first majestic silver

Gold And S&P500 Targets For 2016

Market Analyst & Author
January 10, 2016

Gold price trend via ShutterstockOff to a rather quaint start for New Year, what?

As 2016's first trading session got underway, one of the more revered FinMedia outlets ran with this piece: "So Long, Farewell: Markets Hope to Shake Off 2015". Oops. And for pity's sake, please don't blame China, let alone Young Un's chemistry set; for even lacking those agitative events, we'd not have been surprised one wit to see 2016 commence as it has so done through Week One.

For many-a-missive over recent months, The Gold Update's clarion call, as 'twas reiterated in our radio interview earlier today (Saturday) on AM640 (Toronto), is to securely marshal one's financial forces against an S&P 500 today (at 1922), a level twice its earnings support, whilst Gold (at 1104) is but half its currency debasement mitigancy value. Think that's extreme? With respect to the stock market, a most prudent, non-sensationalist analyst/successful trader whom we're very privileged to know, sent out a private note at this year's kick-off citing a move in the S&P by the end of Q1 2017 (15 months from now) from 2044 (2015's settle) to as low as 569. Might you say "Ouch"? 'Twould certainly hoover our own "sittin' on the bid at 880".

Turmoil and distrust, whether financially technical and/or fundamental, domestic and/or geo-political, have taken over center stage, and sufficiently so such that long overdue reversions to means ought be the year's scene across trading screens from Beijing to Liechtenstein. "Out wiz zee bad air and in wiz zee good!" Out with the S&P and in with Gold. Our respective targets for 2016? Gold: the upper 1200s; S&P 500: the lower 1400s. And in the synergistic balance? Maybe, just maybe, a reawakening to savings accounts and stuffed mattresses. You entrepreneurial types out there might even consider creating a company called 1-800-BUNKERS: "Call in the next 20 minutes and get free installation!"

Let's start our graphics' roll with the 21-day (one month) percentage tracks of Gold vs. the S&P. The grey vertical line marks this year's start:

Next, let's broaden the time frame to our usual year-over-year view of Gold as tracked by its weekly bars and parabolic trends. Looks like that rightmost red Short dot is about to go "POP!" as Gold put in its fourth-best percentage weekly gain in some 2 1/2 years. Note as well the purple-bounded zone denoting the 1240-1280 resistance area; clear it this year and we'll have hit the target:

Then, of course, we've our criteria for "how we'll know when the bottom is in". To review, Gold's weekly parabolic trend as above shown need flip to Long (supported by rising blue dots), price need recover above its 300-day moving average as below shown, that average itself turn from southbound to northbound, and trading activity sustain at least one full week clear atop the purple-bounded 1240-1280 resistance zone. Here visually are those criteria along with Gold's daily closing prices since its highest ever at 1900 on 22 August 2011:

Now before we zoom in on Gold nearer-term, let's take a brief, indeed daunting peek at the trade of the S&P 500 futures market. In both panels of the following chart we've the daily bars of the so-called "Spoo" since the front-month contract rolled 20 trading days ago (10 December) into that for March. On the left is the full 23-hour trading period of the contract, with the usual 'round-the-clock continuity of each session moving fairly uniformly from one day into the next. But on the right, we've the same contract, however only as traded during "RTH", i.e. real-time hours of the stock market. Look at all the huge "gaps" in price from day to day! 'Tis chaos, as traders from Asia to Europe to the StateSide early-birds are boffing the contract about well before the underlying S&P 500 Index itself gets underway. 'Tis big, 'tis global, and if we're correct about the S&P reaching down into the lower 1400s this year, 'tis thus far, nuthin':

"But mmb, the jobs numbers that just came out were great!"

Squire is of course referring to the number of net payrolls created (292,000) StateSide during the month of December; little if any data is explicitly reported as the actual number of "two-fer" jobs created, (i.e. two part-timers doing the work of what is one full-time job; but just think, Mr. Manager, about no longer having to pay their healthcare premiums). The bottom line is, we're hardly impressed, especially given that payrolls are but one of the 50+ monthly metrics that create the track of the Economic Barometer. Here 'tis:

On to the nearer-term pictures for the three metals markets we follow, beginning with Gold. We'll take that which we below see every time, as on the left are the daily bars for the yellow metal from three months ago-to-date, the baby blue dots having broken decisively above their 0% horizontal axis, meaning that the 21-day linear regression trend is both now positive and becoming more consistently so, whilst on the right, the 10-day Market Profile is without overhead resistance, the supportive prices as therein denoted:

As for the white metal, Sister Silver is lacking a similar "Baby Blues" breakthrough, her Market Profile not indicative of underlying support. Thus clearly, she is not wearing her precious metals pinstripes...

