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Investing Strategies: S&P 500 Vies For Breakout, Chip Stocks Strengthen

October 31, 2019

Hi everyone and welcome to investing
strategies it’s Alissa Coram with Investor’s Business Daily from the
Nasdaq market site in Times Square with the S&P 500 vying for a break up to new
highs will it be able to hold its new my territory fairly strategies is here to
provide a technical perspective on the markets action plus we’re analyzing the
rotation into semiconductor stocks as an improving sector outlook is finally
lifting the group back to a position of leadership and gold is consolidating but
it’s trading at its highest levels in over six years State Street Global
Advisors will tell us what’s behind the commodities big move in 2019 and what
investors should expect from gold in 2020 investing strategies starts now okay let’s get started with this week’s
market insights the S&P 500 is now hitting new all-time highs could the breakout
indicate a shift away from the volatility that’s defined much of the
last several months well joining me now to provide a technical look at the
market is Katie Stockton founder and managing partner at Fairlead strategies
thanks so much for being here today Katie glad to be here yeah so we’re now
at new all-time highs for the S&P 500 it’s taken us a little while to get here
and the last several months have been a bit of a bumpy ride so what do you make
of the fact that we are now back at all-time highs for the S&P as a
technician that is very exciting as you can imagine and we’re seeing gaps up so
that’s a good thing it shows momentum behind the move it shows that a lot of
people were watching the final resistance for the S&P 500 which is
right around 30 28 so the breakout is bullish from a technical perspective it
relieves the chart of that final resistance and it reflects positive
momentum especially with the gaps up that we’re seeing with for confirmation
of the breakout we’d like to see a couple of days a couple of closing
prices above that level to confirm and then we can look at higher target prices
the target that we can derive from this breakout in particular is about 31 20
and that’s based on a measured move which really just assumes the trajectory
of the current trend will maintain itself as you mentioned we’d seen a lot
of volatility preceding this breakout or pending breakout and that really was a
trading range environment so during that trading range we’d never saw a lot of
breakdowns which was a good thing but it was a very frustrating environment for
many folks because it was very whippy on a short-term basis now theoretically
with a breakout we could get into more of a trending environment all right so
is it your anticipation then that we could see a little bit of sideways
action from here ideally you know seeing that confirmation and it closes above
this new high ground would be positive but how quickly do you think that a new
uptrend and holding above this new area could happen well it should happen
immediately if this is a real we should see those consecutive daily
closes above this week and get somewhat immediate follow-through on back of that
we do have a short-term overbought condition that the market is contending
with so there’s no guarantee that a breakout is confirmed if that’s the case
I think it’s just another little pauses needed to refresh the uptrend and then
we’ll see a breakout anyway because really around the world we’re already
seeing these types of breakouts maybe not new all-time highs for
different benchmarks but certainly breakouts from that trading range that
characterized global equity markets for a few months and then do you think that
this also signals at least a little bit of a breather from the volatility that
has defined the last several months because we’ve seen quite the whipsaw
action really tied to headlines a lot but does this really signify that that’s
more or less in the rearview at least for the time being it feels that way
there’s no way to be certain of that of course but in a trending tape you tend
to see less of those down drafts less of that retracement and of course that
would be an easier market theoretically to trade because you can stay on the
right side of the moving averages and really just sort of ride the trend so
theoretically yes alright and we shouldn’t be expecting anytime soon a
new test then of the longer term moving averages well the 200-day moving average
has acted as support for the S&P 500 recently it’s I believe not to too far
below around 28 80 I believe and you can never rule out a test or retest but it’s
not a mean reverting factor it’s not something that acts as a rubber band for
the S&P 500 where there’s a pullback to that moving average or really any moving
average but rather we kind of keep an eye on those overbought conditions look
for a sell signals look for any kind of loss of market breadth or participation
that would indicate a significant pullback of course right now with
breakouts underway we don’t have that right so with the breakouts being pretty
widespread what are you seeing in terms of the sectors that now look appealing
to investors oftentimes what we see when you do see new highs and breakouts
you’re seeing more offensive sector leadership and by that I mean area
like technology which tend to be more Grothe more cyclical areas of the market
and we are starting to see signs of life in some of those areas I would also
highlight financials as being a source of newfound outperformance it’s very new
as I mentioned but it could be a basin phase in relative terms for financials
