Trade the Trend | Episode 12
By Jason McIntosh | Published 22 October 2021
Trade the Trend is a weekly video focusing on where the stock market is going. It’s for investors and traders looking for insights to the market’s next move. Jason uses technical analysis and trend following techniques to help you piece together the world’s biggest puzzle.
Where is the Stock Market Going?
00:23 Where is the S&P 500 going?
07:05 Where is the NADAQ going?
10:09 Where is the All Ordinaries going?
12:23 Where is gold going?
16:06 Where is Newmont going?
19:12 Where is Kinross going?
20:55 Where is Evolution Mining going?
Where to invest now?
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Please note: Charts available from video
Welcome to this week’s edition of “Trade the Trend,” a weekly video discussing where the stock market is going. I’m Jason McIntosh. It is Friday, the 22nd October 2021. As always, this is a general commentary and doesn’t take your personal situation into account.
All right. Well, with that said, let’s jump over to the first chart. The S&P 500. Oh, and by the way, I’m going to go through some gold stocks and gold in general at the end of this video, so make sure you stick around for that. Okay. S&P 500. Well, geez, hasn’t it been an interesting three weeks?
So, three weeks ago, the market was sitting right around here, and it looked like it was on the verge of breaking light. Look, there was a whole lot of fear in the market. And I heard of a lot of people that were selling their portfolios, they were going to cash.
They were buying inverse ETFs, you know, to protect their portfolios on the downside. Look, there was a time of a lot of concern. People were talking about, is this another crash? Is another crash about to happen?
And I think the importance of looking back and reflecting on this, now the markets are back near new all-time highs, is that it’s just so important to keep a cool head when the market does pull back.
And it’s important to understand the possibilities and to stick to your plan, stick to your trading plan. And look, yes, big down moves do happen. Every year or two we’ll see the market fall 10%, 15%.
Every few years, you might get a 20% pullback, and every decade we might see a pullback of, well, like, a bear market of, you know, 30%-plus.
Those times do happen. But if you want to trade these big, medium-term opportunities that the market continually throws at us, you need to be able to see off these bouts of volatility that will take place, you know, year in, year out, like we’ve seen.
So look, having said that, let’s…I want to just start by focusing in on this area we were looking at last week, this area in here. So to do that, I’m going to jump over to an hourly chart.
You get much better detail on an hourly than you do on a daily. So let’s just jump there now. Right. Okay. S&P hourly. So, this is the pattern we were looking at last week.
It was a big head and shoulders pattern. So I’m just going to redraw it on the chart. Look, it’s just interesting to reflect back on this pattern and see how it’s all played out.
So I’m drawing in the shoulders there, either side of this part here, which is the head of the move. And look, so this pretty much played out to a textbook head and shoulders pattern.
We had this breakout last…it was around last Friday, and the market really hasn’t looked back. You know, we had some sort of a minor return move. You could barely even call it a return move. It’s been pretty much one-way traffic all the way back up.
And there were two clues, two clues that the market was on the verge of a potential turnaround. First was down here a couple of weeks back where each time the market tried to test lower, it couldn’t break the previous low.
So that was the first clue that the bears were losing their energy in the way that they were able to push the market lower. And a couple of weeks ago, I talked about how I covered my hedge.
I had a short position through an inverse ETF. I covered it somewhere around here due to this very price action where the market was just struggling to go lower. That was the first clue.
Second clue came in this decline here, how it couldn’t follow through it, couldn’t come back to retest this low. And that, of course, is what put this head and shoulders formation into play.
This is a neckline. Once we got the breakout above there, that put the whole thing into action and the market shot higher. And I think, like, a big tailwind for this move has been covering of a record position in inverse ETF buying.
So, last week I showed a graph which showed there was…it was a record position. I think it was something like 1.75% of the market was held in an inverse ETF.
And what happens when the market gets so one-sided in its thinking and its fear of these big declines kicking through, you often get the market lurch back in the other direction.