...and is rather adorned in her industrial metal jacket, as cajoled by the curse of Cousin Copper. Here are the same graphics for the red metal:

"Hang on now, mmb, we won't let you free until you also show us the S&P..."

Goodness: a veritable rhyming Squire. All right lad, but you've been warned: don't lose your lunch:

On that refreshing note, next we've the Gold Stack, followed by a few observations in having rung in the first week of 2016:

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2519
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
Gold’s All-Time Closing High: 1900 (22 August 2011)
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Neverland: The Whiny 1290s
Resistance Band: 1240-1280
The 300-Day Moving Average: 1162
Year-to-Date High: 1113
The Weekly Parabolic Price to flip Long: 1113
10-Session directional range: up to 1113 (from 1057) = +56 points or +5%
Trading Resistance: none, (per the 10-day Market Profile)
Gold Currently: 1104, (weighted-average trading range per day: 15 points)
Trading Support: 1103 / 1099 / 1077 / 1072 / 1060
10-Session “volume-weighted” average price magnet: 1084
Year-to-Date Low: 1061

■ China's Shanghai/Shenzhen CSI 300 Index -12% debacle -- and thus the elimination of its 2015 gains during the week -- is amply documented, such as to simply say here we found it rather awkwardly amusing that their spanking new circuit breakers were put to the test, and essentially failed. Then with the "authorities" stepping up capital controls, limiting Dollar purchasing, and buying up shares, it leaves one wondering if 'tis really a "market" after all.

■ Here in San Francisco last Sunday (03 January), the Federal Reserve Bank's Vice Chairman Stanley Fischer voiced supporting higher rates should financial markets overheat. Well Stan, just as does a space capsule turn red hot upon descending down through Earth's atmosphere, so are such markets beginning to overheat to the downside, the Bond futures thus gaining 1.7% for the week, (their second-best rise since last March), in turn driving the 30-yield from 3.015% down to 2.920%. And we know the markets lead the Fed, (nudge nudge, hint hint, elbow elbow)...

■ On the heels of the International Monetary Fund Managing Director Christine Lagarde's dire economic expressions of a week earlier, this time 'twas the World Bank's turn to chime in and cut their own forecasts, envisioning a sputtering global economy for this year, given slowing and/or contracting within the "BRIC" nations, in turn furthering the commodities slump. Thank goodness Gold is not a commodity, but rather money!

■ And a report this past week of the survey says: "Approximately 62% of Americans have less than $1,000 in their savings accounts and 21% don’t even have a savings account..." One wonders if companies have saved anything: Q4 Earnings Season begins this week.

■ Speaking of which, this could qualify for Headline of the Week: "Despite weak start to year, Wall Street stocks have room to rebound" A shame, really, that stocks don't have the earnings support to rebound.

■ Lastly, the Mighty Prancing Horse, having been spun (pun!) off from Fiat Chrysler Automobiles, found the glorious Ferrari name debuting to start the year on the Borsa Italiana di Milano. Ya gotta love the ticker symbol for this one: RACE. Sadly, the stock's opening weekly stint didn't fare too well, the trading vehicle exceeding the limits of track adhesion, thus having now fallen behind by -5.2%. Siamo così molto dispiaciuto, Enzo ...

But at the end of the day, 'tis hard to go wrong with both Ferrari and Gold, no?

Saluti!

www.deMeadville.com
www.TheGoldUpdate.com

Mark Mead Baillie

Mark Mead Baillie has had an extensive business career beginning in banking and financial services for two years with Banque Nationale de Paris to corporate research for three years at Barclays Bank and then for six years as an analyst and corporate lender with Société Générale.
 
For the last 22 years he has expanded his financial expertise by creating his own financial services company, de Meadville International, which comprehensively follows his BEGOS complex of markets (Bond/Euro/Gold/Oil/S&P) and the trading of the futures therein. He is recognized within the financial community of demonstrating creative technical skills that surpass industry standards toward making highly informed market assessments and his work is featured in Merrill Lynch Wealth Management client presentations.  He has adapted such skills into becoming the popular author each week of the prolific “The Gold Update” and is known in the financial website community as “mmb” and “deMeadville”.
 
Mr. Baillie holds a BS in Business from the University of Southern California and an MBA in Finance from Golden Gate University.


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