which could then be a new upside leader for the market that’s right and speaking
of financials let’s turn our attention to this week’s stocks to watch starting
with Bank of America so the breakout theme continues here
Bank of America moving higher and looking like it’s extending its gains
what are you seeing in this chart with the underperformance that we had seen
from financials and Bank of America as one great example of that especially in
2018 it felt like they were never going to get going again and of course now
just in the last couple of weeks we started to see some signs of life there
where we’re getting some breakouts above important levels Bank of America cleared
some former resistance of previous highs where it had met selling pressure and
confirmed that breakout it’s a little overextended short-term I would say but
that breakout completes a trading range that have been in place for several
months so again there it releases the the chart of resistance
it supports upside follow-through the beyond the near term and shows a
resumption of the uptrend that preceded that underperformance in 2018 right and
this type of action in the group isn’t isolated of course others like JPMorgan
also with with similar chart action so this group does look like it has more
than just one chart that is a bright spot that’s fair to say even the
regional banks are acting much better and making higher lows and then
subsequently exceeding these short-term resistance levels all of that would make
them a turnaround play and I do think it’s best to have core long positions in
long term uptrend and that would not qualify for many of the financials and
yet now with this newfound leadership I do think people should be you know
sniffing around for good opportunities fantastic and then another area on your
radar is the emerging-market so let’s take a look at
the EEM iShares emerging markets etf what are you seeing here because at
first glance it doesn’t really look like it’s done a whole lot lately but could
that change well it’s finally captured some short-term momentum and in doing so
it’s actually climbed above a year-long downtrend line that if you take a step
back on the chart it looks like a big triangle formation that’s now being
resolved to the upside which is the direction of the prevailing trend before
it was established so lower highs higher lows there’s the triangle you see the
breakout about the down trend line and it’s a fairly high probability setup or
you tend to see upside follow-through and this would be months and nature not
just weeks in nature in terms of the implications so I think it bodes well
for emerging markets not necessarily to be a source of great leadership globally
although there are some sense of life as the dollar has pulled back there but
rather to finally participate in what I think is a global rally right and maybe
look at this area as being able to not have that home bias and being able to
diversify in other areas that could be strengthening well that and it’s a
testament to the global breadth behind the move so we do want to see broad
participation not just here in the US but also globally and that really
enhances the sustainability of the uptrend we’re already seeing breakouts
and overseas markets like the German DAX as one great example of that and these
aren’t necessarily new all-time highs but we are seeing those breakouts and I
think we’ll start to see even some spreading out of the rally rally to
things like small caps other areas that had underperformed so it seems like the
message then at the end of the day at least for the time being is a lot
brighter of a picture than all of the uncertainty and volatility that had been
really dominating the market I think it’s a relief of that trading range to
the upside and of course that does make it a more clear picture ahead from a
technical perspective if indeed these breakouts are confirmed but it looks
like even if it doesn’t happen this we could probably
will happen and you know we do have some positive seasonal influences underway
potentially in Q4 so it bodes well for that as well all right well I think this
is the perfect time to really dive into the technical side of the market so
thank you so much for sharing with us what you’re seeing in the market right
now we’re happy – all right and after the break we’re going to continue our
discussion about sector rotation with a look at a group that’s finally leading
the market after a period of underperformance and that’s coming up
next pick winning stocks with Market Smith
growth to 50 shows you ideas with big potential view charts packed with key
data use pattern recognition to see action zones Market Smith by investor’s
business daily try three weeks for 1995 now it’s important for investors to keep
tabs on sector rotation because if you know which sectors are leading the
market that’ll improve your ability to select top stocks and enable you to
invest in sectors that are outperforming the market and after a nearly two-year
period of underperforming the market we’re now seeing strength in
semiconductors stocks amid expectations for a turnaround in the chip industry
cycle and this strength can be evidenced by the action in the Vanek vectors
semiconductor ETFs after a long consolidation in 2018 and
choppy action in 2019 SM H is trading a solidly at all-time highs it also
remains in buyer range from a breakout past a one twenty three twenty three
entry of this Cup with handle based here now SM H tracks the MV is us-listed
semiconductor index which holds the most liquid chip stocks based on market cap
and trading volume this strength and chip stocks is a positive development
