Before going into detail regarding my latest research and cycle phases, I want you to think of these cycle phases as Advancing and Declining cycle trends. They act as a “build-up of trend”, then an “unwinding of trend”. In each instance, trends can be either Bullish, Bearish, or Neutral in nature. My research team and I believe a new Bullish Cycle Phase has begun in Gold and Silver. If our research is correct, the next Advancing Cycle Phase may prompt a broad rally in Gold and Silver.
Understanding Cycle Phase Analysis & Trends in Metals
We interpret these cycle phases as unique trend segments involved in a broader cycle scope. For example, over a longer-term rally, we may see many Bullish Advancing and Declining cycle phases take place – one after another. Conversely, we may see many Bearish cycle phases take place in an extended downtrend. Another type of cycle phase can also exist, the Reversal Cycle Phase – where price Advances
We have experienced an incredible rally in many sectors over the past 5+ months. My research team has been pouring over the charts trying to identify how the next few weeks and months may play out in terms of continued trending or risks of some price volatility setting up. We believe the Utilities Sector may hold the key to understanding how and when the US markets will reach some level of stronger resistance as many sector ETFs are trading in new all-time high price ranges.
Utilities Sector Resistance At $71.10 Should Not Be Ignored
The Utilities Sector has continued to rally since setting up a unique bottom in late February 2021. A recent double top setup, near $68, suggests resistance exists just above current trading levels. Any continuation of this uptrend over the next few weeks, targeting the $70 Fibonacci 100% Measured Move, would place the XLU price just below the previous pre-COVID-19 highs near $71.10 (the MAGENTA Line).
A recent Forbes article highlights the incredible increase in market leverage since the start of the COVID-19 crisis. There has never been a time in recent history where market leverage has reached these extreme levels. Additionally, highly leveraged market peaks are typically associated with asset bubbles.
The easy money policies and global central bank actions have prompted one of the longest easy money market rallies in history. Historically low interest rates, US Federal Reserve and global central bank asset-buying programs, and extended overnight credit support have prompted some traders and investors to move into a more highly leveraged position expecting the rally to stay endless. Although, the reality of the global market trends may be starting to cause traders and investors to become a bit unsettled. Precious Metals, Utilities, and Bonds have all started reacting to perceived fear related to this extended bullish rally trend recently.
As we transition into the early Summer months, we are watching how different market sectors are reacting to the continued shifting of capital over the past 60+ days. One this is very clear, certain market sectors are strengthening while others have run into resistance and are consolidating. We believe the next few weeks and months will continue this type of trend where capital continues to shift away from risks and into sectors that show tremendous strength and opportunity.
We wrote about how Precious Metals are likely starting a new bullish price trend on April 18, 2021. You can read that research article here: https://www.thetechnicaltraders.com/metals-miners-may-have-started-a-new-longer-term-bullish-trend-part-ii/.
This second part of our research article related to the new Bullish price phase in Precious Metals and Miners will continue to explore the potential range and targets for higher price trends.
In the first part of this article, I discussed how precious metals have started moving higher in somewhat of a stealth mode – not really drawing a lot of attention from traders. While other commodities and market sectors continue to rally, Gold and Silver have recently been setting up a new momentum base over the past few weeks. If our research is correct, we may soon see a stronger bullish price rally in precious metals which may drive miners 3x to 5x higher as Miners have greater Alpha than precious metals.