Fitch Matthews: Update for the Week

FM Wealth Management News Letter

Update for the Week

 
Equities
Looking back we can say nothing very significant happened last week. The S&P 500 (SPY) did dip and of course as expected there was buying on the dip. What is most interesting is when we look at the weekly chart we see a lower high, a lower low and a lower close. We are seeing some signs of weakness and decent reversal pattern, which is exactly what we have been waiting for since we broke through 2510. There is a topping pattern on the Dow Jones (DIA), although the down channel is perhaps wishful thinking at this early stage The structure of the decline is not what we would consider a clear trend sequence, but it can still be c viewed as the first leg of something larger. This becomes much clearer in other indices such as the German DAX and FTSE in London.

GOLD
Gold (GLD) had a good week, finishing with a strong session on Friday. Hopefully, you caught our comment in our last article calling a buy in the $1262-72 range. We should break $1305 next week, and we remain fairly certain the low is in for a significant rally back toward $1350-60. We still remain cautious, as the path to those levels is still a little unclear as the price action has been very choppy. Should there be a Monday gap higher it should keep going. Otherwise, a move above $1305 may fade out to a higher low in the $1290s. Even so, we are long again from $1271, which is $50 lower than where sold it back in late August. We continue will hold for the next 1-3 months.

Oil (USO)
Oil did pull back to and has set up a decent buying opportunity. We actually missed it by 10 points, but there will be more buying opportunities at $60, particularly if the trend sequence follows the expected path. We will be in awe if it plays out quite as clean and predictable as above, but we will make adjustments and react to what price is telling us. We will leave it for now comment if and when another buy set-up unfolds.

Natural Gas
Natural gas (UNG) did the same and set up a decent buying opportunity at the trend-line re-test and gap window. Holding here is certainly bullish, but new highs are required, especially above last week’s $3.23 high as the move from the low on 19th October has only completed three waves so far. A new high should create a trend line that opens up more bullish possibilities. 

Bonds
Bonds (TLT) held the re-test highlighted last week and will continue higher.

Dollar
The Dollar (UUP) we have been writing about the EUR/USD ‘head-and-shoulders pattern” for some time. This implied to us that it was a good set up for a short squeeze and last week it that scenario finally played out. Ideally, there should be one more high above 1.19 in this rally from the November low to complete a trend wave.

Your Take-Away
The dollar and Equities are in the early stages of potentially a significant decline. Gold and Bonds have already bottomed out and should rally further. Oil and gas have broken out and should also move higher.