Precious Metals

GLD and SLV had another down day. On the hourly charts, they are moving along the lower boundary of the down trend channels. A tradable bounce may be approaching as they inch closer to important support levels(129 for GLD and 25.5 for SLV).

Update: Natural Gas

UNG failed to effectively break out and close above the 6.40 resistance level. Since UNG invests in NG futures, it makes sense to look at how the underlying futures are acting. It is apparent on the chart that the front month future is actually forming a bearish ascending triangle. Unfortunately, the next likely move is down to test the lower bound of the trading range and hopefully gather energy for another breakout attempt later on.

Update: Natural Gas

UNG is inching toward firm breakout from its recent trading range.

One of the reasons UNG has lost much more than natural gas futures was the steep contango in the futures market in the past 2 years. The chart below illustrates the shape of the curve at different points in time. Right now, shown as the white line, the difference between front month contract and 6 months out is 4%. Six months ago, shown as the green line, it was over 15%. A year and half ago, shown as the orange line, the premium of the contract 6 month out over the front month contract was 60%! Therefore, UNG rolling futures no longer penalizes its investors like it used to.

Natural Gas

Natural gas, especially the ETF UNG, has had a tough couple of years. The natural gas futures have dropped more than 60% from the peak, and UNG has dropped over 90%. However, natural gas may have stabilized and ready to make a move to the upside. UNG formed MACD positive divergence in October, made a higher low in December, and broke its one year down trend today. If it breaks out above 6.40 in the next few days, the trend will likely turn upside.

China Stock Market

The China A shares index is stuck inside a symmetrical triangle marked by the red lines for the past month. It remains to be seen whether the index will break to the upside or downside. Unfortunately, the Chinese central bank just raised the reserve requirements of banks on Friday evening. That puts more pressure on the index on Monday. However, if the index holds well on Monday, the chance of an upside breakout is greatly increased.

Precious Metals Update

Both gold and silver broke their support levels. For gold, the next support is in the 128-129 area. Unfortunately for silver, there is no strong support until the 24-25 area. Does it mean they will fall right to those levels? No, but chances are they are likely headed lower.

Precious Metals

Precious metals are at key support levels. GLD has tested the 133 level for the past 3 days. If it fails to hold, then 130 will be the next level of support. SLV is in a similar position. It's barely holding the 27.90 level. The next support is at 27. Given the price actions, risk/reward favors more downside moves.

S&P Long Term Trend

Inspired by Barry Ritholtz's post, here's an interesting chart on the long term trend of the S&P 500. The red line is the upper bound of the channel as it touches the highs in 1937, 1965, 1987, the lows in 2002, and most importantly the recent high of 1278. Clearly the period from 2000 to 2007 were way overvalued by historical standard. The white line is the lower bound as it touches the lows of 1942, 1974, 1982, and approximately 2009.