BMO Equal Weight Global Gold Index ETF (ZGD.TO) & S&P 100 Index (OEX.I)
It has been another week of big swings across asset classes with significant shifts in sentiment occurring intraday, indicating a big battle raging between bulls and bears.
Equity markets finished March with a big rally which now seems to have been window dressing as stocks have started to slide once again into April. Economic news has been in focus, particularly in the US where there has been a steady stream of disappointing numbers including Manufacturing PMI, Service PMI, ADP Payrolls, Construction Spending and Factory Orders.
Inflation concerns were renewed this week as Crude Oil prices took off this week after OPEC+ announced a surprise production cut to stabilize the market, which has also sparked renewed interest in Energy stocks. WTI moved back up above $80.00/bbl while Brent regained $85.00/bbl.
Combined, these developments suggest Stagflation (high inflation and slow economic growth) has moved back to the front burner. It didn’t help that the Reserve Bank of New Zealand announced a larger than expected interest rate increase, although on the positive side, the Reserve Bank of Australia paused its rate hike program as planned. Questions about the health of the banking sector lingered although there were no specific developments.
This volatile environment kept some investors cautious and sparked another shift of capital into defensive havens, particularly Gold, which broke out over $2,000/oz, and Silver, attracting renewed interest to mining stocks.
A look across indices and sectors reveals a mixed, indecisive market with a few breakouts and breakdowns but the majority of charts showing upward trends being retested but not breaking yet. Individual stock action has also been interesting. Earlier this year, we noted a number of bullish Golden Crosses were occurring, which indicated uptrends were starting, and more recently, a significant number of Bullish Catapults (new breakouts following minor corrections) have occurred.
The coming week is looking to be a busy one for economic news, starting with Canadian employment today and US nonfarm payrolls tomorrow. Next week, the focus turns to inflation data and retail sales, particularly for the US. Confession season for corporations has been very quiet so far, which may be seen as encouraging, particularly considering recent turmoil in the financial sector. Earnings season gets underway next Friday with several of the largest US banks and corporations reporting results.
In this week’s issue of Equity Leaders Weekly, we look at renewed interest in precious metal miners and at the S&P 100 Index.
BMO Equal Weight Global Gold Index ETF (ZGD.TO)
The recent swing in capital flows toward defensive havens which has driven Gold back up above $2,000/oz and sparked a rally in Silver toward $25.00/oz has sparked a resurgence in interest in precious metal miners.
The BMO Equal Weight Global Gold Index ETF (ZGD.TO) has been climbing since September, particularly since it broke out of a base in December. Coming off of a successful retest of support near $63.35 last month, ZGD.TO launched into a new advance with a breakout over $77.25 which has extended up above the $80.00 level to the ETF’s highest level since April.
Previous column highs and a horizontal count suggest next resistance may appear in the $88.75 to $94.15 range, followed by the 2020 peak just below the $100.00 round number. Initial support appears near $75.75, just above the $75.00 round number, based on a 3-box reversal and a retest of a recent breakout point.
S&P 100 Index (OEX.I)
Consisting of the largest global companies based in the United States, and the foundation for calculating the VIX Volatility Index (VIX.I), movements in the S&P 100 Index (OEX.I) provides investors with a sense of what the Generals are doing and what the big money is thinking.
After trending downward through most of 2022, a selloff in OEX.I was contained by a long-term 45-degree support line back in October. Since then, the S&P 100 has been steadily marching higher in a bullish Rising Channel of higher highs and higher lows, consistently trading above uptrend support.
OEX.I broke a downtrend line in December and has continued to generate positive signals into April, completing bullish Double Top and Spread Triple Top breakouts this week to reach their highest levels since August.
Initial upside resistance for OEX.I appears at previous peaks near 1,973, which is close to the 2,000 round number, followed by 2,095 based on a horizontal count. Initial support appears near 1,805 based on a 3-box reversal.
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