Our key tables and comments for this week :
* The FTSE100 index has gone into fully bearish mode, the first major market to do so. The DAX is weak as well, but still holding above its weekly key reversal level. Both are testing their Bottom1 targets already. The US markets have been stronger and remain bullish with upward MoM on the weekly level.
* In the daily key levels all major stock indexes are showing downward MoM, which means a pullback is underway. Is it the start of something bigger? That is always possible. Every bear market starts with one down candle and with one down swing. Right now there is no reason for panic, but if the US and Japanese market also drop below their daily key reversal levels, then the outlook for stocks will darken. So I wait and see.
* For the Nasdaq we have a new Top2 target at 4659.
* In other world markets the French CAC 40 has gone into bearish mode. Several other European markets are coming close to do so as well: Italy and Switzerland. New problems brewing in Europe? Hmmm, just old problems resurfacing… Weekly MoM has also turned down for the MSCI World index, marking a possible long term peak.
* Bonds (TLT) have bounced back, but weekly MoM keeps pointing down for the bond market.
* Gold is back to fully bullish. $1415 is the Top1 target if we get another leg upwards. Now it is becoming DO time for gold.
* The Euro is stuck around 1.36. Key levels are bearish for the Euro at the moment, but that doesn’t mean much in a market that has been going sideways for so long. A big move will come, but which way? Plenty of traders are probably looking to go long Euro on a breakout above 1.40, or to go short on drop below 1.34…, and that may or may not work, as fake out moves have become common. In a coiled market like this one I like to take a look at the monthly key levels for direction. Monthly MoM for $EURUSD is going down since May (it had been going up since August 2012) and a monthly close below 1.3264 would confirm the next major move is indeed down.
* Oil has dropped below its weekly key level and is now fully bearish. The Bottom1 target for oil is 94.60
* Our weekly key reversal levels for the 30 Dow stocks are available here. 28 stocks are bullish this week, up from 27 last week. Above 20 is healthy, see : Keeping an eye on the Dow stocks.
* A reader wrote me to tell how boring it is, e.g. my posts keep repeating “healthy bull market” for the Dow Jones week after week.
What to do? It is not as if shorting the Dow Industrials has been profitable in recent months. I can only repeat George Soros on that point: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
If the key reversal levels are boring it is actually a good sign, it means they are not pointing in a different direction every other week. And that can only mean we are getting good trending moves. E.g. the Nasdaq has been in weekly bullish mode for 79 weeks and counting. It doesn’t get any more boring than that. When we started posting them the weekly key reversal level for the Nasdaq was at 3221, now it stands at 4109, so that is 900 points of Nasdaq profit quietly locked in by our key levels. Meanwhile plenty of other analysts/bloggers have been trying to nail the top since the beginning of last year (if not before). I am sure they have not been bored. But how much have they lost by now (provided they trade their own calls)? 20%, 30%, more? By the time we actually do get a correction it will perhaps give them back half of the money they lost, or back to breakeven if they are lucky (provided they have not given up trading their own calls by then). That’s a big price to pay for being able to say “told you so”.
Some day our key levels will stop saying “healthy bull market”. Maybe next week, next month, next year… It will come.
***
Here are the updated tables.
