The 2020 GDX OUTLOOK>>YIELDS|STOCKS|FED Policy& GOLD>>(Part 2/4)
Updated
Short Analysis on GDX/Gold in 3 bullet points; Series on Commodities and the 2020 outlook - 21st of December 19'
Before I get into the analysis, wishing you all Happy holidays! Here's the simpler version of the chart:
1. Few key takeaways: Despite that the current resistance at ~31 is holding , thebreakout in GDX is eminent. The question is of the timing. From part 1/4 analysis on yields(Ref #5) it seems that yields are looking somewhat bullish. Of course, this is based on the assumption that "Not QE" will continue and eventually QE-4 will be announced. Nevertheless, this means that equities will continue to be bullish, even in sectors such as materials (Ref #6). If we get another series of rate cuts, GDX could breakout as early as Q2 of 2020. For further discussion on QE and monetary policy, visit part (1/4) on Treasury yields:
2. Recently there has been somewhat of a small bounce in PMI's. This was expected as the global monetary policy stance of CB's took a dovish turn in 2019, and the easing environment affects the real economy with a lag. Taking this into consideration,
GOLD may continue the horizontal path that it is currently on. This bounce in the macro data may be very dependent on the outcome of the trade negotiations, which hopefully we will find more about in January.
3. Not expecting gold to make new highs in the first half of 2020. As the election cycle unfolds, there should be more volatility depending on the election circumstances. It's still very early, but it doesn't look good for the Democrats, in which case a breakout in both GDX and GOLD may be postponed. It's all labelled on the chart.
To sum up, based on more accommodating monetary policy, the bottom line in GDX should hold above 27$. The horizontal range (27-31.25) should sustain before we get a breakout triggered by either the election cycle or potential economic shocks. This is a perfect iron condor trade setup. Materials as a sector has been very under-weighted and hasn't performed well, compared to the cyclicals. As the global economic slowdown continues, it seems that there isn't any downside in holding gold as a stock market hedge. Either way, balance sheet expansion favors all assets, especially substitutes for the dollar- gold.
Tried my best to keep it short and simple, this it for GDX and GOLD.
-Step_ahead_ofthemarket-
________________________________________________________________________________________
>>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>>
However, if you'd like to support me and get informed in the greatest of details, every thumbs up and follow is greatly appreciated!
References & Disclosure:
1. FED rates Super-cycle 1980's-
2. Dollar/Yuan breakdown, trade progress and tariffs:
3. Previous Gold chart:
4. XAUXAG, Gold aginst Silver ratio:![MEDIUM TERM(XAUXAG): WAVE COUNT|BULLISH TARGETS+STRUCTURAL [TA]](https://s3.tradingview.com/k/kmfDhDvb_mid.png)
5. Treasuries and QE:
6. XLB Sector, US materials:
Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
Before I get into the analysis, wishing you all Happy holidays! Here's the simpler version of the chart:
1. Few key takeaways: Despite that the current resistance at ~31 is holding , thebreakout in GDX is eminent. The question is of the timing. From part 1/4 analysis on yields(Ref #5) it seems that yields are looking somewhat bullish. Of course, this is based on the assumption that "Not QE" will continue and eventually QE-4 will be announced. Nevertheless, this means that equities will continue to be bullish, even in sectors such as materials (Ref #6). If we get another series of rate cuts, GDX could breakout as early as Q2 of 2020. For further discussion on QE and monetary policy, visit part (1/4) on Treasury yields:
2. Recently there has been somewhat of a small bounce in PMI's. This was expected as the global monetary policy stance of CB's took a dovish turn in 2019, and the easing environment affects the real economy with a lag. Taking this into consideration,
GOLD may continue the horizontal path that it is currently on. This bounce in the macro data may be very dependent on the outcome of the trade negotiations, which hopefully we will find more about in January.3. Not expecting gold to make new highs in the first half of 2020. As the election cycle unfolds, there should be more volatility depending on the election circumstances. It's still very early, but it doesn't look good for the Democrats, in which case a breakout in both GDX and GOLD may be postponed. It's all labelled on the chart.
To sum up, based on more accommodating monetary policy, the bottom line in GDX should hold above 27$. The horizontal range (27-31.25) should sustain before we get a breakout triggered by either the election cycle or potential economic shocks. This is a perfect iron condor trade setup. Materials as a sector has been very under-weighted and hasn't performed well, compared to the cyclicals. As the global economic slowdown continues, it seems that there isn't any downside in holding gold as a stock market hedge. Either way, balance sheet expansion favors all assets, especially substitutes for the dollar- gold.
Tried my best to keep it short and simple, this it for GDX and GOLD.
-Step_ahead_ofthemarket-
________________________________________________________________________________________
>>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>>
However, if you'd like to support me and get informed in the greatest of details, every thumbs up and follow is greatly appreciated!
References & Disclosure:
1. FED rates Super-cycle 1980's-
2. Dollar/Yuan breakdown, trade progress and tariffs:
3. Previous Gold chart:
4. XAUXAG, Gold aginst Silver ratio:
5. Treasuries and QE:
6. XLB Sector, US materials:
Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
Note
Short Update: ¬GDX up about 7 % since I posted this idea. Breakout might even happen simultaneously with the bull run in equities.
Note
Timing will certainly be off. I didn't anticipate such large bullish breakout in gold. Seems that despite all the bullish momentum in equities and yields, gold will make new highs as soon as the first quarter of 2020.-Step_ahead_ofthemarket-
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