, the first fit projected the end of the trend would come approximately in late May, but this new adjustment to the fit is now showing late June.  Of course, if the weekly trading volume changes significantly going forward, the end of the trend would come at a different date, whatever the date is on which the total D of 38 million shares of cumulative volume are fully expended.

S&P 500 Quarter-end Review

We're at the end of the first quarter of 2013, so it's time to review the very long term status of the stock market as displayed by the S&P 500.  All of the charts here are quarterly bar charts.  They are updates of the charts I have shown in our old blog at the end of each quarter, and I'm presuming you have been following such.

The first chart here shows the longest time frame available using daily data on the S&P 500 (displayed here in quarterly bars), covering from 1950 to the present.  The S&P 500 is in the lower pane, and the RSI oscillator in the upper.

This shows that the S&P 500 has been in a very wide consolidation since its top in 2000, and is now back up to that top.  Compare this to the decade of the 1970s, the last time period of a long consolidation that contained a deep market plunge.  In the early 1980s, the market broke out of its malaise and launched into a huge very long term bull market.  Is that what it's about to do now?

To address this question, look at the 12-period RSI on log scale in the upper pane.  I've set its period and scale so that trend lines work well in this display.  Look at the first red trend line.  After the market's washout in 1974, the RSI finally broke above that trend line in 1980, presaging the S&P's breakout into its new very long term bull market.  Fast forward to this present era, and for several quarters now in my blog, I've been watching that second red trend line to see if and when the RSI will break above it.  The second chart here expands the time scale to get a closer look.

First, look at the S&P's behavior in the lower pane.  Recent news reports have all been blathering on about the comparison with the 2007 peak, but I think it's more significant to look back to 2000.  The gray horizontal line's level is at the peak of the market in the year 2000.  Notice what happened at the peak in 2007; although price did poke above the gray line, it quickly retreated and closed below it, which was a  bearish signal, and sure enough, the market plunged to the deep low of 2009.  But look at what has happend now in this 1Q of 2013; the S&P 500 not only went above the 2000 high, but it closed up there.  This is a bullish signal of further upward motion.  Now look at the RSI in the upper pane.  It has finally broken above its trend line, just as it did in 1980.

My Conclusion

It is now more likely than not that the market is not going to plunge down to new recessions lows, but rather will enter an era of a new very long term bull market over the coming years to decade or two.

Caveats

First, this is not a prediction, rather, it's a recognition of relative probabilities, that the market's current behavior is more consistent with a coming very long term bull market than bear market.

And second, there could well be deep market pullbacks ahead on a shorter timeframe than "very long term".  For example, look at the first chart here and notice what happened in the 1980 to 1982 period.  After the RSI broke above the trend line in 1980, the market rose but then fell way back before hitting support and rising again.  That sort of thing could happen now over the coming year or two.  The market could very well fall back to one of the upper green support curves before moving up again.  But it's now unlikely that it will crash down to anything near the lows it hit in 2002 or 2009. 

Welcome to Midas Market Analysis

I am David G. Hawkins, co-author along with Andrew Coles of the book, "Midas Technical Analysis"  (Bloomberg Press - an imprint of Wiley).  Up until a few weeks ago, we had a very nice web site discussing Midas analysis of the markets, but it was hacked and destroyed.  Eventually, we will rebuild it.  But for now, I'm putting up this simple blog so I may continue to post my commentaries on the market.  Once our new site is up, I will fold this blog into it.

This blog is copyright Creative Commons Non-commercial Attribution, which means anyone is free to copy and distribute the contents of this blog as long as it is for non-commercial use and you give attribution to me.