With the release of the Consumer Price Index (CPI) report showing an inflation increase of 5.4% compared to the expected 3.8%, we should pay close attention to investments that keep inflation in mind. Though we have recently talked about food commodities and agricultural tech as potential hedges against inflation, precious metals such as gold (GLD) and silver (SLV) remain the go-to investment.
However, prices of gold and silver have yet to take off. Therefore, we can look for price action to confirm if precious metals are ready to push higher.
From a technical standpoint, gold (GLD) recently had a golden cross. This means the 50-day moving average has crossed over the 200-DMA. While this is a bullish sign, we should next watch for the price to clear the 200-DMA for 2 consecutive days around $171.40.
When watching for phase changes over or under major moving averages, it helps to wait for a second day to confirm price action can hold. Although there is no perfect trading rule, waiting on the second day greatly increases the chances the 3rd day will hold.
On the other hand, silver (SLV) has been trending sideways for roughly a month and needs to clear resistance at $24.70, created from its recent high on 7/06. Silver’s 50-day moving average sits overhead at $25.07. Whether you initiate a position over the recent consolidation or wait a bit longer for a confirmed phase change, the point is that the metals have yet to reflect real inflation.
And their time could be coming real soon.
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- S&P 500 (SPY): 427 support area.
- Russell 2000 (IWM): Needs to clear highs at 234.50 area. Minor support 217.85
- Dow (DIA): 351.09 high to clear.
- Nasdaq (QQQ): Doji Day. (Day where open price and closing price are close together.) Shows indecision.
- KRE (Regional Banks): If cannot get over 63.63 tomorrow next support area at 61.24.
- SMH (Semiconductors): 245 main support area. 262.50 resistance.
- IYT (Transportation): 251.78 support.
- IBB (Biotechnology): 159 support area. 165.79 resistance.
- XRT (Retail): 99.24 main resistance.
Assistant Director of Trading Research and Education
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.