And that’s what’s happened and that’s been, I think, probably much of the tailwind for this move. So let’s jump back over to the daily chart, and what we want to have a look at here…I’m just going to clean that up a touch.
Let’s expand that out a bit. So, let’s have a look at this resistance point that the market has also managed to punch through. So around about there, so it comes in at 4460 to 4480, thereabouts.
So this was going to be an important level to look at to see whether the market got to this and then pause, pull back. But there hasn’t been a pullback at all. It’s gone straight through, which is…I think that’s a particularly encouraging sign.
So the bulls very much remain in control at this point. I think the next test for this market is going to be what happens when it pulls back.
So it hasn’t started to pull back yet, we don’t know when or where that’s going to occur, but just, for example, let’s say it were to pull back somewhere where it is now.
So let’s just put the Fibonaccis on. So if we were to get some sort of pullback, you’d really want to see it holding somewhere around this support to probably the upper level of the Fibonaccis to really keep it looking quite robust.
You know, I’d be looking for, you know, something like, you know, over a couple of weeks, maybe even a week, did that, then that really sets the stage for, you know, being able to do another punch higher.
That’s the sort of a price action we want to be looking, for now, to see that this isn’t just, you know, a quick, short-covering rally higher, and then it rolls back over again.
So, that always remains a possibility, always important to understand your possibilities. So this is a price action we probably want to start to see develop over the next…maybe the next week or two.
All right. So that done, let’s jump to the NASDAQ, which has been interesting as well. So, what’s interesting with the NASDAQ, as you can see here, the NASDAQ is yet to make a new high.
The Dow Jones has, the S&P 500 has, and NASDAQ hasn’t. Now, what’s interesting about that is the NASDAQ has been leading the charge pretty much for the last 18 months.
And so it makes me wonder whether there’s some sort of rotation going on. Financials have been particularly strong over the last little bit, so the S&P financials made a new all-time high a couple of weeks ago, and they did that amidst the volatility that we were seeing in the market.
And that’s a good sign. It’s a good sign when the financials are strong. The Australian financials, they made a new high yesterday. So it seems to be a global theme, financials doing well. So maybe there’s some rotation in the financial stocks.
And then on the other side, you’ve got stocks like Facebook, Apple, and Amazon. Well, they’ve still got quite a bit more work to do to get back to their previous highs. And even Google.
Google’s not far from its high, but it’s looking a bit sluggish in the way that it’s rebounded. So maybe it’s a case that some of these big mega-cap tech stocks need some more time to pause and consolidate.
So it’s going to be interesting to see how this plays out over the next…maybe the next month or two. And what we don’t want to see though, we don’t want to see that the NASDAQ’s stalling here and starting to pull back.
What that would do if it did, you’d end up with this divergence. So we’d have a case where were the S&P 500 and Dow have made new highs, but the NASDAQ hadn’t made a new high.
That’s if ideally if we’re going to see it push on over the next few days, and it’s going to take this divergence possibility off the table. But it is a possibility that could happen, so it’s worth just having a look at and thinking like, “What could that mean?”
So if it were to stall there and get a pullback, you know, you can’t rule out that something like this is still going to occur, and then you’d expect the S&P 500 and the Dow, they would correlate to some extent.
And so this is still a possibility. We don’t want to see this divergence from here, so it’ll be good to see if the NASDAQ can punch above that previous high over the next few days.
So this isn’t the preferred case by any stretch, but it’s always important to be aware of the possibilities and not be blindsided when, you know, something you didn’t entertain as a possibility actually ends up occurring.
Oh, look, and by the way, if you’re getting some value from this video, please click that like button, let YouTube know that you like it, and also click the subscribe button with the bell icon if you haven’t already done so, and help me build up this YouTube channel.
That’d be fantastic if you could do that, please. Now, okay. Next one, we’re going to jump to the Australian market, which is also really interesting to have a look at. I’ve already drawn the resistance band on this chart.
So this is interesting in that it’s not as strong as we’re seeing in the S&P and the Dow, you know, it’s lagging behind, a bit like the NASDAQ currently is at the moment. It’s also a bit behind where the NASDAQ is.
