Are we looking at a healthy consolidation ahead of the next leg higher or a bearish reversal?
Seems like a good time to look at the charts with Jeff deGraaf, Institutional Investor's top ranked technical analyst for the sixth year in a row. Not only did he reveal his outlook for the S&P, but also gold and grains.
deGraaf told us that patterns in the chart of the S&P suggest that “we’re due for a consolidation but it’s not a big deal.”
Looking at the technicals he explains that “90% of issues are trading above their 50-day average and that’s happening in a neutral trend. Overbought conditions in neutral trends tend to work.”
We know that’s confusing so we asked him to bottom line it. He told us “I think it’s a 3% correction at worst. The market just wants to bide some time.”
Despite the massive gains in gold and the prevailing bullish sentiment in the space, deGraaf does not think the precious metal is overhyped.
”When there’s a high number of bulls in gold, the returns in both the short term and long term are pretty good,” he says. “I think it’s a pretty good bet.”
In fact, when looking at the charts he doesn’t see a ceiling. “Technically gold doesn’t have a resistance,” he says. There’s nothing ahead of us that stands in the way. That’s because gold may be becoming the international standard for a stable currency.
Correlations are running very high among assets, deGraaf explains. So as gold and precious metals climb so do grains.
And despite the sharp gains in corn as well as soybeans, wheat and cotton - they all still look very good, he says. Most have nice long-term bases.
In the short term, corn is bumping up against resistance – the high from 2 or 3 years back - but longer term he thinks it could break out.
Salesforce is one of the many high flying tech stocks that investors hammered recently.
deGraff tells us, that in any stock where you have “long-term relative strength and short term weakness, these stocks tend to outperform over the next 4-13 weeks.”
Fast Money trader Joe Terranova agrees with all the calls listed above. "I think what deGraaf has done is identify confidence in each one of those charts."
Terranova recommends getting behind that confidence. "It's ok to buy high and sell a little higher," he counsels.
TAKE YOUR POSITION: BIG EARNINGS
Earnings season is about to kick into high gear with big reports from tech, banks, conglomerates and more. Just take a look at some of the heavy hitters releasing results.
Tuesday: Intel, CSX
Thursday: AMD, Google
Friday: GE, Mattel
How should you position?