We are entering what typically is a slow few weeks for the stock market as people start to prepare for Christmas and take a break from market trading. Historically trading volume actually fades over the rest of the year, but that doesn’t mean that things don’t happen.
This has been a year marked by huge stock market volatility. If anything that is the defining feature of it and my view is that this volatility is going to contract over the coming months. I talked about this in a video I did last week that you can find on this post from last week here.
Last week we saw energy stocks rise and do well, with many energy stocks breaking out of bases. This morning oil is up, but this week what I think we need to watch is the Federal Reserve meeting on Wednesday and the price of gold.
Seasonally gold has its worst two months of the year in October and November and then best two months in December and January. But it also tends to drift for two or three trading sessions into a FOMC meeting and then start a new move. In fact often in December it starts to rally hard into the rest of the year after the mid-December FOMC meeting.
There weren’t a lot of big stories about the meeting this week in the major newspapers, but the talk is still that there is likely be an even more dovish tilt coming out the meeting. We might see a statement even more dovish when it comes to letting inflation run in the future come out of the Fed this week or talk of keeping rates lower for even longer.
Let’s take a look at the gold chart.
Gold itself is still outperforming the S&P 500 market year to date, despite the fact that it has been in a consolidation since the end of July. It simply fell less than the S&P 500 did in March and went up stronger into August before the S&P 500 lost momentum on Labor Day.
Gold has now given back 50% of its gains from its March low and summer high, to create a classic bottom around the $1750 level last month. Now it’s trading between that level and $1900.
It will take a close above $1900 to get the next big run going and attract people into buying it. I think’s going to happen, but until it does no one cares. The masses only chase something they see go up, and with not a single metals ETF or mining stock on the list of top 100 Robinhood most owned stocks the small trader is not doing it now.
Silver is in the same position as gold is in.
Obviously a close above $25 on silver would break the current consolidation trading range of $22.00-$25.00.
We are also seeing a nice consolidation in Inca One Gold (OTCMKTS: INCAF).
This morning gold is down in pre-market, but again the thing to keep an eye on this week is the FOMC statement and what gold does from its release through Friday’s close.
Disclosure: Mike Swanson owns shares of Inca One Gold. Because it is a small cap stock with a market cap of less than $100 million he has put himself in a trading blackout on the stock and will not buy or sell a share of it for at least 30-days from the date of this post. Wallstreetwindow.com, is owned by Timingwallstreet, Inc., which is being compensated by a third party (Leadgopher LLC DBA Pinnacle Ad Network) to conduct an investor awareness advertising and marketing campaign for Inca One Mining. This third party paid Timingwallstreet Inc., $11,000 to produce and disseminate this and other similar articles and send traffic to them through paid advertising campaigns for 30-days from the date of this post. This compensation should be viewed as a major conflict with our ability to be unbiased, more specifically: This communication is for entertainment purposes only. Never invest purely based on our communication. For more on trading risks read our policy statement by clicking here.