Gold Futures To Test Major Support

Posted on by Mike Seery

Gold Futures

Gold futures in the December contract settled last Friday in New York at 1,962 an ounce while currently trading at 1,860, down over $100 for the trading week, experiencing one of their worst percentage loss in months.

I'm not involved, but if you look at the daily chart, it looks like lower prices are ahead as the downtrend line remains intact, with prices now trading below their 20 and 100-day moving average for the first time in months. It looks to me that prices will test major support around the 1,800 level in the coming days. The U.S. dollar has hit a 2 month high as that has negatively influenced the precious metals that have fallen out of bed this week.

Gold prices are experiencing high volatility as that situation will not change anytime soon. I am advising clients to sit on the sidelines as I will be looking at a bullish position down the road. Fundamentally speaking, the Federal Reserve will implement trillions and trillions of stimulus dollars into this economy. Eventually, it will push all asset classes higher as I think this is just a consolidation of the massive run-up that we witnessed over the last 6 months, but I do not believe the long term trend is over with just the short-term trend has turned negative.

TREND: HIGHER
CHART STRUCTURE: SOLID
VOLATILITY: AVERAGE

Silver Futures

Silver futures in the December contract absolutely collapsed this week after settling last Friday, New York at 27.12 an ounce while currently trading at 22.85, down about $4.25 for the week as prices have now hit a 2 week low. Continue reading "Gold Futures To Test Major Support" →

4-Week Losing Streak For S&P 500 And DOW

Posted on by The INO.com Team

The stock market is trying to end the week on a daily positive note as we head into the close. The S&P 500 is +.9%, the DOW +.6%, and NASDAQ rounds out the positive run with a gain of over +1%, which has helped turn the week positive for the NASDAQ. However, the S&P 500 and DOW will post weekly losses marking four straight weeks losses.

On a weekly level, the S&P 500 will post a weekly loss of about -1.4%, joining the DOW, which will post a weekly loss of about -2.5%. The NASDAQ was looking at a weekly loss heading into the close, but afternoon strength in the tech sector was able to push it into positive territory with a gain of roughly +.25%.

But looking at the bigger picture, the major indexes have had a tough month, with the S&P 500 falling more than -6% in September. The DOW has dropped -5.2% over that time period, and the NASDAQ is down -8.2% month to date. September has certainly lived up to the hype. Continue reading "4-Week Losing Streak For S&P 500 And DOW" →

Topping Pattern Or Just Consolidation?

Posted on by Chris Vermeulen

The Transportation Index, which typically leads the US stock market by 2 to 4+months, has been unusually aligned with the S&P 500 over the past 8+ months. Recently, though, the Transportation Index has rallied up to recent new all-time highs (over the past 9+ months) and has rotated lower – below resistance near 11,440 (the MAGENTA LINE on the first chart). Our researchers are warning us that any continued breakdown below this level could prompt a bigger downside market move.

Is recent rotation a topping pattern or just consolidation?

Currently, the US stock market has rolled into a sideways/topping pattern. After the peak in metals setup near August 7, 2020, the US stock market continued to rally a bit higher, then rotated lower on September 3, 2020. The Transportation Index rolled over on September 3 but climbed higher less than 5 trading days later – breaking above the highs set before the COVID-19 peak.

We’ve suggested a “Bull Trap” pattern may be forming in the major markets, and we’ve urged traders to be cautious regarding the new price highs and appearance of a continued upside price rally. The Bull Trap pattern, sometimes called a “Scouting Party,” happens when price breaks above resistance (or below support) briefly in an attempt to establish a new trend. If the price fails to find support after breaking above the previous resistance level, it typically rotates lower and collapses back below the resistance level (attempting to find a lower support level).

