S&P 500:

Another wild day in the equity markets with the S&P hitting a high of 2746.80, then hitting a low of 2685.75, before closing at 2701.58. As we warned in Sunday’s issue of the Trend Letter, instead of a year-end rally we could see a cycle inversion if the S&P cannot push through the 2830 resistance level. In Sunday’s Trend Letter we showed a chart of a bearish scenario with a test of 2600 in December, and a potential low of 2475 before year-end.

The S&P has fallen below both its uptrend line (green diagonal) and its 200-day MA (pink line),

One of the negative drivers was that Apple has now dropped below its 200-day MA and is down almost 20% since its high in October. Tech stocks which have been the darlings of the bull market are being sold-off and are leading the way down. Apple has Key Support at 182, its uptrend line (yellow shaded area).

S&P 500 trends:

Long-term trend is bullish

Immediate trend is bearish

Our current position is neutral

Gold:

Gold was finally able to have an up-day closing up 8.70 after declining all through November.

In our very first issue of the Trend Letter in 2002 we recommended buying gold when it was trading at 290. We rode that bull market all the way up to August 2011 when it hit our SELL Stop at just under 1800, a  500% gain. Since then gold has been in a 7+year downtrend channel.

So what happened? After the peak in 2011, after years of decline, investors got tired of waiting for gold to rebound, to the point where today gold is hated by the investment community. Over the past month based on the Commitment of Trader (COT) data, gold is oversold to an extreme. It means that future traders are massively pessimistic on gold and even more so on silver. As contrarians will love these scenarios because at the extremes futures traders often get it wrong.  When these speculative traders all bet in one direction, the opposite usually occurs. This opens a scenario where we could see a very good run for gold, silver, and other precious metals.

But understand, while we are looking for gold to have a good run up here, we do not see this as the ultimate low for gold. So if adding gold or gold stocks at these levels be sure to determine your SELL Stops to protect yourself in case this expected rally does not materialize, or does not last long. Gold must push through 1370 before we even consider a long-term rally.

Long-term trend is bearish

Immediate trend is neutral

Our current position is buy

Stay tuned!

S&P 500:

In Monday’s update we highlighted a potential scenario where depending on the election results we could see a quick drop to test the previous 2600 support level and if that level gave way, black box algorithmic SELL Stops would be triggered, causing a potential spike lower to 2500. We also noted that a quick run to 2800 would diminish the odds of a move to 2500. Fortunately for the bulls, we saw the latter scenario.

As we can see on the chart below, the S&P closed the day at 2813, an impressive 58.44 point or 2.12% move  higher, putting it back into its 2-year uptrend channel, and above its 200-day MA…bullish action.

Long-term trend is bullish

Immediate trend is bullish

Our current position is neutral

Note that the S&P must close above 2830 this week to maintain its immediate bullish trend.

Stay tuned!

Stocks:

The S&P 500 rallied over 1% for the 3rd straight day for the first time in six weeks after Trump tweeted that he and Xi of China had a good conversation on trade.

However, in after market trading Apple shares were down up to 7% after it warned that it could miss its December revenue target due to weakness in the emerging markets.

The S&P is now back above its 9+ year uptrend channel (green shaded area). What we are looking for is that 2600 support level to hold. We have resistance at 2770 and if the S&P cannot get up through that resistance level we could see a sharp decline testing 2600.  If 2600 is tested and does not hold, then we have 2580, 2535 and 2500. Our previous long-term projection was after 2930 we would see a sharp correction with a potential low of 2470 – that projection is still valid.

There are lots of reasons for the market to drop dramatically and do not underestimate the impact of a Democratic win in the upcoming elections. As investors we do not participate in political discussions other than to say if the markets felt that Trump’s tax and regulation policies were to be rolled back we would see a violent reaction.

Key support levels to watch tomorrow and next week are  2700, 2600, 2580, 2535. Expect a wild ride over the next month.

Long-term trend is bullish

Immediate trend is neutral

Our current position is neutral

Once again we implore every investor to have a hedging or exit strategy.  As an investor you need to be prepared for a serious market correction, or potential crash.  If the recent market action has caused you to lose sleep at night then you are not properly protected.  Now is the time to protect your investments.

