The two most popular investments a few years ago have been lying dormant and out of the spotlight. But a look at the price charts of both gold and oil suggest their time to shine may be returning.
Seasonal charts allow us to look at what the average price for an investment does during a specific time of year. The gold and oil seasonal charts below clearly show that we are entering a time in which price tends to drift higher.
While these chart help with the overall bias of the market, keep in mind they are not great at timing moves and should always be coupled with the daily and weekly underlying commodity charts.
Let’s take a quick look at what the godfather of technical/market analysis shows in terms of market cycles, and where I feel we are trading.
John Murphy’s Business Cycle
Mature Stock Market
Commodity Index Looks Bullish and Should Rise
Gold and Silver Seasonality, Price Charts With Analysis
Precious metals such as gold and silver are nearing a bounce and a possible major rally in the second half of this year.
Crude Oil Seasonality, Price Chart With Analysis
Crude oil has been a tough one to trade in the last year. The recent 15 candles have formed a bullish pattern, and with the next few months on the seasonal chart favoring higher prices, it has been leaning toward the bullish side.
In short, I feel the equities market is nearing a significant top. If this happens in the next couple of weeks, money will soon start flowing into commodities in general as people look to a safe haven play. To support this outlook, I am also factoring in a falling US dollar. Based on the weekly dollar index chart, it looks as though a sharp drop in value is beginning. This will naturally lift the price of commodities, especially gold and silver.
It is very important to remember that once a full-blown bear market is in place, stocks and commodities (including gold and silver) will fall together. I feel we are beginning to enter a time when precious metals will climb, but they may not climb extraordinarily higher before selling takes control again.
This could be very
bullish for the Toronto Stock Exchange's S&P/TSX Composite Index
(TSE:OSPTX), as it is a commodity-rich index. While the US may have a pullback or crash, Canadian stocks may hold up better in terms of percentage points.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
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