Gold, Bitcoin & Oil
RLT Newsletter
SPY and QQQ were flat, SMH was down, oil was up, gold was up, and semiconductors were down. It was a very interesting day in the market, and depending on what you are in, you may have seen almost no overall movement in your account. That is normal after a massive run up in stocks.
SPY 3 Day Chart
April and May conditioned traders to think that once the rally starts, it is up only with no pause and no rest. In reality, markets digest moves, retest, pull back, and then advance. The “up only” times in the market are extraordinarily rare and should not dictate your trading plans.
In the very last newsletter I wrote, I mentioned that CVX could be a nice short if it followed through. Well, it did the exact opposite and gapped strongly over the 100-day SMA on Monday’s open, causing me to cut the trade for a small loss because the bear thesis was broken with that gap.
Friday’s bearish close was a trap, and I was ensnared. Today’s bullish gap and subsequent follow-through was all of the bears getting squeezed out. This is the reason I always say that learning to simply read candlesticks, sentiment, and gaps is the #1 skill for traders. With candlesticks, volume, and moving averages, you can garner a lot of edge from the markets and implement risk management at key areas.
CVX Daily Chart
In hindsight, I should not have just exited the bear trade for a small loss. I should have flipped the trade and gotten in bullish. I knew other traders were trapped because I was trapped, and I could have easily made up for the small loss and then some by flipping the position.
However, the intraday chart did not give me any compelling setups as I studied it in hindsight, so I am pretty happy with how I risk managed the trade. You cannot catch every move, and sometimes the best trade is simply cutting the position when your thesis is broken and moving on.
Crude Daily Chart
Gold finally did something slightly bullish after 100 days of down only price action. After four bullish days, gold has reached up into its daily long-term averages, which were my targets for locking in some gains and getting into a collar on the position I built over the last month.
I now have a trade that cannot lose over the next month, and I can patiently and very unemotionally analyze the price action to see where gold is heading next.
If I am being honest, I would prefer that we get another final drawdown and a low around $3,500. The risk-reward just gets too good there for me to not want to buy once again at those levels.
That would also line up with a 100-week SMA retest on gold, which has not happened since mid-2023, before the massive rally we just saw. I think that kind of reset would be quite healthy, and I would look to hold a position into new all-time highs over time.
The fact that we broke out of the bearish trendline (pink) last week is also a strong signal, and how gold reacts at the 100-day SMA and 200-day SMA will be very telling.
A vertical drop back down would signal that we should be hitting the 100-week SMA this fall. But a choppy, sideways move lower that holds $4,170 would be a good sign that further upside is ahead.
Gold Daily Chart
Check out the in depth Bitcoin analysis video that I did below, as well as the Monday Swing Room where I review QQQ, Gold, and much more.