So it has been a good rebound off the lows, but we really need to see the market punch through this resistance band, which is somewhere around, say, 7700 to 7740.
We need to see it punch through there to clear a path for a retest of the highs. And if we can do that, the market will be looking quite solid at that point. The concern is if we can’t punch through this level and we start getting a pullback, then it’s going to be really important to watch, okay, what happens then?
Is it a pullback before we get, like, a really good sharp punch through that’s positive? If it’s then a pretty sluggish sort of rebound like this, well, then we start to wonder, well, okay, is the next move actually going to be down to here? A little bit like what we’re looking at the NASDAQ.
So these sort of bearish scenarios do still remain on the table. And they’re things that we need, well, need to be aware of, not base cases, but, you know, possibilities.
So if this were to happen, I don’t think this would still be…still don’t think that would be the case, then we start looking for a big bear market decline or anything. I think it would just mean it’s that the consolidation would then stretch out over a longer period before we then start to potentially look for higher levels.
Okay. So, now I want to…I want to jump over now and have a look at gold because gold is probably one of the markets where I get the most questions out. There’s this, like, there’s always been…as long as I’ve been in the market, there’s been a fascination with gold.
And so let me just find the gold chart. Okay. So here’s the gold chart. So, let’s just tighten the…yeah, here we go. Now let’s just draw some…drawing a pattern, which I’m having a look at, at the moment.
It’s a triangle formation. It’s this tightening band through here, which the market’s been in since March. Look, I don’t think this is the greatest triangle of all time. The proportions don’t look or feel quite right to me, but nonetheless, there are some clear lines there to be aware of and to look at.
And now let me just jump over. Having put that in, I want to jump over to our weekly chart. Now, I think this is all looking, you know, really constructive. I think that what we’re seeing through here, I think this is all a consolidation, pretty much…Well, definitely of this move, and possibly even, from this move as well.
It wouldn’t surprise me to see this extend out even further. Now, here’s the thing, the longer the market travels sideways here, the bigger the base, and the stronger that base is to support a move upwards.
So ultimately, I think we’re looking at a market that’s going to do that. And if this were to go sideways for another, you know, two months, three months, four months, maybe even longer, maybe it’s into the…you know, into around February, March, that’s the sort of move I’m looking for.
And the bigger that base is, I think the stronger that launching pad for a big move higher. So, that’s my favorite case.
So let’s jump back to the daily chart for gold, and I’m going to put some moving averages on. So there’s the 50 and 100-day moving averages. So look, moving averages are still down at the moment.
It’s going to take a bit more work for gold to start to turn these averages up, so I don’t think there’s a hurry to start going in and buying gold positions at this stage, particularly while the market’s moving sideways, it’s below our trend lines, below previous highs.
I don’t think there’s a hurry. I just don’t think there’s a hurry to be getting into gold at the moment. I think gold needs more time. The moving averages need to cross.
And even if it’s move up started now, look, just for example, just say, you know, the move up gets underway now, we get a punch up, then there’s almost certainly going to be some sort of return move, then some consolidation, and then you start to get a move higher.
But even if you get something like that, it’s still potentially after December before it really starts to get into a position to really start to accelerate because you’ve got to wait for things like these averages to cross and for the trend to…It’s like turning the supertanker around, it takes a bit of time.
I don’t think we’re going to see… Look, I don’t think we’re going to see a move like that. That’s sort of like the parabolic acceleration phase you get towards an end of a move.
Moves usually don’t start like that. They start more lumbered and cumbersome, and just gradually trying to build their momentum. That’s what we need to look out for in gold.
Okay. So, let’s jump and just quickly look at a few gold stocks. And remember, please hit that like button if this is helping. It tells YouTube that people are getting some value from the videos.
Let’s see. Let’s start with Newmont. Newmont’s an interesting one to start with. Look, okay, this is interesting because Newmont’s the biggest gold producer in the world and it’s come right back to a support band.
