Oil, Gold, Silver, Bonds and the Dollar (Premium)

This commentary will look at oil, gold, silver, bonds and the Dollar. I am sure that there are some intermarket narratives at work here, but I will try to stick with the price charts for a pure assessment. Oil is backing off of a massive resistance zone. Gold broke above the 200-day SMA as it extended its run and silver is challenging a triangle trendline. US Treasury Bonds, as represented by the 20+ Yr Treasury Bond ETF, are in a long-term downtrend, but could be poised to extend an oversold bounce that began in March.

Oil Takes a Short-term Hit

The long-term trend for oil remains up, but resistance is nigh and price took a hit over the last two days. The chart in the upper left shows the ATR Trailing Stop triggering with a 5% decline the last two days. This is the second outsized decline since mid March and this shows nervousness in the market. The big window shows spot crude ($WTIC) hitting a long-term resistance zone and backing down for the fifth time since April 2019. It is possible that a Double Top is forming and a break below the March low would confirm this bearish reversal pattern. The swing within this pattern turned down with this week’s decline.

Gold Takes Out the 200-day

Overall, there is nothing negative to say about gold, except that it is quite extended after a 12% surge the last eight weeks. The chart is bullish, but I do not see a setup right now. Long-term, the chart in the upper left shows GLD bouncing off a reversal zone marked by the spring 2020 lows and 67% retracement. This is a long-term bullish sequence: three steps forward and two steps (67%) backward. The double bottom in March and breakout in April are bullish. On the bar chart, GLD extended its advance and broke above the 200-day SMA. The Heikin-Ashi Candle chart shows GLD breaking out of a pennant pattern last week.

Silver Challenges Triangle Line

The Silver ETF (SLV) is also bullish, but getting extended after a 19% run that is challenging the triangle trendline. I do not see a setup on this chart right now. The long-term chart in the upper left shows SLV near the triangle trendline and a breakout would be long-term bullish. Note that StochClose turned bullish on May 6th. Personally, I am more inclined to trade the swing within the pattern and the swing turned up with the falling wedge breakout on the bar chart (mid April). I am now on hold and waiting for the next bullish setup to emerge.

TLT Could be Poised to Extend Oversold Bounce

The 20+ Yr Treasury Bond ETF (TLT) is in a long-term downtrend and it is easy to be bearish on bonds. Perhaps too easy. The Fed is the elephant in the room because the Fed is actively buying US Treasury bonds. I do not want to speculate on Fed purchases and future tapering plans, but the Fed presence is an issue. On the price chart, TLT is in a long-term downtrend and the ETF became very oversold from late February to mid March. This gave way to an oversold bounce to the 141 area and then weakness here in May. The base case is bearish, but TLT could be preparing for a bounce. Note that the ETF is firming in the 50-67% retracement zone and trading just below the 50-day SMA. On the candlestick chart, broken support turned resistance and TLT is challenging the support break. A break above 138 would be short-term bullish and could extend the oversold bounce to the 144 area.  The blue dashed line shows a possible ABC corrective move (Elliott Wave).

Dollar Nears January Low

The Dollar Bullish ETF (UUP) remains in a long-term downtrend and is on the verge of a 52-week low. UUP bounced from January to March with a test of the falling 200-day. UUP actually broke above the 200-day, but this break did not last long as it turned down a few days later. The downturn extended the last seven weeks and the trend is clearly down. For whatever reason, the Dollar and SPY are negatively correlated, which means they are moving in opposite directions.

Thanks for tuning in and have a great day!

-Arthur Hill, CMT
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