In The Sloppy Stock Market This Chart Shows Real Buying – Mike Swanson (12/21/2018)

As you know the stock market dumped after the Fed meeting and fell again the day after. However, the VIX touched the 30 point level yesterday and then came down to close below it to show some fear in the market.

We can get a bounce attempt heading into Christmas and even New Years and people are now looking for stock pick diamonds to play it.

I don’t think though that the real bottom will come until the VIX closes above 30 and people get really scared with big selling.

But Thursday’s tap-touch of 30 can bring some buyers in. Every time the market opens down people do try to buy and everyone on CNBC is calling bottoms and coming rallies. So far the bulls have failed to make a bottom, but hopefully today they will at least get in a positive close and if they do we will see follow through next week.

What is more important is what is now going up for real.

And as I said with David Skarica on Tuesday before the Fed meeting it is gold that is going up for real. Gold closed yesterday above its 200-day moving average and has been outperforming the stock market now since Labor Day while the “FANGS” and other fad stocks continue to trend below these long-term indicators.

Look at the gold chart.

Notice that gold is making higher lowers and now higher highs in the past three months in contrast to stocks like NVDA.

Notice too that the gold/spx relative strength plot at the bottom of the chart is going up. You want to own things outperforming the stock market if you want to be a winning trader and not dead cat bounce POS stocks like NVDA and FB.

It is also worth noting that no one really believes that the Fed is going to raise interest rates two more times next year. Fed Fund futures have the odds of that at zero and if it were true gold would be falling and not going up. There is more happening to the stock market than worries about more rate hikes!

I hope the stock market bounces for people here, but either way this action in gold the past few months is showing us where the strength in the markets now is going to be going forward and I hope to help you with that in the coming weeks. The stock market cycle is shifting and that is what we must adapt to now.

-Mike



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