U.S. Equities Trading Outlook: Gold and Silver Miners Surge!

Tuesday produced yet another day of mild stock market gains in what seems like a repeat of last week.

Yet there is some real sector rotation is happening under the surface.

With this in mind, it’s important to pay attention to what’s happening within the Materials sector and particularly with Precious Metals and Gold & Silver Mining stocks.

This area is finally beginning to show some real evidence of strength.

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We’ve seen gold and silver stocks outperform handily in the last week, and many Materials sub-sectors such as Chemicals are on the verge of their own sub-sector breakout.

China looks to be strengthening while Emerging markets have begun to stabilize and could turn higher. Overall exactly what one might suspect can happen when the Dollar and yields are both moving lower.

xau gold silver index bullish breakout metals miners stocks february 20

S&P 500 Trading Outlook – (3-5 Days): Bullish

The trend is bullish, but I’m skeptical that the S&P 500 Index gets over 2800 into next week. With this in mind, the next 3-4 trading days will be important.

For now, little to no real signs of any deterioration, but this run-up has been lifted momentum to near overbought levels. Expect possible run to 2795-2800 and will need a close UNDER 2737 to pay attention on the bearish side. Watch for evidence of negative breadth during Wed-Friday for clues

With regards to the S&P 500, one should stay long barring a close under 2729 (ES_F) 2731 SPX cash index. Breadth came in around 2/1 positive but some noticeable lagging in Tech compared to Energy and Materials. Financials were somewhat strong, yet much of the strength happened in Regional Banks, which was mentioned in this week’s Weekly. Overall, markets are now nearing overbought levels, with Daily RSI at a 69.5. Yet Demark patterns argue for another 3-4 days to complete the Daily Setup counts which would produce an ideal 9-13-9 pattern to sell into.

Thus, a move to 2800 still looks more probable than not. As always given the extent of our move, we’ll be on the lookout for any signs of Equities turning back under last Friday’s lows, as that would set off at least a minor correction. Yields certainly have not cooperated and continue headed lower, so it’s importnat to pay attention at this point in the rally heading into late February. For now, there hasn’t been any real price deterioration to make one worry about a pullback.

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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.