Trade the Trend | Episode 26
By Jason McIntosh | Published 4 February 2022
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?
00:21 Where is the Nasdaq going?
08:26 Where is the Russell 2000 going?
10:03 Where is the ASX 200 going?
15:12 Where is gold going?
20:02 Where is copper going?
21:39 Where is uranium going?
Where to invest now?
Looking for ASX stocks to buy now, as well as off the radar ideas most people don’t know? Our algorithms scan the stock market daily for medium term investment trends. We then tell our members precisely when to buy shares. And most importantly, we tell them when to sell.
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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 4th February, 2022. As always, this is a general commentary and doesn’t take your personal situation into account.
The S&P and the Dow, they’ve got similar structures, but I think it’s the NASDAQ which has the most downside risk. It’s really those big tech stocks which have run so far and are so far above those lows from back down here in March 2020.
I think that’s where the vulnerability is. So when you look at the S&P 500 it doesn’t look as vulnerable as the NASDAQ and then you look at the Dow and it looks less vulnerable again. If this were to happen, you get downside everywhere, of course, but I think this is where the most downside risk is. And so let’s just wait and see. We’ll wait and see how this rebound takes shape and then we’ll come back and discuss it further.
Just quickly, I want to jump over to the Russell 2000, the small caps, because this is another interesting one to look at. We’ve talked about this a few times, talked about it quite a lot, actually. I’ve left these markings on from a couple of weeks ago when we last spoke about it.
So we’ve got this breakdown from this range which held for around nine months, had a false break there, came back in, now we’re broken to the downside. When you do a measured move of this range, so you measure the width of the range and then you project it lower, that’s where this green line is, that’s the theoretical target. So this doesn’t look like a lasting low. It’s a temporary low, I think.
And if this were to…look, we could see a bit of a sideways move over the next week or two perhaps and then maybe we get another leg lower in the Russell in the small caps. If that sort of scenario played out, well then, you know, it probably lends more weight to that bearish scenario for the NASDAQ. And what’s interesting about the Russell is it’s down 22% from its high, so technically now that is in a bear market.
So we have our first of the U.S. indices to hit bear market territory. NASDAQ’s not far behind and S&P and Dow are further back. But, look, I think at the moment, we just need to be prepared for more downside, choppiness, and then more down downside after this rebound plays out. And now in a moment, I’m going to take a look at gold, copper, and uranium.
But before I do that, I want to briefly jump across and have a look at the ASX 200 because it’s doing interesting things as well. And so what we’ve had happen here over the last week is we’ve had a rebound off support.
So this is a support region through here that we’ve kept an eye on, somewhere around that sort of marks around the 6,900 level. We’ve got some highs here, picks up some lows, picks up the lows from a week ago, had a brief break below up and it’s rebounded back up, and now we’re having the bounce.
So where to from here? I think we’ve got more upside in this bounce. I think we need to correct this entire move down, which now looks like a complete move. It’s not to say there’s not going to be another leg to it later on which goes further down, but for now, I think this is probably only quite an important low at least for the time being and it’s going to give us our rebound.
So, where we’ve rebounded to now, I’m going to draw in another band. This used to be a support. This is a support level which we watched for quite a while. It’s in place for saying like about six or seven months. You got highs here, lows, lows, lows, held all the way through, then we got the breakdown. Now we’re having the rebound and the rebound’s bringing us right up to this what has now become a resistance zone.
And it’s going to be interesting to see how the market handles now we’re back at this point. So let’s skip over to the four-hourly, just get a little bit more detail. So what we’re looking at here, it’s interesting just looking at the Aussie market now just as I am just near the close on Friday afternoon, it just looks like it’s going to close it at a high for the week. So I think that’s a good sign that I think there’s more rebound coming.