If our research is correct, the recent rotation in the Transportation Index may suggest a Bull Trap pattern has set up and completed (with the price falling back below the 11,440 level). If this trend continues, we may see a much bigger downside price move where price attempts to find support near 9,800 or 9,200. Continue reading "Topping Pattern Or Just Consolidation?" →

CVS Stock Slump Despite Aetna Catalyst

Posted on by Noah Kiedrowski

CVS Health (CVS) wasn't immune from the market declines that were inflicted by the COVID-19 downturn. Despite being in the traditional defensive healthcare space and confined to domestic operations, the stock has not been able to break out and participate in the broader raging bull market post-CVOID-19 lows. The combination of CVS Health (CVS) and Aetna was proving to be a success after initial skepticism by investors. CVS even posted a string of better than expected quarters in part attributable to the Aetna acquisition. CVS is generating large amounts of free cash flow, paying down debt, and returning value to shareholders in a variety of ways. To further boost long-term growth prospects, restore growth, and fend off potential competition, CVS combined with Aetna. This combination creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company.

CVS has been in a perpetual stock slump with or without COVID-19 in the backdrop. CVS has been beaten down for years, plummeting by over 50% ($113 to $52) from its multi-year highs. The stock currently sits at a bleak ~$58 per share and struggling to hold on to any share price appreciation despite the positive string of recent earnings with plenty of runway left in its growth from its Aetna acquisition. This was a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions, and political backdrop with drug pricing pressures. CVS made a defensive yet necessary acquisition to enable the company to go back on the offensive. At current levels, CVS presents a compelling investment opportunity; however, it has been a value trap for years despite the company still being in the early stages of its CVS-Aetna combination, which will drive shareholder returns for years to come.

Challenging Backdrop

The pharmaceutical supply chain cohort, specifically CVS, has been unable to obtain a firm footing in the backdrop of consolidation within the sector, negative legislative undertones, drug pricing pressures, rising insurance costs, and a market that has lost patience with these stocks. These factors culminated in sub-par growth with a level of uncertainty as the sector continued to face headwinds from multiple directions. Many of the stocks that comprised this cohort presented compelling valuations in a very frothy market. This allure had been a value trap as these stocks continued to disappoint. It's no secret that these companies have been faced with several headwinds that have negatively impacted the growth and the changing marketplace conditions have plagued these stocks. Continue reading "CVS Stock Slump Despite Aetna Catalyst" →

This Is Why You Are Losing To The S&P 500 - Part 2

Posted on by Matt Thalman

In Part One, I discussed how heavily weighted the S&P 500's top stocks are and how, in reality, the bottom 200 stocks in the index don't even matter. Now I would like to talk about potentially better options than buying an S&P 500 index Exchange Traded Fund or mutual fund but still being diversified in a large number of stocks, with a wide range of diversity and having a good chance of beating the S&P 500's returns.

The biggest issue with the S&P 500 is that the top stocks carry all the weighting. The bottom stocks don't mean much. Instead of buying the SPDR S&P 500 ETF Trust (SPY), why not purchase something that doesn't hold as many positions and have all the assets focused on just the top companies. This way, when the bigger companies that mean more anyways move, you have more money in them. And since the larger companies are typically less volatile, your portfolio shouldn't have to worry about as many companies going bankrupt or falling apart as someone who owns the S&P 500 would have to be concerned with.

The first ETF I would like to discuss is the Invesco S&P 500 Top 50 ETF (XLG). The XLG is an ETF that tracks a market-cap-weighted index of the 50 largest US companies. In essence, it holds just the top 50 of the 500 companies that make up the S&P 500. The fund has a weighted average market cap of $668 billion and a yield of 1.34%. XLG also has an expense ratio of 0.2% and $1.65 billion in assets under management. XLG is up 19.19% year-to-date and more than 35% over the past 12 months. On an annualized basis, the fund is up more than 16% over the last 10 years, a figure that easily beats the market average of a little under 10%. Lastly, the funds top ten holdings represent more than 51% of the fund with Apple (AAPL) taking the top spot at 12.69% of the assets. Continue reading "This Is Why You Are Losing To The S&P 500 - Part 2" →