ChartWatch Markets: US stocks, gold and silver surge on FOMO plus "HOFU" — Can they make new highs?

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Gold Futures (Front month, back-adjusted) COMEX

• Silver Futures (Front month, back-adjusted) COMEX

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Nasdaq Composite Index

Nasdaq Analysis

Okay, so I may have screwed up loading the correct chart yesterday (originally it was 7-Aug candle vs 7-Nov candle…not sure how I did that!!!) – but you’ve got to give me some credit for nailing the analysis!🎯

As in, the analysis for the correct 7-Nov candle that was provided! 😉

If you didn’t know how to read candles, then it would be easy for you to mistake Friday’s 50-point loss as a win for the supply-side.

We knew better! The long downward pointing shadow, plus close on the session’s high – meant Friday was a picture of demand side control… that the excess supply which had prevailed from the 24020 peak had been hoovered up – and that the demand-side had swept in forcefully to buy the dip.

Monday’s gap and run (a +280 point gap-up mind you) – plus white candle with close near the high – was hardly a surprise. Let me say though, while “a gain” and “a decent gain” certainly qualified as MOTN (More Often Than Not) scenarios post-Friday… Monday’s big day out probably sits in the LOTN category!

It was a monster.

If I have one minor criticism, it’s that volume was a touch below average.

The pullback from 24020 occurred on consistently above average volume – ergo, there was clearly a bit of supply swanning around before Friday. It could still be in the system, which means it may simply be waiting for a better price to transact (nearer to 24020>) – or it could also be completely exhausted – hence the below average volume.

There’s probably also a bit of latent supply from those who bought during that downturn and are waiting for any rally so that they can break even.

Anyways, if there is substantial latent supply lurking in the system – we didn’t see it appear in force last night. My point is, without a strong “we just cleared the deadwood” volume event – we must watch the price action and volume closely to see if that supply is manifesting itself. So:

• Long black-bodied candles = ⚠️

• Long upward pointing shadows = ⚠️

• Either of the above on substantially large volume = ⚠️⚠️

• All of the above occurring to form a lower peak below 24020 = ⚠️⚠️⚠️

That’s all. I’m splitting hairs a little – because strong demand-side oriented price action like Monday’s on low volume isn’t necessarily a bad thing – it just means very motivated demand and similarly dedicated (i.e., to hold on for more) supply. And both auger well for prices to keep rising MOTN.

The Friday-Monday candle combo is a massive showing of demand-side control. It likely significantly reshapes demand-side thinking away from "If I wait, I might get it cheaper" to "I can't afford to wait any longer (=FOMO!)".

For the supply-side, thinking switches from "If I don't supply now, I may not get a better price" to "I might get a much better price (=Hold On For Upside – HOFU!)".

FOMO + HOFU = 📈 MOTN

Nasdaq View

You can't argue with all those acronyms! Therefore, I remain FRP (Full Risk Position corresponds to a 100% allowable capital allocation limit for US stocks based on my personal risk management model).

Nasdaq Key levels

22563 it is a "critical line in the sand" for demand-side control – and therefore a close below this point will trigger a cut to my US capital allocation limit to 2/3RP. The next critical zone of demand below 22563 is 22058-185 – below it, the short term trend is likely down, and the long term trend is under significant pressure = ⚠️ 24020 is the critical point of supply, we don't want to see major supply-side signals there = ⚠️

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Gold Futures (Front month, back-adjusted) COMEX

Gold Analysis

The last time we covered gold and silver was in ChartWatch Markets on 6-Nov.

In that update, I noted my gut was leaning to “it's already been too long... that is, my gut says 4398 is going to be very sticky for quite some time”.

“Too long” – as in, the quick bounce required to reset the gold short and long term uptrends had already taken too long.

I don’t think that statement is out of the running – because even after gold’s rally on Monday – the “big test” of 4398 remains. And to be fair, this is the crux of my scepticism regarding whether gold can make a full recovery here: Where is the next major point of supply going to form – above or below 4398?

I reckon I’m still in with a very warm chance it’s “below”, but as always, the price action and candles will guide my views. I never let myself get wedded to a hunch!

For now, I acknowledge a very credible demand-side showing on Monday – a long white candle by recent standards, with a close very near the high, and on modest volume (about average, but up on the previous 3 sessions). After all, in that 6-Nov update I requested gold do the following to make its case for shooting to a new high:

• Logging strong demand-side candles very soon ✅

• Closing above the last point of supply at 4060 ✅

• Closing above the balance point (i.e., halfway point) of the 4398-3961.2 move (i.e., above 4180) ❌

Two out of three, and that last one is a “not yet”.

Today’s candle (the last on the chart) is live – discount it. Based upon what I can see, there’s likely more in this latest gold rally – but how much will depend on if/when the latent supply my gut believes remains in the system kicks in… You will know when it has because you’ll see:

• Long black-bodied candles = ⚠️

• Long upward pointing shadows = ⚠️

• Either of the above on substantially large volume = ⚠️⚠️

• All of the above occurring to form a lower peak below 4398 = ⚠️⚠️⚠️

Yes, that’s a copy and past from the Comp – because it’s largely the same scenario here. Can the demand-side overcome the inevitable supply-side challenge that comes with tackling a previous major high? We shall see!

So far, I’ve only discussed what happens if gold keeps rallying, but there’s now a clear go-no go zone of demand at 3109-35 that possibly defines where this gold bull market ends. A close below that zone would be telling indeed!

Gold View

As per last update, I am happy to remain at my present risk exposure on gold, i.e., "=R". I require a strong demand-side showing / test of 4398 before considering adding risk, i.e., "+R". My model would consider a close below 3961.2 / the short term uptrend ribbon as a reason to reduce risk, i.e., "-R".

Gold Key Levels

3109-35 is the closest zone of demand, the price should not close below here if the demand-side is in control of gold's price, thereby nullifying the short term uptrend = ⚠️

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Silver Futures (Front month, back-adjusted) COMEX

Silver Analysis

• A more emphatic move on silver (+4.5% on Monday vs +2.8% for gold) Logically, this means greater demand-side control.

• Silver's balance point is 49.64 (midpoint of 53.77—45.51) vs Monday's close 50.31 ✅

• Silver's trough separation is better than gold's (i.e., better price action via greater demand reinforcement) ✅

• Greater demand-side candle count since the pullback low than gold ✅

So, given the above, I'd say silver is tracking along relatively better than gold with respect to its major point of supply test (i.e., at 53.77).

Ditto on the stuff we do want to see:

• More demand-side candles

• Continued rising peaks and rising troughs

And ditto on the stuff we don't want to see:

• More supply-side candles – particularly large ones on high volume

• A lower peak, and or a peak formed by strong supply-side candles in the shadow of 53.77

Silver View

As per last update, I am happy to remain at my present risk exposure on gold, i.e., "=R". I require a strong demand-side showing / test of 53.77 before considering adding risk, i.e., "+R". My model would consider a close below 45.51 / the short term uptrend ribbon as a reason to reduce risk, i.e., "-R".

Silver Key Levels

45.51 is the closest point of demand, the price should not close below here if the demand-side is in control of silver's price; alternatively, a close below the short term uptrend ribbon (presently 47.65-48.45) will also nullify the short term uptrend = ⚠️