High Yield Bond and Transports Signal Gold Buy Signal
The comments below are an edited and abridged synopsis of an article by Chris Vermeulen
Gold has rallied above the $1,400 level and formed a large bullish flag pattern. This confirms the new bullish price trend for gold, which indicates that global investors are more fearful of a crisis or some other type of economic uncertainty.
Vermeulen believes the next move in gold will push prices above $1,625, then above $1,745. If that happens, the fear of some type of crisis is real, and the bullish trend in gold may continue for years.
As much as we like to think that gold leads the market in terms of measuring fear and uncertainty, corporate bonds share a role in future expectations related to economic capacity. If they begin to sell off before a major downside market trend begins, it will represent a fear that future earnings and the ability to support/service corporate debt levels may be at risk.
A corporate bond sell-off indicates that global investors believe the economy is grinding to a halt, and that earnings will decline.
Then there’s the Transportation Index chart, which indicates the potential for a dramatic price sell-off. The lack of real market depth and liquidity, as well as an early warning set up in the charts, suggests a market breakdown event may be happening right before our eyes. If this is correct, and there is a drop in stocks, it could be a big downside move.
Vermeulen believes his charts confirm that prices and technical analysis are screaming an early warning signal that price weakness is setting up in the US and global markets. The continued lack of liquidity throughout December may prompt a breakdown price move at any time in the near future. When any of these markets begins a price move to confirm the predicted set ups, it won’t take long for the bigger major trends to follow through.
Vermeulen has been through a few bull/bear market cycles. He has a good take on both the market and on timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are huge if handled properly.
