Chart Advisor: Buyers Step In

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Monday, 6th March, 2023

1/ Buyers Step In

2/ Gold Finds Support

3/ Coal Is On a Roll

4/ Weak Economies, Strong Stocks

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1/ Buyers Step In

The Nasdaq 100 (QQQ) and other large-cap major averages just closed higher for their third consecutive session. However, it’s not today’s action that has our attention, but the end of last week’s.

Last Thursday, Nasdaq bulls stepped in exactly where they needed to, defending the pivot highs from last fall and rebounding off the long-term moving average (MA).

Source: All Star Charts, with data provided by Optuma

It’s been over a year since the S&P 500 and Nasdaq have spent this much time above their 200-day moving averages. While we should avoid using a moving average as support or resistance due to the inherent lack of price memory, in this case, it provided just that.

As trend followers, we prefer to use moving averages as trend identification tools. When price is above an upward-sloping 200-day MA, it tells us the trend is pointing higher. When it is below a downward-sloping 200-day MA, it tells us we’re in a downtrend. For now, we’re sitting on a flat 200-day MA, indicating the trend could still be sideways.

2/ Gold Finds Support

When we step back, the recent pullback in gold seems like a standard market correction. What impresses us is that the bulls have stepped in, driving prices higher off a logical level of support.

Notice the multiple anchored VWAPs converging at approximately $1,810:

Source: All Star Charts, with data provided by Optuma

These levels mark the price the average participant has paid for an ounce of gold since the March 2020 low, and the August 2020 and 2022 highs. Think of it as the breakeven price for buyers since these anchor dates.

This is more evidence that gold bugs are persistent in their bullish outlook as they place a healthy bid on the metal.

Not only did gold find support, it also reclaimed a key retracement level. With near-term momentum favoring the bulls, it could be time to see some upside follow-through.

3/ Coal Is On a Roll

One commodity that has stood out as a persistent leader since 2020 is coal.

After a healthy consolidation of recent gains since last year, these stocks appear to be resolving higher again.

Source: All Star Charts, with data provided by Optuma

Our equal-weight custom index provides an excellent representation of how the coal industry is performing. It includes Peabody Energy (BTU), the largest coal stock listed in the U.S., in addition to eight other small or mid-cap coal companies. As you can see, the index reached new highs last week.

4/ Weak Economies, Strong Stocks

Bullish evidence continues to build in favor of international equities. Even stocks in some of the weakest economies have caught a strong bid and are making new highs. 

Below is our custom equal-weight index of Europe’s secular laggards: Portugal, Ireland, Italy, Greece, and Spain. The index is making new 52-week highs.

Source: All Star Charts, with data provided by Optuma

Seeing investors bid these stocks higher tells us two things. First, it is evidence of broadening participation overseas and supports a new bull market thesis for global equities in general. Secondly, it speaks to an increasing risk appetite among investors. Neither of these developments are bearish.

Originally posted 6th March, 2023

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