Chart Advisor: Gold Hits Fresh 52-Week High

By J.C. Parets & All Star Charts

Monday, 20th March, 2023

1/ Gold Hits Fresh 52-Week High

2/ Investors Look to Growth

3/ Oil & Gas Services Slip

4/ Worst Week Since the Global Financial Crisis

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1/ Gold Hits Fresh 52-Week High

Prices of precious metals are rising again, with gold leading the way.

Gold bugs closed out last week with another strong performance, absorbing overhead supply at a critical level—the former 2011 highs.

Those former highs mark the peak of the last secular bull market for gold, and last week’s breakout signifies a significant uptick in demand for the shiny yellow rock.

It’s hard to ignore the impressive upside follow-through across the precious metals space.

Gold is breaking out to new all-time highs in currencies all around the world. Silver is trading back in the box, implying increased risk appetite. Meanwhile, gold priced in U.S. dollars is approaching fresh all-time highs of its own.

The next secular bull market in gold could be taking shape.

2/ Investors Look to Growth

The recent volatility in the markets brought about big price swings on both an absolute and relative basis.

The large-cap growth vs. value ratio just registered its second-largest weekly gain in history. We’d have to go back to the dotcom bubble crash in 2001 to find a week where growth outperformed value more than it did last week.

In this ratio, we are using the Russell 1000 Growth ETF (IWF) as the numerator and the Russell 1000 Value ETF (IWD) as the denominator. This gives us a more comprehensive view of the growth vs. value dynamic than we would get using S&P indices.

We want to pay close attention to extreme rate of change (ROC) readings such as this, as they are evidence of momentum thrusts. Momentum thrusts tend to occur at turning points and can signal either the exhaustion of an old trend or the initiation of a new one. Considering the ratio fell steadily throughout 2022, it is unlikely that this signals exhaustion. A new relative regime that favors growth stocks could be underway.

3/ Oil & Gas Services Slip

Despite today’s relative outperformance from value-oriented sectors, many of these areas are under pressure as yields begin to roll over.

The energy sector has been particularly hard hit. And it’s not just crude oil and natural gas futures that are taking a hit—so are the strongest subsectors.

Here is the SPDR Oil & Gas Services ETF (XES):

While many energy stocks were already under pressure, XES was breaking out to fresh multi-year highs earlier this month.

But as in many other cyclical areas of the market, the bears have taken control. Last month’s breakout in XES is now failing.

For now, these market areas could represent risk as money begins to flow back into growth stocks.

4/ Worst Week Since the Global Financial Crisis

The financial sector has been gripped by volatility in recent weeks as weakness from regional banks trickles into other markets and asset classes.

Both the absolute and relative trends for financials have been damaged by the intense selling pressure.

The chart below shows the Financial Sector ETF (XLF) registering its worst week since the global financial crisis relative to the S&P 500 (SPX):

Outside of last week, such extreme negative readings had only occurred during the 2007-2009 bear market. This could represent the beginning of serious structural damage in the sector unless the bulls step in soon to fix it. If they don’t—and we continue to see further downside from financials—we could expect the overall market to crack as well.

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Originally posted 20th March, 2023