Trade the Trend | Episode 16
By Jason McIntosh | Published 19 November 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?
00:00 Intro 00:21
Where is the S&P 500 going?
02:10 Where is the Dow Jones going?
04:45 Where is the All Ordinaries going?
06:17 Where is silver going?
08:12 Where is uranium going?
12:56 Where is this mystery stock 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 19th November 2021. As always, this is a general commentary and doesn’t take your personal situation into account.
So, the S&P 500. Well, look, it’s really been a pretty quiet week overall. Not a lot of action to speak of during this period here. And, oh, look, and by the way, make sure you hang around at the end. I’ve got a mystery stock that I’m going to tell you about, an interesting stock that came up during the week.
But, yeah, now just back to this, back to the S&P 500. So, look, it’s very much along the lines of what we were talking about last week. We’re talking about how it had this big rally through here over several weeks, and it was very much unchecked.
The market hadn’t done any work to consolidate that, and that’s pretty much what we were looking for and that’s kind of what we’ve got. And I thought we might have seen a little bit more downside in this consolidation period.
I thought, you know, maybe we would have seen the market, like, pull back a bit more down towards here. So far, that hasn’t been the case. It’s going to be interesting whether the market can just rally from here or whether it does still need to do a little bit more work.
And what’s interesting to look at is I’m going to jump to the S&P 500 Equal-Weighted Index. So, this is equal-weighted, so the smaller stock has the same impact as the larger stock. And what’s interesting here is that this has actually played out a little bit more like I thought.
So, we’ve had this rise and then we had more of a pullback. And so what this suggests to me is that it’s really the big mega caps which have taken control again and are driving the market. And, look, there’s a bit more back-and-filling going on in the broader market.
And I’ll show you another example of what I mean. When we jump over to the Dow Jones, you can see it’s been even weaker. So, you can see in the Dow, you know, we’ve got the classic AVC zigzag pullback.
This is quite different to what we’ve seen in the NASDAQ. And also, we can put some Fibonaccis on here. Let’s just put the Fibs of the latest move, and you can see it’s pretty much come back to the 38.2.
That’s kind of what I was looking at for the S&P 500 to do. It hasn’t done that. It’s been relatively stronger. But what has happened here with this price action is that we’ve actually got some divergence coming in.
So, that’s where we got the high, and then we got a lower high here during the week, whereas the S&P 500 has actually, like, just nudged up to a new high. So, there’s a bit of divergence, a bit of disagreement in the markets with how they’re trading.
So, look, I don’t think that’s a sign of trouble by any stretch, but I think that’s possibly a sign that there is some more work to do over the near term. Maybe these markets aren’t quite ready to rally and move on.
But, look, like I say, I don’t see any immediate signs of trouble in these markets, and I think it’s very much a case of the bulls remain in control until we see otherwise. And, look, I often talk about the dangers of trying to pick tops in these markets as you’ll see.
You’ll see so many people trying to call the top in the market or call a low in the market. It’s just such a dangerous strategy because most of the time, I find the market just rolls over the top of you and keeps doing what it’s doing.
So, that’s why my preference is to stay with the overall trend. Don’t try and pick tops. You, know, it’s a great story about one of the great market analysts, a value investor by the name of Jeremy Grantham.
You know, he’s picked all sorts of, you know, highs and lows over his time, but he’s often early with his timing. I remember he made a big call on Japanese stocks in 1989 and said they were heading towards this, you know, peak. There’s going to be a bubble. There’s going to be a crash.
He was right but he was a year early. And in that year that came after his call, the market almost doubled. So, look, and I’ve learned that from my own experience. Don’t try and pick the top. Let the market tell you when the top is in, you know, and take it from there.
So, for now, in the equities, I think it’s a case of staying with that trend. So, let’s jump over to the local market briefly. Look, I’ve got this resistance band we drew in last week at around $7,750. The market is still struggling to get above there.
