Markets have run very hard over the last year or so. After the COVID-crash in February last year, central banks have been pressing the brrr button rather hard. This of course has been great for equity markets and, at least for a while, everyone trading Gold on the long side (at least for the first six months). As equity valuations reach closer and closer to the stratosphere, trading Gold has become a little more tricky than what it was when all the stimulus was just announced. In fact, Gold has been fading ever since August last year. Now, after all is said and done, we’re finally starting to see Bond Yields start to rise and the Dollar start to strengthen. These two forces might be enough to catch some the bulls trading Gold offside. Things are looking fairly bleak for the shiny yellow metal.
Offshore trade ideas
S&P500 (SPY)
The rising wedge formation is starting to look more and more ominous. A break below both the 50 day moving average and the trend line support, could see SPY testing the 200 day moving average around $345.00.
Nasdaq (QQQ)
By the look of things, QQQ has broken the bullish channel is has been trading in since the bottom of the “COVID-crash”. It has now taken out the 50 day moving average as well as a significant trend line. Support comes in at $280.00.
Dow Jones Industrial Average (IYY)
It seems that the second target will not be reached in this move after all. IYY has also come down to test its 50 day moving average and a break below will open a move toward $86.00.
Russell 2000 (IWM)
Small caps have been outperforming larger caps for a solid four months, although it seems that the party has finally come to an end. The tertiary trend line has been broken. Although the 50 day moving average has not yet been tested, the secondary trend line has now become a target.
Volatility Index (VIX)
The VIX failed to break below 20. Over the last year or so, each time the VIX has bounced off the 20 level, it traded to resistance around the 40 level. A move towards 40 in the coming weeks would likely mean a move lower on most equity markets.
Dollar Index (DXY)
Looks like the DXY had a fake break lower last week. It failed to make a new low below $89.00 and popped right back above the 50 day moving average. This puts the falling wedge formation squarely back on the table with the 200 day moving average is the first target. Much of the weakness we saw in Gold on Friday was likely driven by the sharp move the DXY made on the same day. A further push of Dollar strength will continue to put pressure on the Gold price. From a momentum perspective, it seems that the DXY is becoming more bullish.
USDZAR
A stronger Dollar spells a weaker ZAR. Keep an eye on that strong resistance (trend) line though. Once that down trend is cracked, we could see a fast move up to R16.16.
Bitcoin (BTC)
Well, hat sure is tasty…nom, nom, nom. Last week I was looking for higher crypto prices in general, although a decent spell of “risk-off” ruined the party. Leaning on historic performance, and based on the assumption that we are in fact in the fourth (or parabolic) year of the halving cycle, we’ve seen that during the parabolic years BTC can easily make 40% corrections. Thus, considering that “risk-off” is likely going to get a little wild next week, a 40% correction in BTC could see BTC scrambling for support around $35k. Overall my view has not changed and nor has my end of year target of $200k. In the short-term though, things could get a little bumpy.
Brent Crude Oil
Oil has had a very good run, although it is starting to look like a pullback is due. Over the medium-term I still believe that we will see strong oil prices, but in the short-term it is due a correction.
iShares 20 Plus Year Treasury Bond ETF (TLT)
TLT has put in a strong bounce. Should this bounce keep up and TLT test its 50 day moving average, we could see a relief rally in Gold.
International Gold ideas
Gold
The key support was broken in a big way on Friday. The next “big” support level comes in around $1680.00. From a trend perspective though, the 50 and 200 day moving averages have formed a “death cross”. Momentum wise things are not looking good either. Further, should the DXY rally, Gold will come under pressure. If the Bond Yields come down again, we might see Gold bounce a little, although overall, for those trading Gold on the long side, it is not looking very good at all. The most probable scenario for me here is that we see Gold test the support at $1680.00 before we see a bounce.
Gold Fields (GFI)
The break is clear. Look out below! Full target here is $5.00.
