As we are watching the US and global markets rotate dramatically lower over the past few days, we have been advising our members that we believe this rotation is an over-reaction to economic impetuses and trade issues – not a massive downside price break. Overall, some of our longer-term technical indicators are currently bearish, as one would think technical indicators would react to price activity and trends. Our ADL, predictive modeling system, is still suggesting upside price activity and we believe our research team has hit on something that helps to put this end of year turmoil into perspective.
Where is the fear? The news cycles had indicated that much of the “big money” investors had already exited the markets prior to Nov 1. This leaves the retail investors and the market-makers to manipulate the markets. Volatility has been much higher than the previous two-Quarters average and volume has been moderately strong in the ES. This leads us to believe that quite a bit of retail and foreign investor activity has been taking place in the US Equities markets.
Yes, there are concerns arising from the likes of Apple (NASDAQ:AAPL), Caterpillar (NYSE:CAT) and other blue-chip symbols. These arise from some concerns regarding future earnings capabilities in the face of increasingly complicated trade and global market conditions. Yet, we have yet to see any of this fear fall into the normal outlets – GOLD.
When we take a look at monthly gold using one of our custom pricing indicators, we are seeing very moderate upside gold price activity over the past 60+ days. All of this is taking place near a very tight pricing channel, setting up as a pennant or flag formation, that should prompt a bigger move in Gold in 2019. But as of right now, nothing is evident to show that a massive amount of fear has entered the markets and is driving capital into the traditional safe-haven investment.
Therefore, we still believe this downside move is more technical in nature and will likely end near the 2620 level on the ES as support continues to hold near recent lows. As we have been suggesting for many months now, we continue to believe this is the time to establish small long positions near these support levels in preparation for a broader market recovery near the end of December and into early 2019.