If you have not done so already, for each of your positions determine how low you are willing to let them go before selling. Then use SELL Stops and if they are hit, SELL, do not change your mind and talk yourself out of  selling. Or if you do not want to sell for tax or other reasons, use a hedging service like Trend Technical Trader. TTT subscribers who have followed its lead have booked gains of over 40% in a number of trades in just the last 5 or so weeks. If you want to subscribe, we will extend our earlier offer of a $250 discount, meaning you only pay $399.95.

If you had been a TTT subscriber and actioned those trades, they could have covered a decades’ worth of subscriptions. Click here to take advantage of this offer. It’s your money – take control!

Gold:

Gold had a solid day gaining 23.60 and closing just above its previous high.  If it can continue higher, 1260 is its next resistance level.

Long-term trend is bearish

Immediate trend is bullish

Our current position is bullish

Stay tuned!

Stocks:

Today stocks fell sharply lower as losses accelerated into the close, which put both the Dow and the S&P 500 into the red for the year, and the Nasdaq into correction territory (10% decline). The S&P dropped whopping 84.59 points or 3.09%.

There are lots of news items driving this decline, but we believe that politics is now moving front and centre.  It is already ugly, but this US election is going to be very destructive. We live in Canada and have no vote in the US election. Our role is to help investors understand what is happening in the global economic environment and to help subscribers protect and grow their wealth.

What we do know is that whatever your opinion of Trump the person, his policies of lower taxes and reduced regulations have been very  good for US businesses, and they have been key drivers for this bull market.  The market right now is very concerned that if the Democrats win the election, these tax breaks and reduced regulations will be rolled back, hurting the profitability of these companies, so they are selling off.

On a technical basis the S&P closed 111 points below its 200-day MA (pink line), which clearly bearish. It has also fallen definitively below its 2-year uptrend channel, also bearish.

Our next key support level is the late March low at 2600.  Our yearly forecast target low for the S&P had a potential for 2535, then 2470. Both of these will become valid if we break the 2600 level.

Looking at the bottom of the following chart we can see that the Relative Strength Index (RSI) has dropped to 24.30 (red circle), and whenever we see a reading below 30, it is considered oversold. This does not guarantee a rally here, but it does set up for at least a bounce soon.

Looking at the bigger picture we see that the S&P has been trading above its 9+ year uptrend channel, although it has now fallen below the upper level of that channel.  All this action is bearish, suggesting that the S&P will very possibility test the 2600 level.  Given that markets decline much faster than they rise, we could see this support level hit this week, although the RSI suggests we see a bounce very soon.

Understand that this is still a long-term bull market and that corrections are to be expected along the way. This bull market has been so strong over the past two years it appears some investors forget that corrections can be a healthy part of the process, they provide buying opportunities. We will see if this is simply a healthy correction or if it is the start of a new bear market. Everyone has an opinion, we will simply watch the numbers.

Long-term trend is bullish

Immediate trend is bearish

Our current position is neutral

Again we note: Whether you believe that this market is going to run much higher, or believe that we are now heading for a big crash, you need to have an exit or hedging strategy. This bull market will end, whether it starts today, next month, next year, or 2-years from now. Every investor needs to have a strategy to protect your wealth against a serious downside move that is accompanied by recessions.

While we are currently neutral with offsetting long and short positions, our Trend Technical Trader (TTT) hedging service has a number of more aggressive short trades and those trades have gains of 21.16% (entered Sept.5/18), 52.77% (entered Sept 2/18), 45.52% (entered Oct 4/18), and 41.81% (entered Oct 4/18). All of these trades are simple click of the mouse actions, the same as trading any stock online. If you would like to subscribe to TTT, we are extending our Special Offer at $399.95, a $250 discount. Click Here to subscribe at this rate. It’s your money – take control!

Gold:

Gold was a big disappointment today, down 5.70, as it failed as a safe-haven play against a crashing equity market.  The safe-haven winners today were US bonds, the US dollar, and to a lesser degree, the Japanese Yen.

Immediate trend is bullish

Long-term trend is bearish

Our current position is a buy

Stay tuned!