Key reversal levels for next week:
| Weekly |
Current |
Mode |
Key (W) |
MoM (W) |
Weeks |
% Ch. |
| Nasdaq |
4,415.49 |
|
4,109.03 |
6.88 |
79 |
42.93 |
| S&P 500 |
1,967.57 |
|
1,861.01 |
7.57 |
84 |
38.92 |
| Nikkei |
15,164.04 |
|
14,607.06 |
3.08 |
5 |
-0.26 |
| FTSE 100 |
6,690.20 |
|
6,834.48 |
1.32 |
0 |
0.00 |
| DAX |
9,666.34 |
|
9,409.44 |
4.08 |
15 |
0.46 |
| Bonds (TLT) |
113.58 |
|
109.23 |
2.31 |
24 |
6.46 |
| Gold (spot) |
1,338.12 |
|
1,279.81 |
0.47 |
3 |
1.76 |
| $EURUSD |
1.3607 |
|
1.3729 |
-2.19 |
8 |
-0.60 |
| Oil (CL) |
100.83 |
|
104.15 |
2.36 |
0 |
0.00 |
(Legend: Mode: green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Latest daily key reversal levels:
| 7/11/2014 |
Current |
W |
Mode |
Key (D) |
MoM (D) |
Days |
% Ch. |
Str. # |
| Nasdaq |
4,415.49 |
|
|
4,342.43 |
3.49 |
35 |
6.76 |
2 |
| S&P 500 |
1,967.57 |
|
|
1,948.25 |
3.24 |
35 |
4.20 |
2 |
| Nikkei |
15,164.04 |
|
|
15,128.86 |
1.04 |
36 |
5.22 |
2 |
| FTSE 100 |
6,690.20 |
|
|
6,797.17 |
-2.79 |
3 |
-0.72 |
11 |
| DAX |
9,666.34 |
|
|
9,908.46 |
-3.60 |
3 |
-1.25 |
7 |
| Bonds (TLT) |
113.58 |
|
|
111.94 |
0.90 |
3 |
0.82 |
5 |
| Gold (spot) |
1,338.12 |
|
|
1,299.15 |
3.36 |
21 |
5.12 |
17 |
| $EURUSD |
1.3607 |
|
|
1.3643 |
-0.33 |
5 |
0.10 |
15 |
| Oil (CL) |
100.83 |
|
|
104.71 |
-5.52 |
5 |
-2.81 |
11 |
(Legend: Mode : green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | W = weekly mode | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Our current key target zones (we use a +/-1% zone around these targets):
| Key Targets |
Top1 |
Top2 |
Bottom1 |
Bottom2 |
| Nasdaq |
4531 |
4659 * |
3975 |
3742 |
| S&P 500 |
2001 |
2031 |
1755 |
1641 |
| Nikkei |
15976 |
17220 |
13860 |
12940 |
| FTSE 100 |
6800 |
7110 |
6642 |
6230 |
| DAX |
10240 |
10450 |
9682 |
8715 |
| Bonds (TLT) |
114.60 |
115.70 |
108.25 |
102 |
| Gold (spot) |
1415 |
1541 |
1160 |
1075 |
| $EURUSD |
1.3950 |
1.42 |
1.3403 |
1.2870 |
| Crude Oil(CL) |
109.24 |
112.47 |
94.60 |
91.85 |
(* = new or updated target ) (for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )
Good luck, Danny
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Is gold really outperforming the S&P 500?
Posted by Danny on February 15, 2019
I saw this tweet, which tries to show that gold has been a better investment than stocks:
I will shamelessly repost the chart it uses to make the case:
That looks very convincing, but there are a few problems with this:
1 – The starting point of year 2000 is quite conveniently chosen. Stocks were at a major peak in early 2000, while gold was at a generational low.
2 – To make a fair comparison we have to include dividends. Here is a good calculator that gives you the total return for S&P 500 with dividends reinvested: https://dqydj.com/sp-500-return-calculator/. From Jan 2000 until Dec 2018 the total return for S&P 500 with dividends reinvested is 157%, more than double the 70% used in the above chart.
3 – If an investor kept all his savings in physical gold, then he would probably have used storage or insurance or both. That would have reduced the given 345% return quite a bit.
Gold would still be the winner over this given period, but not by as much as this chart suggests.
To have a more fair comparison that has both gold and stocks go through a few bull and bear markets it would be better to take 1971 as the starting point. That’s when gold was decoupled from the dollar and started trading freely.
If we use $37.50 as the 1971 starting price and $1283 as the closing price for 2018, then we get 3,321% gain for gold since 1971.
The total return for S&P 500 without considering dividends was 2646% from Jan 1971 until Dec 2018. So, it looks like gold wins.
But with dividends reinvested an S&P 500 portfolio returned 10,813%. That’s how much difference a little bit of compounding can make over a longer time period.
Conclusion: the stock investor is almost 3 times richer than the gold investor over this nearly 50 year period.
Does this mean stocks will again outperform gold in the next 50 years? I don’t know. Some people will probably see this as a reason to believe that the price of gold must multiply by three to catch up with stocks. Who knows?
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Posted in Market Commentary | Tagged: gold, S&P 500, stocks | 2 Comments »