for the overall stock market because the semiconductor market is a key sector of
the global economy chips play a vital role in many
industries enabling emerging trends from 5g to cloud computing to self-driving
cars to AI and the Internet of Things among others and within the
semiconductor sector chip equipment makers like Lam research have been
leading the group LRCX broke out of a base in early September and after a
small run the stock was able to hold its gains and move sideways for several
weeks then the stock blasted higher on October 24th in reaction to its
quarterly earnings report the report showed narrowing declines on the top and
bottom lines and the company’s outlook was strong the move put shares more than
20% passes by point from early September and was accompanied by heavy volume
which indicates strong demand from institutional money managers now group
peers KLA MKS instruments and ASML have also been strong performers as of late
in another example of recent strength in the semiconductor sector can be found in
Taiwan Semiconductor which broke out of a cup with handle base several weeks
before its latest quarterly report now the stock wobbled a little bit after the
report was issued but shares are now trading at all-time highs
up some 14% from the 44 98 by point here and elsewhere in the group nvidia is
hitting 11 month highs heading into its quarterly report next month and intel
surged higher on October 25th after its latest quarterly earnings report
breaking out over a prior resistance level
now while breakouts and run ups across the group are positive they’re not
Universal Texas Instruments gapped down on its latest quarterly report so keep
an eye for continued signs of a recovering chip industry cycle and be
aware of potential threats to the group from the ongoing US and China trade war
and fears for a recession on the horizon all right well coming up next we’re
sitting down with State Street Global Advisors to put this year’s gold rally
into perspective and analyze the outlook for gold in 2020 we’ll be right back on cultural capital we are in New York City
and San Francisco come with me as I tour some of the world’s most innovative
companies from Squarespace to c3a I give II and figma learn how CEOs built
growing companies while maintaining the ultimate office culture on season 3 of
cultural capital on the brand-new Nasdaq calm while gold has been consolidating over
the last two months it’s been on the move in 2019 the Spyder gold chairs ETF
GLD is holding at its highest level since the spring of 2013 and here to
share insights about the precious metals gains this year and where gold could be
headed in 2020 is George Milling-Stanley Chief Gold Strategist at State Street
Global Advisors thanks so much for joining me today George thanks for
inviting me so as I said Gold’s been on the move this year but taking a step
back and looking at the bigger term picture what does the move really mean
in terms of what we’ve been seeing over the long term for Gold’s I think it’s a
pretty substantial move I mean it’s it’s an inflection point if you like gold was
holding in a very narrow range for the six years from the spring of 2013 right
up until June of this year and every time the price popped its head above the
1350 dollar area speculative interest would play whack-a-mole and knock it
back down they didn’t do that in June when the price started to move up and
it’s important to try to understand why I think they the suggestion from Jerome
Powell that the Fed was going to make a mid cycle adjustment I believe it was
called at the time and lower interest rates at the July meeting that was
probably the proximate cause for why gold has gone up a good deal since then
we’re now kind of filling in a bit of the gaps that we left behind having
moved $200 above that trading range that have been there for six years and I
think that’s actually very healthy so I’m kind of pleased with with what
Gold’s been doing recently all right and gold is of course known as a very
popular safe haven asset and we have seen a lot of volatility coming into the
market over the last few months ed may be subsiding a little bit now but do you
think that that kind of relationship between gold and volatility still exists
to some extent or not oh no question I mean volatility in other markets has
been one of the keys have been a lot of different things behind Gold’s move up
first there was the interest rate move and then a subsequent move in September
and markets are expecting this week yet another cut and then negative interest
rates on fixed income securities all around the world
that’s another driver towards gold as a safe haven volatility in the equity
markets you know the best news in markets is that the decades– have gone
up to ten straight years but nobody in their right mind expects that to be
repeated over the next 10 so people are very very concerned and that level of
concern drives people toward safe haven assets like gold right and speaking of
investors flocking to gold can you tell us a little bit more about the demand
that’s behind this move that we’ve seen yeah I mean obviously investors
safe-haven buying is one of the keys we’ve seen continued good physical
demand in the emerging markets in both jewelry has held up remarkably well
investment demand in the emerging world is growing whether it’s into bars and
coins or into ETFs increasingly so we’ve seen a lot of a lot of that kind of
demand coming as well institutions and individuals gradually putting together
small strategic allocations to gold because of its defensive properties
because of its diversification properties all of this coming together
