President Trump tweeted a warning to Russia about not shooting down U.S. missiles targeted at Syria. Chemical weapons were recently used in Syria. The last time chemical weapons were used in Syria, Trump hit Syria with missiles.
What’s an investor to think of all this? Let’s explore with the help of two charts.
Please click here for the annotated chart of S&P 500 futures ESM8. Similar conclusions can be drawn from charts of the Dow Jones Industrial Average DJIA, S&P 500 ETF SPY, Nasdaq 100 ETF QQQ, and small-cap ETF IWM.
Please click here for a chart of gold futures. Similar observations can be made from charts of popular ETFs such as gold ETF GLD, silver ETF SLV, gold miner ETF GDX, and junior gold miner ETF GDXJ.
Please observe the following from the charts:
• Stocks fell on concerns about Trump’s warning to Russia.
• The VUD indicator, the most sensitive measure of supply and demand in real time, was less negative than expected as stocks fell. This indicates underlying strength in stocks. When net supply demand is buying, it is shown in green on the chart. When net supply demand is selling, it is shown in orange on the chart.
• While stocks were falling, money flew into gold and silver.
• Gold moved higher and has broken out from the psychological resistance at $1,350 an ounce. Another major resistance is right ahead above $1,360.
• Also note that the VUD indicator for gold is not as positive as would be expected.
High-beta stocks are those that move more than the broader market. Popular high-beta stocks include Amazon AMZN, Facebook FB, and Apple AAPL. The VUD indicator for those stocks shows the same pattern as that of the S&P 500 futures chart. The VUD indicator is not as negative as would have been expected.
Historical precedence is that when missiles fly, investors buy and the market goes up. There is no guarantee that the same pattern will be repeated this time. However, history is a good guide….Read more at MarketWatch.
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