Ukraine war hype, China demand drop, GOFO mysteries… these are the short term noise inputs on the gold sector.
US Treasury bond yield spreads, gold vs. commodities (i.e. the ‘real’ price of gold), gold vs. the stock market… these are some of the fundamental considerations that actually matter and they have taken a hit since January.
It is easy to say ‘I am bullish in the big picture’ (measured in years) but it is not so easy to actively manage in the smaller pictures (measured in days, weeks and months) with all of the above noise inputs and more bombarding the poor individual player.
We use shorter term charts to manage the shorter time frames. Daily charts have most recently indicated a bearish set up as bear flags formed across the precious metals complex (with the exception of silver, which never got going to begin with) last week. Weekly charts continue to indicate that an extended and oh so grinding bottom may be forming, but that includes the potential for ups and downs, also known as volatility.
There is also a lot of noise lately in the stock market. The US stock bull celebrated its 5th birthday last month. The last 2 cycles (the manic phase of the secular bull ended 2000 and the cyclical bull ended 2007) were each approximately 5 years long. Today let’s retreat to the calm of the long term monthly charts and get a snapshot of the big picture.
The S&P 500 has a measured target of around 2190 that we have had open as a possibility since the big breakout occurred in early 2013. A measured target is just that, a measurement; simple math. It is not a directive and therefore 2190 is not hype, it is just a possibility.
While we are seeing some shorter term signs that the S&P 500 may not make it to that target (at least pending a test of the big breakout) the chart does not lie. A breakout occurred off of a giant pattern that had its low 5 years ago. A 5 year cycle in the SPX could simply entail a decline to the breakout support. That would probably occur within the context of a mild cyclical bear market. Indeed, we will only manage such a potential decline for now rather than force other interpretations on the chart at this point.