It’s, you know, the same story as last week. You know, unless you’re a day trader and these daily movements are an issue for you, look, I don’t think it really matters whether this market breaks higher this week, next week, or next month whenever it may be.
If you’re using a process or a strategy of using wide trailing stops, as very much like I do and my Motion Trader subscription service does, if you’re using those wide trailing stops, then, look, it’s often a case of just waiting out, waiting out these consolidations and sideways periods for the next trend to reveal itself and to then potentially be in a position to make your money there.
So, look, for now, it’s a bit quiet, a bit dull, but that’s often how markets are, and we’ll get the trends when the trends are ready to reveal themselves.
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All right. Okay. So, let’s look at a few commodities. Well, a couple of commodities. I want to start just briefly with silver because that’s been interesting over the week. I’ve left in the lines I drew last week so we got this big sideways consolidation.
It’s been in for…look, a bit over a year now. A very big consolidation. A potential head and shoulders pattern we’ve been talking about. So, you got the two shoulders and you got the head, the neckline. This was very interesting last week because we got that break.
So, let’s zoom in a little bit. So, we got that break a week or so ago, and what’s been interesting the last week is we started to get a return move down to the support, the support you get at this neckline area. Now, what’s really important now is what happens here.
So, this is really the make or break for this pattern, not for silver overall, but just at least for the near term.
It’s now either going to rally off this base and we’re going to see the market move up to potentially the upper end or the upper half of this big consolidation range it’s been in, or we’ll see this has been a false break and the pattern will just basically fail if the market, you know, ends up doing something like this.
Well, it just takes this head and shoulders out of play. Look, as I’ve said in the past, head and shoulders are a bit hit and miss. Sometimes they work really well. Other times they don’t, but it’s all about, look, identifying possibilities, and there is a possible good move higher.
And this is one of those asymmetric sort of situations where you don’t need to give it much room to fool you to decide, well, the timing is not quite right, but if it does go, yeah, it could be quite a good move. So, look, I’ll continue to watch silver with plenty of interest.
And, look, it could be a case of the whole precious metal sector setting up, but, you know, we’ll just have to wait and see how this continues to play out.
Now, I’m going to…I had a few requests to have a look at uranium because that’s been a focus point over the last few months.
It’s really, really been an interesting area. So, we’ll start by looking at the weekly chart. So, just looking at the weekly for uranium, and, look, it’s been a really strong move we’ve had over the last…look, this is probably what?
A month and a half, two months ago now. It was a really strong move up. And big moves often don’t just keep adding to themselves and going up and up and up. There’s got to be pauses and consolidations along the way.
At the very height of a market, you know, you see these rapid advances, but this was after, like, you know, a long, long building phase which we don’t have on this chart. So, look, I’d expect…well, I’d think probably there’s room for some consolidation here.
I don’t think there’s a hurry, basically, with uranium. I think it’s a great medium to longer-term story, but, look, there just may not be a rush. The actual uranium price itself, look, you know, it’s possible it does…you know, you could even see it pull back before it, you know, really gets going again.
That’s not to say that’s a prediction, but that’s the sort of thing which could happen. This is looking like…you know, it does look to be struggling here to push high the actual uranium price itself.
So, maybe that’s a sign that there’s some more work needed, but I think the overall structure when you look at on this weekly chart I think…well, on the weekly chart which we just had. This is a daily.
I think the overall structure is very positive and supports I think significantly higher prices over the months and, look, even over the years ahead. And just quickly jumping to some of the stocks.
So, this is the stock I own. It’s the North Shore Global Uranium Mining ETF listed in the U.S. I’m in from around here, and I’ve been riding this trend.
I’ve been using my wide trailing stock, you know, the Motion Trader way which I keep talking about, giving stocks plenty of room to move, plenty of breathing space, because you don’t want to get knocked out during these pullbacks, and that was a larger pullback which I was able to sit through because you want to get this big trend.
