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RoboStreet – June 12, 2020
Good Time To Hedge With Gold
Big losses from fresh fears of new spikes in COVID-19 cases and hospitalizations triggered a widespread equities sell-off in what was already grossly overbought market. Traders just needed an excuse to book short-term gains and they certainly got one.
The S&P 500 dropped 5.9% on Thursday, the Dow Jones Industrial Average (-6.9%) and Russell 2000 (-7.6%) underperformed the benchmark index, while the Nasdaq Composite declined 5.3%. There were few places to hide.
Adding to the downside pressure were growth worries for the economy following a cautious FOMC statement. The market had rallied despite these growth concerns, though, as the S&P 500 gained as much as 48% from its March 23 low.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
Selling was indiscriminate, but the value and cyclical stocks, which were among the leaders on the way up, were hit the hardest for the third straight day. An -8% drop in WTI crude to $36.41 put a lid on that rally as well, while the financial sector also shed -8% was attributed to yield curve flattening.
The 10-yr T-Note yield declined to 0.65% as investors sought some safety in longer-dated maturities. The U.S. Dollar Index rose 0.8% to 96.76.
Notably, the CBOE Volatility Index spiked 48.0% to 40.79, which reflected increased hedging interest against further equity weakness. The S&P 500 did end the session below its 200-day moving average of 3010, which is a key technical level many traders observe. The next level of support for the S&P is 2,880 where the 50-day m.a. sits.
While the primary bull trend remains intact, with massive central bank stimulus providing bullish tailwinds, the market faces five separate headwinds that argue well for hedging accounts with some exposure to gold. They include a resumption in the spread of the coronavirus, simmering tensions with China, a weak dollar weighed down by the massive creation of a debt, social unrest, and possible change in the White House.
By themselves, each headwind can easily weigh on upside momentum. Collectively, they make for some stiff overhead resistance until there some clarity emerges that diffuses these risks in the week ahead. But since the market tends to pay most of its attention to currency, interest rate, and earnings risk, at present the slide in the U.S. dollar index (DXY) is of concern. A 3-year chart of the DXY below shows the greenback under stress and testing a key technical support level.
To combat the potential downside of the dollar and these risks that could adversely impact equity portfolios, investors should consider adding shares of Gold SPDR ETF (GLD) as the quintessential hedge to market volatility and rising turbulence.
When applying my AI tools, the GLD for the short-term, the Stock Forecast Toolbox rates GLD a “B” with a 10-day price target of $167 and a 6-month target of $180.
Within our RoboInvestor advisory service, we’ve traded GLD on a few occasions, but not with such a compelling backdrop where the yellow metal could really breakout from its tight trading range. RoboInvestor subscribers have enjoyed a better than a two-year string of high-percentage winning trades where we profit 88.28% of the time we risk capital.
Take me up on my offer to go to work for you and your nest egg. RoboInvestor is an AI-driven portfolio of only blue-chip stocks and ETFs that can involve stocks, bonds, currencies, commodities, and volatility. There is no reason to trade and invest in the markets anymore with one hand tied behind your back. Don’t miss out when I put GLD in our RoboInvestor Portfolio. It’s one trade you don’t want to miss out on!
Join up as a member of RoboInvestor and start making money in all market conditions. My personal money is in on every trade – right with yours. I’m with you all the way to the bank. And we make a lot of trips to the bank!
“I’m investing my own money in each and every stock as my AI platform identifies.”And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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