Barrick Gold Corp. (GOLD)
This stock has come off very hard over the last two weeks. It might be a little overdone here, although from the look of things, we likely won’t see a bounce before the $16.00 level is tested. There could be a good counter-trend trade here, although we’ll have to wait for a small consolidation or a reversal pattern of sorts before we can get involved.
Newmont Corporation (NEM)
NEM is the world’s largest gold miner and if those support levels break, it could be in the world’s largest trouble. $54.00 has been a support level in the past though, so let’s not get too excited too fast. We need to wait for the break below the key support (zone) before we can rush into any new short positions.
VanEck Vectors Gold Miners ETF (GDX)
There are two ways in which this can play out, and perhaps this chart does a better job at communicating the current view on Gold in general. Much depends on Bond Yields and Dollar strength. We could see a brief relief rally come in a drive GDX up toward the down trend line before the next leg lower (green path). The more likely outcome is that GDX follows the orange path. This would simply mean that when markets open, the support breaks and GDX keeps trading lower.
VanEck Vectors Junior Gold Miners ETF (GDXJ)
As above, things are not looking good for the Junior Gold miners either. Death cross, bearish momentum, break of key support… it looks like this ETF is about to fall off a cliff.
DRDGOLD (DRD)
DRD is looking pretty bad. There is some support around $8.00. After that the next major level is $6.00.
AngloGold Ashanti (AU)
Very clear break of the previous low price. Simple trend following dictates that price is headed lower. Much the same as the rest of the Gold stocks, the momentum oscillators are all triggering sell signals as well. This is a very nice short setups with a really tight stop loss and high risk-reward ratio.
Agnico Eagle Mines Limited (AEM)
AEM is looking very oversold, although we know that a stock can remain oversold for long periods at a time before they bounce. If the $55.00 level breaks, it opens a $45 price target.
South African trade ideas
Top 40 Index (ALSI)
It seems that the trend might be running out of a bit of steam. All eyes on the tertiary trend line. If that trend line breaks, we could see the ALSI pull back to the 200 day moving average in the coming weeks.
Netcare (NTC)
NTC could be offering a really nice, high risk-reward long entry here. Be careful though, because if it breaks below R13.50, odds are that it’s going to have another go at the R12.00 level.
Shoprite Holdings (SHP)
Be patient here. Waiting for a potential long around the R125.00 level is the current game plan.
The Foschini Group (TFG)
The trend line has broken, which triggers a short trade to the 200 day moving average. A short trade here is against the trend, so keep a tight stop loss.
Truworths (TRU)
TRU is battling to get through the resistance at R50.20. This offers a high risk-reward short trade down to support around R30.00.
Joining HCA trading
HCA trading offers a number of different trading accounts to suit different types of traders. Our offshore trading accounts allow traders to buy shares, ETFs, CFDs and even fractional shares in the United States for only $2 a trade. Locally, we offer shares, ETFs and CFDs at good rates with robust and reliable trading platforms. All our trading, including CFDs, is done on a Direct Market Access basis and thus our clients are able to interact directly with the real equity market and not have to worry about excessive counterparty or liquidity risk. Our prime broker locally is a big four bank and offshore we make use of one of the largest non-bank prime brokers in the world.
Local stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| JSE listed equities and ETFs | 0.30% | 100% | R150 |
| CFDs on JSE listed equities | 0.20% | 10% – 25% | R50 |
| SAFEX listed index futures (ALSI) | R20 | 6% – 8% | R20 per contract |
Offshore stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| U.S. listed equities and ETFs | USD 1 cents per share | 100% | USD 2 |
| Canada listed equities and ETFs | CAD 2 cents per share | 100% | CAD 2 |
| U.K. listed equities and ETFs | GBP 12 + 0.1% | 100% | GBP 12 |
| Germany listed equities and ETFs | 0.20% | 100% | EUR 8 |
| Forex | 0.40% | 100% | USD 4 |
*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.