That’s where all the money is made. And we spoke a few weeks ago. A few weeks ago I was talking about…we had this big move up and we had the pullback, and I was talking about it around this point saying, “Well, okay, this is…we now got like a 50% retracement.
This is potentially like a good risk-reward entry point.” And it turned out, you know, that actually was a pretty good point to jump on. I’ve been asked, “Look, would you jump on now?” And it’s tricky. Look, the risk-reward is just harder up here.
It feels like maybe these markets could do some work. It’s just not as attractive as down here or, like, you know, even further back down in this region. So, I want to see how this market develops before I consider adding to my positions.
That could well continue to run, but the risk-reward dynamics of getting in now just isn’t as appealing to me. And looking at some of the stocks, this is an Australian listed one, Boss Energy. It’s been doing really well.
There’s a pullback we were talking about in the fund I’m in, and Boss is up near its highs for this run. So that’s looking really good. Then you look at a company like Deep Yellow. It’s not doing as well. It’s quite a fair way from its highs.
And this is why I play the ETF because I’m getting a basket of stocks and it doesn’t rely on me picking the right stock because that’s always a danger. You get the big view right but you’re getting the wrong stock.
And I’ve had that happen many times in all sorts of situations so that’s why I’m in here, in the ETF on this particular move. I might play a few of these smaller uranium plays, but the main game for me is in the ETF.
Looking at Paladin, another local stock, a bit stronger than Deep Yellow, not as strong as Boss. But then, look, you look at one of this Canadian-listed one and, like, look at what that’s done. Like, this is that pullback I was talking about, and it’s almost doubled.
Well, actually, probably it’s more than doubled since that point. So, this stock, Uranium Energy Corp., it’s probably in that ETF I’m talking about.
So, that’s the advantage of the ETF approach rather than trying to play it minor by minor, because you do get the wrong ones probably quite often, and, you know, the way these things work out, no one knows. No one knows where the big hit is going to be.
Okay. Lastly, let’s have a look at this stock I was talking about. So, this is an interesting one. It came up in Motion Trader’s scans just this week, and it’s in the precious metal space. It’s a stock called Zimplats Holdings. It’s Zimbabwe-based. It’s involved with the platinum metals, so platinum, palladium, and a number of others.
Also, some gold and silver, some copper in there, but the platinum and palladium, they’re the main plays. So, this is interesting. I always like when these stocks come up and you look at it and you see there’s an interesting chart pattern there, you know, to support the strength.
And this is your classic bullish wedge-type formation. So, I’ve had the big move up then we’ve gone into the large consolidation which has been, you know, six, seven-month consolidation, and we’ve recently just had the breakout.
And what’s interesting is this breakout happened on some pretty decent volumes so it gives some extra validity to that break. So, that’s an interesting thing on its own.
And then you can do some… Look, you never know where these things could go, but you can give yourself, you know, maybe some rough ideas by doing some measured moves.
So, if we use this point here for that last run-up, that would project us up to around 36.5, which is…I think that’s probably around 50-odd% from where we are now. Yeah. It’s about 50% from current levels. So, look, that’s not a target.
It’s just a projection of what could happen. And, you know, it could go even further. Let’s just have a quick look at the weekly, tell us whether that shows us anything of interest.
Yeah, look, that’s interesting, like, you know, this big period in the doldrums as it corrected from, you know, the last big advances that it had, and this move has been building. It’s been accelerating.
Yeah, look, it could willow some upside. So, look, I’ve just got a little position in it. Yeah. See what happens. It’s an interesting pattern. Interesting pattern. Yeah. I just like to bring these patterns to your attention when I see them.
They are of interest and, yeah, you never know. Never know what happens with the Zimplats. All right. Well, let’s call that a wrap for the week. Thanks for joining me.
Let’s come back next week and try and put all the pieces together. Hope you got some value. Please hit that like button, and look forward to joining you next week.
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.