Hi everyone and welcome to investing strategies it's Alissa Coram with
Investor's Business Daily from the Nasdaq market site in Times Square with
the S&P 500 vying for a break up to new highs will it be able to hold its new my
territory fairly strategies is here to provide a technical perspective on the
markets action plus we're analyzing the rotation into semiconductor stocks as an
improving sector outlook is finally lifting the group back to a position of
leadership and gold is consolidating but it's trading at its highest levels in
over six years State Street Global Advisors will tell us what's behind the
commodities big move in 2019 and what investors should expect from gold in
2020 investing strategies starts now
okay let's get started with this week's market insights the S&P 500 is now hitting
new all-time highs could the breakout indicate a shift away from the
volatility that's defined much of the last several months well joining me now
to provide a technical look at the market is Katie Stockton founder and
managing partner at Fairlead strategies thanks so much for being here today
Katie glad to be here yeah so we're now at new all-time highs for the S&P 500
it's taken us a little while to get here and the last several months have been a
bit of a bumpy ride so what do you make of the fact that we are now back at
all-time highs for the S&P as a technician that is very exciting as you
can imagine and we're seeing gaps up so that's a good thing it shows momentum
behind the move it shows that a lot of people were watching the final
resistance for the S&P 500 which is right around 30 28 so the breakout is
bullish from a technical perspective it relieves the chart of that final
resistance and it reflects positive momentum especially with the gaps up
that we're seeing with for confirmation of the breakout we'd like to see a
couple of days a couple of closing prices above that level to confirm and
then we can look at higher target prices the target that we can derive from this
breakout in particular is about 31 20 and that's based on a measured move
which really just assumes the trajectory of the current trend will maintain
itself as you mentioned we'd seen a lot of volatility preceding this breakout or
pending breakout and that really was a trading range environment so during that
trading range we'd never saw a lot of breakdowns which was a good thing but it
was a very frustrating environment for many folks because it was very whippy on
a short-term basis now theoretically with a breakout we could get into more
of a trending environment all right so is it your anticipation then that we
could see a little bit of sideways action from here ideally you know seeing
that confirmation and it closes above this new high ground would be positive
but how quickly do you think that a new uptrend and holding above this new area
could happen well it should happen immediately if this is a real
we should see those consecutive daily closes above this week and get somewhat
immediate follow-through on back of that we do have a short-term overbought
condition that the market is contending with so there's no guarantee that a
breakout is confirmed if that's the case I think it's just another little pauses
needed to refresh the uptrend and then we'll see a breakout anyway because
really around the world we're already seeing these types of breakouts
maybe not new all-time highs for different benchmarks but certainly
breakouts from that trading range that characterized global equity markets for
a few months and then do you think that this also signals at least a little bit
of a breather from the volatility that has defined the last several months
because we've seen quite the whipsaw action really tied to headlines a lot
but does this really signify that that's more or less in the rearview at least
for the time being it feels that way there's no way to be certain of that of
course but in a trending tape you tend to see less of those down drafts less of
that retracement and of course that would be an easier market theoretically
to trade because you can stay on the right side of the moving averages and
really just sort of ride the trend so theoretically yes alright and we
shouldn't be expecting anytime soon a new test then of the longer term moving
averages well the 200-day moving average has acted as support for the S&P 500
recently it's I believe not to too far below around 28 80 I believe and you can
never rule out a test or retest but it's not a mean reverting factor it's not
something that acts as a rubber band for the S&P 500 where there's a pullback to
that moving average or really any moving average but rather we kind of keep an
eye on those overbought conditions look for a sell signals look for any kind of
loss of market breadth or participation that would indicate a significant
pullback of course right now with breakouts underway we don't have that
right so with the breakouts being pretty widespread what are you seeing in terms
of the sectors that now look appealing to investors oftentimes what we see when
you do see new highs and breakouts you're seeing more offensive sector
leadership and by that I mean area like technology which tend to be more
Grothe more cyclical areas of the market and we are starting to see signs of life
in some of those areas I would also highlight financials as being a source
of newfound outperformance it's very new as I mentioned but it could be a basin
phase in relative terms for financials which could then be a new upside leader
