A season for Gold

1) Follow the leader: Growth vs value

Another of my daily go-to charts is the ratio between Large Cap Growth and Large Cap Value.  The chart below shows the relative strength between these via the SPYG (SPDR S&P 500 Growth) and SPYV (SPDR S&P 500 Value) ETFs.  This chart is from FastTrack.

Growth, in general, tends to lead the market – both up and down.  So when the yellow line is rising, then the growth side led that day, week, etc.  My moving averages here are a “weekly” proxy of a 5-day and 21-day EMA crossover.  These moving averages are 5x those values: 105-day and 25-day moving averages, giving me weekly-like signals on my daily chart.  Kinda fancy. 

On around April 24, this ratio crossed both of my moving averages, making it worthy of attention.  And by May 7th, the moving average lines also crossed over.  It all happened so quickly that now that it would take a fairly strong reversal to undo these changes.  But since this shows that the growth side of the market is again leading, we might be in for a longer duration of a market run. 

2) A season for Gold

I’ll admit it.  I’m not at all a fan of gold.  And I’ve heard the reasons why I should love it…mostly relating to a doomsday scenario.  But from a trading perspective, I’ve found it difficult to navigate. 

However, I have noticed that there is a “Season” for gold – and it might be coming to an end.  Looking at closing prices for the Gold ETF (GLD), it looks like it peaked on April 21st.  And while it did make an attempt at a higher-high on May 6th, it came up short. 

Looking at the Seasonax chart of Gold over the past 10 years shows that this Gold ETF does indeed tend to peak between the 18th and 20th of April.  Huh.  Funny how that works out sometimes.  And while history doesn’t always repeat, it’s often said it rhymes.  If that is the case, the gold trade so many have been bragging about recently might turn ugly. 

Everyone looks like a genius in a bull market.  It’s the bear markets where you really find out how good you are.  Or maybe this is where many investors will become HLDRs of this commodity.  I wish them luck.

3) Sector update: XLV still ugly

Yesterday I went on and on about the ugliness of the Health Care (XLV) chart and all the reasons not to be in it.  Today showed continued weakness in that sector, as it was down (again) another -2.35%.  I said there were warnings about it and they were plentiful. 

To add do the negative factors I didn’t list yesterday in XLV, today I use the Slope of the ADX line as confirmation.  I’ve seen many investors use it to show a strong trend if it is above 20 or 25, but I’ve found that the slope can be just as important.  So if the Slope is True (in Green), to me that is confirming the DMI trend status (see chart below). 

DMI True (Green) and Slope True – that’s a confirmed positive trend.  Right now, sectors with that reading look good:  XLY, XLK, XLI, XLF, XLE, and XLC. 

DMI False (Red) and Slope True (Green) – is showing a confirmed negative trend.  If you still own it, you might want to reconsider and/or look for your exit.  Right now, only two fit that criteria:  XLV (big shock) and XLP.

The Slow Stochastic on the far right of my grid is just something I’m playing with. It is just because it is interesting, but not a factor I’m currently using to make decisions. But when it agrees with the other factors, it’s worth noting.

For a day when the S&P 500 gave a positive result, the underlying sector performance was underwhelming.  Only three sectors were positive, but those three (as I mentioned earlier this week) are large enough to move the market.  So, as always, keep those in the forefront of your mind. 

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