This is a Hedgeye Guest Contributor piece written by Tim Boyd of Delphi Capital.
As the old Chinese curse goes, "May you live in interesting times."
The times we currently inhabit are nothing if not very, very interesting - which may or may not turn out to be a curse but it certainly makes narrowing down what to talk about each morning rather difficult! Such choices must be made, however, and on this gorgeous autumn morning in San Diego we'd like to highlight two charts that have our attention.
First, and in keeping with our bearish stance on U.S. equities since the spring, we believe QQQ (which is a better measure of overall risk appetite and global growth prospects than SPY) is about to do two things: 1) embark upon a 61.8% Fibonacci retrace of the Christmas Eve to late-July rally, and 2) in so doing activate a monstrous head and shoulders formation.
Indeed, if QQQ does not break out to new highs soon, the technical outlook for tech stocks is very poor. Note that both the RSI and MACD have been diverging from price action for six months and that QQQ has been under performing the overall market over that same period.
We now turn to a chart of SLV, which remains one of our favorite longs over the next 12 months although we once again caution investors that the volatility in silver prices is not for the faint of heart. SLV has been undergoing a fierce correction since early September but we believe the swing highs of October 2015 will provide the launchpad for the next leg higher.
Our topside target is $25-ish, which marks the confluence of three key resistance levels: 1) the 38.2% Fibo of the 2011 to 2018 plunge, 2) an old uptrend line going back to last decade (orange line), and 3) the swing lows of mid-2012. We continue to recommend a "buy on red weekly candles" strategy.
EDITOR'S NOTE
This is a Hedgeye Guest Contributor piece written by Tim Boyd of Delphi Capital. This piece does not necessarily reflect the opinion of Hedgeye.