Gold Is The Hottest Trade Today, All-Time Highs In Sight

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Gold Is The Hottest Trade Today, All-Time Highs In Sight

Gold Gets A Cold

The gold market is skyrocketing. The spot price is up nearly 2.0% as I write this and risen more than 13% since the middle of December. The fundamental picture is this, inflows of cash to ETFs and Mutual funds, along with strategic purchases by central banks, is underpinning the move. The World Gold Council Gold Outlook for 2020 cites these factors and others, like the easy-money conditions central bankers around the world have created, and sees gold buoyant through 2020 at least.

Add to this the growing coronavirus scare and the flight-to-safety trade and you get today’s rally. The coronavirus has now claimed more than 2,500 lives and is spreading throughout the world. South Korea, Italy and Iran all report a growing number of cases that threaten to shut down activity in areas outside of China. Bottom line, the virus issue is far from over and will be a driving force in gold prices for the foreseeable near-term.

The Gold Chart, It’s Not Too Late To Get In

The gold charts are unbelievably bullish. Starting with the chart of daily prices I see large green/white candles moving up from a point of resistance. The point of resistance is also a point of consolidation within an uptrend that could easily go to $1780 because there are no other good targets for technical resistance. The indicators are also bullish and in support of upward price action. The MACD is convergent with the high at least and on the brink of setting an extreme peak, one of my favorite signals, so price action is likely to remain elevated if not in uptrend.

Moving on the weekly charts, gold is also moving higher following consolidation within uptrend. The move looks strong with one caveat; the indicators are still a little weak but I’ve got something to say about that, too. With MACD and stochastic still low in the range, technically divergent from the highs, there is still room for them to move higher. With my target at the $1780/$1800 level and no major points of technical resistance before than I think it likely prices will continue to move higher.

How To Play This Trade

There are a couple of ways to play this move depending on how you like to trade. Longer-term oriented traders may wish to open positions with the intention of taking profits when resistance is reached. Short-term traders will want to move down to a shorter-time frame chart and use bullish continuation patters and tests of support for their entry points.

A Rare, But Often Effective, Early Warning Sell Signal (Preview)

By Lawrence G. McMillan

This is something that we’ve written about twice before – first in 2020 (Volume 20, No. 16) and later in 2020 (Volume 22, No. 15). In short, one measures the advance in the $SPX Index over a 494-day span (trading days). If it has risen 50% or more over that time, it is a major overbought warning. However, to use it effectively as a timing tool is difficult, for the market can continue to advance (five times since 1950, the advance has reached 70% in that time period – of which four were relatively major tops). Moreover, there can be long periods of time (weeks or maybe even a couple of months) where the measure flits above 50%, then below, then above, etc. for a while. To make this computation, you need to keep “rolling” the figures ahead. So, for example, if one were comparing day 500 of your data to day 1000, that would be the calculation for day 1000. The next day, you’d compute the advance from day 501 to 1001, etc. For the purposes of this article, we’re going to term this the “roll:” the difference between two days in the market that are 500 days apart…

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Johnson Victory Sends Pound Rocketing Higher, Is Now The Time To Buy?

Historic Victory In The UK

Boris Johnson and the Conservative Party scored an historic victory in Thursday’s snap-election. The Conservatives won an overwhelming number of seats, secured a clear majority in Parliament, and their most commanding lead in over thirty years. The news is a win for the pro-Brexit movement and virtually assures a smooth, clean break will happen early in 2020.

The win is also a clear victory for the UK economy because it alleviates virtually all uncertainties that have been plaguing this market. Businesses have been loath to make plans without knowing the outcome of Brexit. The U.S. President Donald Trump congratulated Johnson on the victory in a Tweet saying the two nations could begin working on a comprehensive trade deal as soon as Brexit was completed.

In terms of the markets and the impact on prices, UK stocks led the rebound in European equities with a gain of 1.90% at midday. The pound also got a boost from the news, surging more than 2.0% in early Friday trading. The move confirms bullish signals seen in the GBP/USD and EUR/GBP over the past two months. The question now is, is this the time to buy? Based on the charts I don’t think it is.

The GBP/USD did indeed surge by more than 2.0%. The pair moved up and through the 1.3370 level in what could have been (and might still be) a very bullish move. The problem for the bulls is that sellers were ready for the move and overwhelmed the rally. Whether it be profit-takers, short-sellers, or loss-cutters the signal is clear; there is strong resistance to price movement above the 1.3370 level. This is important because 1.3370 is a two-year high-water mark and the indicators confirm the presence of heavy resistance. Both stochastic and MACD show some divergence from the new high.

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The weekly charts are a little more bullish but still suggest the possibility of consolidation if not correction. The 1.3370 level is still an obvious point of strong resistance, the difference is in the indicators. The MACD shows convergence with the new highs that shows a high-level of market commitment and the possibility of new highs to come. If so, there will be a better time to buy. I would wait for a clear break above the resistance target to avoid risk of reversal.

The EUR/GBP is equally bullish in respect to the pound (bearish for the pair). The pair is moving lower but likewise finding resistance to lower prices. Support is present at the two-year low and it may keep prices from moving lower in the near and long-term. Traders are advised to avoid overly bearish positions without a clear break of support. The 0.8230 area should be watched closely when approached for indications of buying and potential for bullish reversal.

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