So let’s put the Fibonaccis on because now we’ve got this what looks to be a complete move down. We can do the Fibonaccis. Just going to take that support out so it doesn’t clutter up our chart. So look, here’s a Fibonacci. So we’ve come back to the 38.2% already. I think this is going to get back up towards the 50% which is in the upper boundary of that resistance band we had that would be around 7,200. Perhaps it even gets higher, perhaps it even gets up there in that 7,300, sort of, mark.
Look, I think that what I’ve been doing, I’ve been using this rally to lighten my portfolio. I’ve used it to sell some stocks which hit their exits over the last couple of weeks. So what I’ll normally do, I’ll look at my…I use end-of-day data.
I’ll look at my exits at the end of the day. I usually then sell them the next day or soon after but what’s happened through this period here some of those stocks have then just moved quickly below my stops and I’ve taken the view that the market looked oversold or was new support and there’d probably be a rebound and that would give me the chance to do some exits, and that’s what I’ve done.
So, look, that said though I bought a stock today. So it’s not a case of just getting all bearish and looking to sell everything, it’s about selling stocks which are hitting their exit points, selling stocks which are weakening, but then holding stocks which remain in the broad upward trend and using wide trailing stops to try and see off volatility and stay with those trends.
The stock I bought today, it’s a stock which was breaking higher. It is breaking up to new highs. I had a buy signal. So it’s a case of follow the price action, not the emotions, not the fears, not the headlines.
And, as I’m always telling my Motion Trader members, we don’t know what the markets going to do next but if you’ve got a good trading plan, well, look; then you know what you’re going to do. And I think that’s the key to taking out the emotion and giving yourself consistency, giving yourself a repeatable path for profiting from the market.
If you need some help in this area, come over to my Motion Trader website at motiontrader.com.au. I’ve got lots of free resources, things that might help you, you know, just work on this area of trading plans and the structure and the trailing stops and so on. So jump over and have a look if you think that might help.
All right. So I want to go over to gold next. And, look, and by the way, if you’re getting some value, please hit that like button and please leave a brief comment just, “Hey, I like the video.” Just something brief like that. All that does, it tells YouTube that people are watching, people are engaging, that it’s interesting, that it’s helpful, that it’s useful, then they show other people. And that helps build my YouTube channel and it’s really helpful for me. So please do that if you’re getting some value. So, okay.
So, now, let’s go into the home straight, and we’ll look at some commodities. So, gold. Gold is our first one. Now, I haven’t spoken much about gold for a while. Let’s just switch back to the daily chart. And the reason I haven’t been speaking much about gold is because really, frankly, it hasn’t been doing very much to talk about.
What we’ve had really in gold over the last how much, maybe it’s seven or eight months, we’ve just been in this big range. It’s not doing much, if anything, the range is contracting. The range is getting tighter.
So there hasn’t really been much to say. And for me, what I’m doing with this hasn’t been much to say, but I’ve watched gold all the time. It’s one of the first markets I look at each morning when I put the screens on and just see what’s happened overnight. I check out the U.S. markets like the NASDAQ, Dow, S&P, then I’ll look at gold.
So let’s tighten up the range. So what I’m looking at now, I’m looking for…I want to see gold break either to the topside or the downside to get some direction for where things might be going over the near term. And then the near term can then lead to the medium term, could even use this point here but I prefer to use this one because it’s just been a little bit longer standing.
And at this point, look, it really could go either way. I think gold’s got a really good medium to longer-term story. I’m bullish, I’d say. Am I very bullish? Yeah. Look, I’d probably say, push comes to shove, I’m very bullish on gold over the medium to longer-term. I think it’s got a great overall chart setup.
But that doesn’t mean that, you know, the next move is going to be up. We’ve always got to be aware of bearish scenarios that work against our prevailing view. It’s like, let the price action rule, not your opinions. So I’m not pre-empting any break in gold to the topside because, quite frankly, that may not be what happens.
I’ll give you a bearish scenario. This is a bearish scenario, or well, it’s at least a short to medium-term bearish scenario. Let’s just say we get another leg down. So to give us a downside target, we can do a measured move. We’ve measured from the high to this low back to this high, that gives us a potential target down around this band here. And this could be what could be part of a zigzag correction in gold.
