Precious Metals. Gold is in a period of seasonal strength, and silver can tend to benefit as well. There has been a significant decline in gold prices over the last few years, but over the past year, they have started to show signs of bottoming. The chart is showing a good sign of a “head and shoulders” bottoming pattern. This implies that if we get a break above the neckline, there could be significant upside potential. Gold is due for a retracement. $1200 would be the new support for gold. $19.50 would be the support level for silver.
For financials in general, seasonal strength is in the first half of the year, but not particularly strong for the back half. This one has been doing quite well during its off-season. The chart shows the 20 day is moving higher, a positive short-term trend. 50 day is curling higher, implying a renewed positive intermediate term trend. Technically, it is approaching resistance at $35.77. Pulling back today and wouldn’t be surprised to see some consolidation.
The energy sector, particularly the energy exploration and production industry, tends to have 2 periods of seasonal strength. The first one is from January all the way through to May. The next period is just approaching, basically the last half of summer all the way through to Labour Day. The average gain for August and mid-September is about 5%. Trends are still very much positive. 1.9% dividend yield.
Energy is entering its next period of seasonal strength. There is potential for downside risk, and this stock is showing that with its recent plunge. This has fallen below its 200 day moving average and its 50 day is pointing lower, which implies a negative intermediate term trend. Support has been breached on the stock, so it is pointing to significant downside potential.
Reported greater earnings recently. Chart shows it has spiked higher, and it essentially has created a gap. We essentially could see a fill of that gap by a downwards movement of about 5%. Trading well above its significant moving averages. Seasonally, Internet stocks tend to do pretty well into September and October.
Markets. We have just entered the most volatile period of the year. From the start of July all the way through to October volatility typically rises. As we have seen since June, the Vicks has spiked about 50%. The S&P 500 has now broken support at the 50 day. Since the 2011 lows, we have been rising in a narrowing range and the rallies have been less intensive. Investors do not believe in the rally. That is a bearish setup. If we break below the bottom trendline of that pattern, it could suggest significant downside potential. It seems reasonable, especially now in this seasonal volatile time frame, that we will see a correction happen in the next couple of months. Right now there are no favourable recurring events to drive the market higher. We are past earnings season. Between now and the 3rd quarter earnings season, the market’s economic data tends not to be too favourable at this time.