for the market that's right and speaking of financials let's turn our attention
to this week's stocks to watch starting with Bank of America
so the breakout theme continues here Bank of America moving higher and
looking like it's extending its gains what are you seeing in this chart with
the underperformance that we had seen from financials and Bank of America as
one great example of that especially in 2018 it felt like they were never going
to get going again and of course now just in the last couple of weeks we
started to see some signs of life there where we're getting some breakouts above
important levels Bank of America cleared some former resistance of previous highs
where it had met selling pressure and confirmed that breakout it's a little
overextended short-term I would say but that breakout completes a trading range
that have been in place for several months so again there it releases the
the chart of resistance it supports upside follow-through the
beyond the near term and shows a resumption of the uptrend that preceded
that underperformance in 2018 right and this type of action in the group isn't
isolated of course others like JPMorgan also with with similar chart action so
this group does look like it has more than just one chart that is a bright
spot that's fair to say even the regional banks are acting much better
and making higher lows and then subsequently exceeding these short-term
resistance levels all of that would make them a turnaround play and I do think
it's best to have core long positions in long term uptrend and that would not
qualify for many of the financials and yet now with this newfound leadership I
do think people should be you know sniffing around for good opportunities
fantastic and then another area on your radar is the
emerging-market so let's take a look at the EEM iShares emerging markets etf
what are you seeing here because at first glance it doesn't really look like
it's done a whole lot lately but could that change well it's finally captured
some short-term momentum and in doing so it's actually climbed above a year-long
downtrend line that if you take a step back on the chart it looks like a big
triangle formation that's now being resolved to the upside which is the
direction of the prevailing trend before it was established so lower highs higher
lows there's the triangle you see the breakout about the down trend line and
it's a fairly high probability setup or you tend to see upside follow-through
and this would be months and nature not just weeks in nature in terms of the
implications so I think it bodes well for emerging markets not necessarily to
be a source of great leadership globally although there are some sense of life as
the dollar has pulled back there but rather to finally participate in what I
think is a global rally right and maybe look at this area as being able to not
have that home bias and being able to diversify in other areas that could be
strengthening well that and it's a testament to the global breadth behind
the move so we do want to see broad participation not just here in the US
but also globally and that really enhances the sustainability of the
uptrend we're already seeing breakouts and overseas markets like the German DAX
as one great example of that and these aren't necessarily new all-time highs
but we are seeing those breakouts and I think we'll start to see even some
spreading out of the rally rally to things like small caps other areas that
had underperformed so it seems like the message then at the end of the day at
least for the time being is a lot brighter of a picture than all of the
uncertainty and volatility that had been really dominating the market I think
it's a relief of that trading range to the upside and of course that does make
it a more clear picture ahead from a technical perspective if indeed these
breakouts are confirmed but it looks like even if it doesn't happen this we
could probably will happen and you know we do have some
positive seasonal influences underway potentially in Q4 so it bodes well for
that as well all right well I think this is the perfect time to really dive into
the technical side of the market so thank you so much for sharing with us
what you're seeing in the market right now we're happy - all right and after
the break we're going to continue our discussion about sector rotation with a
look at a group that's finally leading the market after a period of
underperformance and that's coming up next
pick winning stocks with Market Smith growth to 50 shows you ideas with big
potential view charts packed with key data use pattern recognition to see
action zones Market Smith by investor's business daily try three weeks for 1995
now it's important for investors to keep tabs on sector rotation because if you
know which sectors are leading the market that'll improve your ability to
select top stocks and enable you to invest in sectors that are outperforming
the market and after a nearly two-year period of underperforming the market
we're now seeing strength in semiconductors stocks amid expectations
for a turnaround in the chip industry cycle and this strength can be evidenced
by the action in the Vanek vectors semiconductor ETFs
after a long consolidation in 2018 and choppy action in 2019 SM H is trading a
solidly at all-time highs it also remains in buyer range from a breakout
past a one twenty three twenty three entry of this Cup with handle based here
now SM H tracks the MV is us-listed semiconductor index which holds the most
