Geopolitical risk and seasonal change points pushing markets, notes Jeff Greenblatt.
Last week we talked about a key reading in the gold market on a weekly chart. Our Kairos methodology identified the gold breakout. In fact, it identified at least three major trading turns in the past six weeks, not to mention all the little intraday turns. We’ve discussed them, gold went higher, heating oil went lower; which allowed us to leverage the equity drop in late May because we knew the key energy sector would drop. Then Kairos identified the breakout on the oil chart before prices accelerated to the upside after Iran shot down one of our drones. Want to call it luck? When you are good, you tend to lucky.
By the way this is the exact same methodology I taught in my master class at the recent New York Traders Expo. Kairos did it again last week with the KBW Bank Index (BKX) and once again it’s better to be good than lucky because Kairos lined up before a US-China truce was announced. I digress so let’s talk about gold.
As it turned out the reading, we talked about on the weekly chart repelled the action in precious metals on some bad luck for gold bugs (see chart above). I spend so much time talking geopolitical and domestic risk, because I believe we are in a similar environment to the late 1930s. You study the charts; those events also drove the bus all the way up to the final high in September 1939 when WWII started. So, the apparent good news on the tariff truce was bad news for gold. But the calculation came first. Gold gapped down but is trying to hang on. The long-term view of gold? With all the smaller Kairos readings along the way, if they can somehow emerge out of this 87 vibration at 187 weeks after a bear range of 874, odds go way up for a major bull move. It’s not like there hasn’t been a bull move to this point. People forget the low in gold on the long-term chart was back in November 2015. But all we remember are the major fails and there have been two of them before the recent thrust higher. Hypothetically, the vibration you see on the chart is right there to end this phase. So, if they survive, this is the sequence we’ll likely to remember that propelled it. But precious metals are attracted to bad news. What could possibly happen that would create that type of environment.
Stocks
You’ll remember back in March I warned the market could turn back up after the seasonal change point. Poker players call it outs. Simply put, that means how many chances a player must pull his hand. With a seasonal/cycle high the market had one out to turn back up. As we know it elected to hold the 61-day vibration off the bottom and has stayed higher for the most part. But it’s not much higher now due to an interesting drop in May partially due to the turn in the oil market (see chart).
Here we are with the seasonal change point again. Markets come off the high. One cycle point out left. That was the 127-day point off the bottom on June 27 which would be another inversion of the cycle. Golden spiral enthusiasts know how important 1.27 is because it is the square root of 1.618. Normally, I don’t give too much weight to the 127-day window but in this instance, it hit on the 27th day of the month. Since I specialize in vibrations, I know it’s a good probability that day was going to be important. It was.
Additionally, there was another Kairos reading for the low turn in the BKX. Right now, we have a mixed bag. Markets broke out on Monday with the US-China sentiment. But it was a day that disappointed nearly everyone. With the Dow up over 200, it gave back most of the gains as at one point it was only up around 20. The bulls were frustrated. Then in the last hour it was up again over 100. The bears became frustrated as well. But there were numerous dojis which are not sell signals, rather warning signs. Lots of names were worse for wear by the end of the day. What that likely means is a market that could stay elevated into July but the advance-decline line could start to deteriorate.
The moral to this story? Pay close attention to the BKX and precious metals.