Yeah, look, there’s a nice support band in there for Newmont, you know, around say $52 to $54 thereabouts, and it’s come back to the supporters’ bounce. Encouraging. That’s encouraging.
Note the moving averages are still down, so again, that’s not showing any need for urgency at this point. Now, I want to focus in on this point here for a moment, and to do that better, I’m going to jump to an hourly chart just to get that better detail of, like, the developments here.
So what we have here, we’ve got a price channel which has formed over the last few months. Let me just fit that nicely. Yeah, so it’s quite a nicely formed trend channel, and the market has now broken out of it, it’s doing a little sideways move here.
So it’s got all the hallmarks of a stock that wants to sort of, like, you know, break up from this pattern. You know, that’d be an encouraging sign for the gold market, generally.
So it’s one which is worth watching. So, just coming back to the daily chart, and I think this has a potential to form a head and shoulders type bottom.
So look, so if that…This is, of course, just possibility of what could happen, but, you know, there’s a possibility that what we see there, that could become a shoulder, and this here could become the head. Let me just get rid of that channel.
Interesting to watch whether we get another shoulder form. That’s just how you just watch price action, watch how price action develops and you think, well, what could happen? Maybe we could get something like this over the next month or so.
And then if that were to happen…and this may not happen at all, it’s just like the things that you look out for, the things that could happen, you could find that we have a head and shoulders bottom in Newmont around the same sort of time that that gold chart has a stronger base.
And then the whole thing starts to move upwards. And this becomes, like, a big consolidation base in Newmont, like an 18-month, 2-year consolidation that supports a really big move higher. That’s a sort of possibility that I’m thinking about and I’m on the lookout for.
Now, another couple of stocks, Kinross. Kinross is a big Canadian producer. Again, it’s interesting. Like, I’m just going to get a bit more data on this chart.
So this chart, we’re going back to 2016 and you’ll find there’s a… Where would we put it? Like, it’s not…yeah, look, generally, you’d say there is a big support band…Just trying to match it up by eye here.
Like, it’s hard to fit this really well, but you can see, there is some sort of like, you know, picks up these highs, a high there, picks up working there, you know, the overshot either side here, we’re down around this point where we’re bouncing.
There’s probably some sort of, like…you could say there’s some support around that sort of area there. And I also like…there’s also this zigzag, ABC sort of formation that we have coming down.
So look, this is…it fits in with that whole Newmont pattern. I wonder whether you could get a declining wedge in there. Actually, I think you can. So that’s another interesting pattern to keep an eye on as well.
Just seeing this now, so look, this would support, like, you know, you’d look for a move like this up to the top of the wedge or a term move, and then, you know, a breakout. That’s how you’d expect that sort of pattern to play out.
So you can see these bullish scenarios which are taking shape in these gold charts. But again, look at the moving averages.
They haven’t turned up yet, so this is all speculation about possibilities, but they’re really exciting possibilities and they’re possibilities which could lead to some really profitable trends if the price action continues to play out.
Okay, last stock, let’s have a look at Evolution Mining, an ASX-listed gold miner.
Now I’ve already drawn a support level in here, and look, similar sort of feel to Kinross and Newmont in the case of coming back to these sort of broad areas where there’s been previous congestion in the share price, previous support resistance, bounced off that.
Again, we got the zigzag. It too would probably support some sort of wedging formation that’s sort of a little bit steeper than the one in Kinross, not as well-formed.
Look, again, showing that potential that it’s been a long consolidation, but it could be forming that base for quite an exciting move higher sometime in the months ahead, maybe even into the new year.
It’s a developing situation which is worth paying close attention to. Okay, well, let’s call that a wrap for this week, I hope you got something out of it.
Please hit the like button if you haven’t already, if you enjoyed, and please maybe leave a comment. It tells YouTube you’re engaging with what I’m saying. And I’ll leave it on that note.
I’ll be back next week to try and put all the pieces back again together next week to work out where the markets might be going. Thanks for joining in, and I will catch you next time.
I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.