liquid chip stocks based on market cap and trading volume this strength and
chip stocks is a positive development for the overall stock market because the
semiconductor market is a key sector of the global economy
chips play a vital role in many industries enabling emerging trends from
5g to cloud computing to self-driving cars to AI and the Internet of Things
among others and within the semiconductor sector chip equipment
makers like Lam research have been leading the group LRCX broke out of a
base in early September and after a small run the stock was able to hold its
gains and move sideways for several weeks then the stock blasted higher on
October 24th in reaction to its quarterly earnings report the report
showed narrowing declines on the top and bottom lines and the company's outlook
was strong the move put shares more than 20% passes by point from early September
and was accompanied by heavy volume which indicates strong demand from
institutional money managers now group peers KLA MKS instruments and ASML have
also been strong performers as of late in another example of recent strength in
the semiconductor sector can be found in Taiwan Semiconductor which broke out of
a cup with handle base several weeks before its latest quarterly report now
the stock wobbled a little bit after the report was issued but shares are now
trading at all-time highs up some 14% from the 44 98 by point here
and elsewhere in the group nvidia is hitting 11 month highs heading into its
quarterly report next month and intel surged higher on October 25th after its
latest quarterly earnings report breaking out over a prior resistance
level now while breakouts and run ups across
the group are positive they're not Universal Texas Instruments gapped down
on its latest quarterly report so keep an eye for continued signs of a
recovering chip industry cycle and be aware of potential threats to the group
from the ongoing US and China trade war and fears for a recession on the horizon
all right well coming up next we're sitting down with State Street Global
Advisors to put this year's gold rally into perspective and analyze the outlook
for gold in 2020 we'll be right back on
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calm
while gold has been consolidating over the last two months it's been on the
move in 2019 the Spyder gold chairs ETF GLD is holding at its highest level
since the spring of 2013 and here to share insights about the precious metals
gains this year and where gold could be headed in 2020 is George Milling-Stanley
Chief Gold Strategist at State Street Global Advisors thanks so much for
joining me today George thanks for inviting me so as I said Gold's been on
the move this year but taking a step back and looking at the bigger term
picture what does the move really mean in terms of what we've been seeing over
the long term for Gold's I think it's a pretty substantial move I mean it's it's
an inflection point if you like gold was holding in a very narrow range for the
six years from the spring of 2013 right up until June of this year and every
time the price popped its head above the 1350 dollar area speculative interest
would play whack-a-mole and knock it back down they didn't do that in June
when the price started to move up and it's important to try to understand why
I think they the suggestion from Jerome Powell that the Fed was going to make a
mid cycle adjustment I believe it was called at the time and lower interest
rates at the July meeting that was probably the proximate cause for why
gold has gone up a good deal since then we're now kind of filling in a bit of
the gaps that we left behind having moved $200 above that trading range that
have been there for six years and I think that's actually very healthy so
I'm kind of pleased with with what Gold's been doing recently all right and
gold is of course known as a very popular safe haven asset and we have
seen a lot of volatility coming into the market over the last few months ed may
be subsiding a little bit now but do you think that that kind of relationship
between gold and volatility still exists to some extent or not oh no question I
mean volatility in other markets has been one of the keys have been a lot of
different things behind Gold's move up first there was the interest rate move
and then a subsequent move in September and markets are expecting this week yet
another cut and then negative interest rates on fixed income securities all
around the world that's another driver towards gold as a
safe haven volatility in the equity markets you know the best news in
markets is that the decades-- have gone up to ten straight years but nobody in
their right mind expects that to be repeated over the next 10 so people are
very very concerned and that level of concern drives people toward safe haven
assets like gold right and speaking of investors flocking to gold can you tell
us a little bit more about the demand that's behind this move that we've seen
yeah I mean obviously investors safe-haven buying is one of the keys
we've seen continued good physical demand in the emerging markets in both
jewelry has held up remarkably well investment demand in the emerging world
is growing whether it's into bars and coins or into ETFs increasingly so we've
seen a lot of a lot of that kind of demand coming as well institutions and
individuals gradually putting together small strategic allocations to gold
because of its defensive properties because of its diversification
