A Tale of Two Charts

Whether one has a positive or negative outlook depends largely on the individual’s perspective or vantage point. Turn on CNBC one moment and you may hear a strong bullish case for equities; an hour later you may listen to an analyst predicting an upcoming market apocalypse (e.g. NYU’s Nouriel Roubini). In the world of technical analysis, such variations in perspective can largely differ when viewing multiple timeframes. Trends and common indicators can look convincingly bullish on a daily chart while on a 15-minute (or any other) chart, a correction may be near. We’ll walk you through an example to demonstrate.

The following graph shows a daily chart of the gold futures contract. A quick observation tells us it’s currently in a bullish upward trajectory as it hovers above the 20-, 50-, and 200-day simple moving averages.

20200717_GC_daily

Investors should find comfort in continuing to hold long gold here, especially after recently cresting $1800 which was a significant psychological barrier going back to April. Even if there’s a pullback to $1700 (as long as the 200-day SMA holds as support), adding an additional position may prove to be prudent.

Contrast the daily view with a 15-minute chart of the exact same gold futures contract and you may have a different perspective.

20200717_GC_15min

A little over a week ago, gold spiked through $1800 and has bounced off of that support level over the last several days. Today’s session saw gold crawl back towards the $1820 resistance level that’s been in place since July 10. Depending on what gold decides to do when it reopens on the Chicago Mercantile Exchange on Sunday evening, it might make sense to go short with a stop loss above the $1820 level given the consolidation and indecision that’s been happening as of late.

So, is it the best of times or is it the worst of times? As a trader, it depends on the lens through which you gain your perspective…and the timeframe you choose to view.

Forte Strategy Update

We executed four trades last week in our Forte (ETF) Strategy – one using the Nasdaq 3X leveraged ETF (TQQQ) and three with the 1.5X Leveraged VIX index ETF (UVXY) for a net gain of 0.9% compared to a gain of 1.3% by the S&P 500. Our long Nasdaq model based on daily price data essentially shutdown for the week due to the high volatility as the markets butted against the psychological barrier we’ve mentioned in our prior email blogs. Our YTD net results so far are a 1.5% loss compared to a 1% YTD loss for the S&P 500. Our YTD max drawdown is 9.5% vs 33.9% for the S&P 500.

Our Forte Futures Strategy is up 2.5% for July and 4.1% since May inception.

More details about our trading activity can be found by registering on the Collective2 website and searching for “Forte Strategy” and “Forte Futures”. A running list of these email blogs and general information about Maestro Capital Research can be found at maestrocapitalresearch.com.

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