has been a very good reasons why gold is is 150 200 dollars above that trading
range right and then in terms of the GLD ETF what are we seeing there in terms of
the influence we’ve seen in flows of six and a half billion dollars this year
into GLD alone taking it to the 45 billion dollar level in assets under
management that’s pretty good going for something that will turn 15 years old in
a couple of weeks we’ll be ringing the closing bell on the NY IC in a couple of
weeks time and then there’s our junior product GL DM the mini version that’s
only been around for about 14 months but has already amassed more than a billion
dollars in assets including taking in half a billion this year alone so the
fact that GL DM the mini product and GLD the big kahuna have been growing
together to my mind is is definitely reflecting investor interest in ETS
right and there was a long period of time where the multi-year gains were
really sustained for gold but as you mentioned there was that six year period
of moving kind sideways so what do you tell investors
who aren’t sure about the long-term performance that they’re going to get
with gold I think the the best example of a long-term luck trend in the gold
market was from 2001 to 2010 when increasing levels of economic activity
throughout the emerging world led to gradually increasing purchases of
jewelry and the gold price went up from 250 dollars an ounce to 1250 this
current period seems to me like we’re embarking on something very very similar
a lot of the background is very similar nervousness in equity markets
nervousness in fixed income markets investors just basically concerned macro
economically geopolitically there are worrying things everywhere you turn and
I think we’re moving into something very similar
I can see gold looking to try to establish a new higher trading range
than the one that we saw over the past six years whether we we know we’re
staying around the $1,500 level at the moment I think that what gold is doing
is is shoring up the foundations for a move higher and it’s important to
remember also that we’re just moving into what is typically the strongest six
months of the year for physical demand across the emerging world with the
Diwali festival in India leading to the marriage season we’re looking for good
demand across the world for the next six months I think that points to higher
prices alright so in the next six months that brings us into 2020 which and it’s
an election year not to you know focus too much on that but to that bring
further volatility or uncertainty to the market or is more of the focus on the
holiday shopping season and that bringing strength I think it depends on
where you look in the world the the the wedding season shopping for jewelry in
India for the next six months will be very important Chinese New Year when it
comes will also be very important our election season is only going to add to
the general uncertainties against which gold is operating and that just means
that the background the environment in which gold is performing becomes ever
more favorable right and so then in terms of asset allocation in the
portfolio how should invest be utilizing gold within their
portfolios well we don’t say anybody should put a hundred percent of their
money into gold that you know that to my mind doesn’t make sense there have been
times when it would have been a good idea but not enough what we do say is
that everybody should have a properly balanced portfolio with some fixed
income with some equities maybe some commodities some real estate and every
portfolio should have some gold in it a lot of people are comfortable with a 5%
level other people feel a little bit higher right now given all the
prevailing circumstances are being so favorable for gold there are a lot of
people I’ve been talking to recently who say that 10% is the correct level right
now obviously there’s no one answer for every investor every investors risk
tolerance is liquidity needs all of that is different across the board so there
isn’t one Pat answer but somewhere between 5 and 10% right now would seem
to make sense right and there are obviously a variety of ways that you can
invest in gold why do you think that the ETF wrapper is a good option for
investors because it’s so transparent because it is so deeply liquid GLD is
turning over between a billion and a half and two billion dollars a day in
terms of stock now that’s only one percent of the total turnover in the
gold market but it gets but it is significant and it is contributed to
general strength in the gold business as well I think the liquidity has been one
of the principal ways the transparency the specific bars that back GLD and that
bar list is updated every day on the internet so people know exactly what it
is they’re buying they’re not buying gold they’re buying exposure to
movements in the price of gold they own a trust and the trust owns the gold it’s
a very very simple very simple equation and investors have embraced it with
great enthusiasm great well it sounds like gold might be poised for the next
leg higher so we’ll have to see where it goes from here thank you so much for
sharing all these deep insights with us today the opportunity to talk to you
really appreciate it all right and thank you all for watching Investing
Strategies this we’ll see you right back here for our
show next Monday featuring the Chief Investment Officer at Nuveen and XOUT Capital until then I’m Alissa Coram Thank you

1 Comment

  • Reply FineFlu October 30, 2019 at 3:32 am

    Thank you for being such a great host.

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