properties all of this coming together has been a very good reasons why gold is
is 150 200 dollars above that trading range right and then in terms of the GLD
ETF what are we seeing there in terms of the influence we've seen in flows of six
and a half billion dollars this year into GLD alone taking it to the 45
billion dollar level in assets under management that's pretty good going for
something that will turn 15 years old in a couple of weeks we'll be ringing the
closing bell on the NY IC in a couple of weeks time and then there's our junior
product GL DM the mini version that's only been around for about 14 months but
has already amassed more than a billion dollars in assets including taking in
half a billion this year alone so the fact that GL DM the mini product and GLD
the big kahuna have been growing together to my mind is is definitely
reflecting investor interest in ETS right and there was a long period of
time where the multi-year gains were really sustained for gold but as you
mentioned there was that six year period of moving kind
sideways so what do you tell investors who aren't sure about the long-term
performance that they're going to get with gold I think the the best example
of a long-term luck trend in the gold market was from 2001 to 2010 when
increasing levels of economic activity throughout the emerging world led to
gradually increasing purchases of jewelry and the gold price went up from
250 dollars an ounce to 1250 this current period seems to me like we're
embarking on something very very similar a lot of the background is very similar
nervousness in equity markets nervousness in fixed income markets
investors just basically concerned macro economically geopolitically there are
worrying things everywhere you turn and I think we're moving into something very
similar I can see gold looking to try to
establish a new higher trading range than the one that we saw over the past
six years whether we we know we're staying around the $1,500 level at the
moment I think that what gold is doing is is shoring up the foundations for a
move higher and it's important to remember also that we're just moving
into what is typically the strongest six months of the year for physical demand
across the emerging world with the Diwali festival in India leading to the
marriage season we're looking for good demand across the world for the next six
months I think that points to higher prices alright so in the next six months
that brings us into 2020 which and it's an election year not to you know focus
too much on that but to that bring further volatility or uncertainty to the
market or is more of the focus on the holiday shopping season and that
bringing strength I think it depends on where you look in the world the the the
wedding season shopping for jewelry in India for the next six months will be
very important Chinese New Year when it comes will also be very important our
election season is only going to add to the general uncertainties against which
gold is operating and that just means that the background the environment in
which gold is performing becomes ever more favorable right and so then in
terms of asset allocation in the portfolio how should invest
be utilizing gold within their portfolios well we don't say anybody
should put a hundred percent of their money into gold that you know that to my
mind doesn't make sense there have been times when it would have been a good
idea but not enough what we do say is that everybody should have a properly
balanced portfolio with some fixed income with some equities maybe some
commodities some real estate and every portfolio should have some gold in it a
lot of people are comfortable with a 5% level other people feel a little bit
higher right now given all the prevailing circumstances are being so
favorable for gold there are a lot of people I've been talking to recently who
say that 10% is the correct level right now obviously there's no one answer for
every investor every investors risk tolerance is liquidity needs all of that
is different across the board so there isn't one Pat answer but somewhere
between 5 and 10% right now would seem to make sense right and there are
obviously a variety of ways that you can invest in gold why do you think that the
ETF wrapper is a good option for investors because it's so transparent
because it is so deeply liquid GLD is turning over between a billion and a
half and two billion dollars a day in terms of stock now that's only one
percent of the total turnover in the gold market but it gets but it is
significant and it is contributed to general strength in the gold business as
well I think the liquidity has been one of the principal ways the transparency
the specific bars that back GLD and that bar list is updated every day on the
internet so people know exactly what it is they're buying they're not buying
gold they're buying exposure to movements in the price of gold they own
a trust and the trust owns the gold it's a very very simple very simple equation
and investors have embraced it with great enthusiasm great well it sounds
like gold might be poised for the next leg higher so we'll have to see where it
goes from here thank you so much for sharing all these deep insights with us
today the opportunity to talk to you really appreciate it all right and thank
you all for watching Investing Strategies this
we'll see you right back here for our show next Monday featuring the Chief
Investment Officer at Nuveen and XOUT Capital until then I'm Alissa Coram
Thank you