So the first leg so you’d have like, you know, the wave A, the wave B, and then the wave C. And what that could look like, it could look something like that. You get the break and a rebound and then gold makes its way down there over, could be any timeframe, could be a couple of months to six months, I don’t know. And this is possible.
So let’s look at this on a weekly chart just to put some perspective to that sort of timeframe and decline. When you look at it on a weekly, gold could do that and still maintain a longer-term bullish picture. So from a washout like that, you could then get in and get the makings of a new bull market and it could be off and away.
This isn’t a prediction. It’s just going through a possibility. This is a sort of thing that could happen because I know there’s a lot of bullishness about gold out there. There’s a lot of people who really think, you know, gold’s got to run. They look at, you know, all the quantitative easing and the central bank balance sheets blowing out, inflation picking up, the only thing that hasn’t come together has been gold hasn’t rallied. So there’s a lot of people who are sitting there who are quite…I think who are very bullish on gold, they see this big longer-term potential.
Markets don’t do what everyone thinks they’re going to do or everyone wants them to do. There’s a possibility that maybe the scenario is there’s another washout coming. Maybe all that bullishness, pent-up bullishness has to be washed out with another decline to the downside, and then that could set up next move higher.
This is why I’m not pre-empting the break because I know there’s also this negative or this near-term bearish scenario that could play out. Maybe it doesn’t, maybe we get our upside break, and maybe it’s off and away. But we’ve got to wait and see. That’s why it’s always, I think, important to…you know, you follow the market, not your opinions.
And let’s quickly jump to copper because copper has got a similar situation. Again, you know, there’s plenty of people with this long-term bullish view on green metals and copper and all the copper needed for electric vehicles and they say copper has got to go higher. And maybe it does but it doesn’t mean that it’s going to go higher this month or even this year. It’s similar structure to gold, big up move, then we’ve had this big sideways consolidation.
Now, the sideways consolidation could be setting the market up for a big advance, or it may not be finished. It could be a case that we do get that decline, it could be a case that the market isn’t ready to move up yet and we get that sort of move, like in gold, to flush out all the bullishness which has built up there.
Maybe we need to…maybe the market’s going to shake things up, get a few people disillusioned, get them to move away, get them to exit their positions, and then when that happens…and I’ve seen this happen more than once. Once that happens, the market reverses and up it goes. We don’t know, could go from here.
But be aware there’s always an alternate scenario and you just need to be aware of that because that helps you structure your risk and your exit stops and work out how to really put your portfolio together and be aware of what could happen. But, again, it’s why I’m not talking about it much because we are in this big sideways range and until we break from there, there’s probably not a lot to say.
Lastly, let’s quickly jump over to Uranium. And this has been one which, again, I think there’s a great medium to longer-term bullish story there. But it’s just a matter of you got to give the market time to do what the market’s going to do. There’s a support band, which comes along here which has been holding up quite nicely over the last, what’s that, about last four months now. The one niggling concern with this is I’m looking at these highs and the highs keep getting lower.
So that is somewhat of a worry because it does open the possibility that uranium is getting ready to do that breakthrough support. So that wouldn’t neutralize the longer-term bullish outlook for uranium but it would certainly slow things down and put that…I don’t know, maybe, you know, the shorter to medium-term bullish outlook would then have to go on hold and we’ll need to see what happens from there.
Again, there’s plenty of bullishness in the uranium market and it could be a case that there needs to be more players washed out before this market is ready to go. But, look, let’s just wait and see.
I think there’s some very bullish possibilities out there but if they happen, it’s going to be on the market’s time, not ours. So good trading and investing is as much about patience as it is anything else. So it’s really about wait for the market to show its hand, let it tell you when it’s time, and I think that’s the way to play it.
So, look, let’s call that a wrap for this week. Hope that was helpful. Hope it was interesting. Thank you for joining me as always, and I look forward to checking back in with you next week. Bye for now.
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.