From the summer slump to the year-end surge: How to profit from seasonal trends in precious metals and Bitcoin | chart watcher

Safe-haven investments such as gold, silver and now Bitcoin have all had a bumpy and uncertain rise, despite mixed opinions from analysts. The rise is driven by fears of inflation (or slower growth due to inflation), US national debt at record highs, changing Fed interest rate expectations, and record purchases by central banks, especially among the BRICS countries.

Except for the Federal Reserve’s interest rate cut. I think I will As is likely to happen towards the end of the year, most of everything mentioned above will likely continue in the direction it has been going, i.e. against the value of the US dollar.

Short-term downtrend, long-term uptrend

Besides interest rates remaining stable (depending on the three upcoming inflation reports), there is another reason to expect a potential decline, if not a further increase, before the next round of increases. seasonality.

Gold, Silver, and Bitcoin All Experience Summer Slumps. So, based on these expectations Should this seasonal pattern repeat itself? Let’s say we’re likely to see a short-term decline this year, followed by a strengthening move toward the end of the year. If you want to get into one of these safe havens, could this summer be a good time to increase your position?

analysis tools

The goal is to examine the seasonal outlook and compare it to the current price situation. To do this, it helps to look at StockCharts’ seasonality tool. And you can use StockChartsACP’s tools to fine-tune your analysis. This article uses: Fibonacci retracement tools and Money Flow Index (MFI) Fine-tune your analysis.

Seasonally hot summer “dip” in gold, silver and Bitcoin

Since you are likely a stock trader or investor, let’s not look at each asset’s seasonality on its own, but rather its historical performance relative to the broader market, comparing its seasonal performance to the S&P 500 ($SPX). your portfolio).

When using StockCharts’ seasonality tool, pay attention to the following two numbers and keep in mind that you are looking at a 10-year seasonal cycle.

• The bar (and the number above it) represents the percentage of times the asset is closed more frequently compared to the S&P in this case.
• The % figure at the bottom of the bar reflects the average return over 10 years. Relative to S&P 500.

Chart 1. Seasonal 10-year chart of Bitcoin versus S&P 500. See higher closing rates compared to average returns.

Bitcoin’s high closing rates and returns are decent in June and July, with August being the weakest performing month (summer recession). However, almost all months tend to be dwarfed by October’s higher closing rates and returns (89% higher closing rate and 22.5% average return).

Now let’s take a look at the performance of silver ($SILVER).

Chart 2. Seasonal 10-year chart of silver versus the S&P 500. Note the weakest performance in June and November and the outstanding performance in December.

Although not as great as Bitcoin, Silver ($SILVER) is the neglected sibling of the three. Compare to S&P 500 (Remember that we do not look at the seasonality of each asset on its own.) June through November tend to show little movement in the negative, despite higher closing rates in August and October. While November is the worst month for silver, December is the month in which the white metal tends to outperform the overall market, closing 67% higher and returning 4%. Again, this supports the bearish to bullish pattern that the market fundamentally tends to expect.

And finally gold.

Chart 3. Seasonal 10-year chart of gold versus the S&P 500. December and January are the strongest months for gold prices compared to the overall market.

Gold ($GOLD) performance relative to the S&P looks similar to silver. November is the worst month, while December (also January) represents the strongest relative performance, with a 67% higher closing rate and a 2.3% average return. Over the past 10 years.

So if you’re realigning your portfolio with these safe assets, here’s what you need to know: Assets and When to Become Overweight While maintaining a broader market portfolio.

Chart 4. Bitcoin daily chart. The cryptocurrency is in a trading range, but momentum is decreasing.

According to some analysts, the traditionally off-season summer months could see prices seek new catalysts, potentially sending Bitcoin below $50,000. There is also a slight bearish divergence from the falling Money Flow Index (MFI) line and its near flat range, suggesting buying momentum is declining. Assuming that is the case, the price would first have to fall below support a few points above 38.2%. Fibonacci retracement level (see blue arrow). A break below this level will likely find support above the 50% Fib level (see blue arrow), below which we see the $50,000 price.

Technical buying activity is likely near this level. However, if the price continues to fall, the ideal buying range between 50% and 61.8% would be consistent with the four-week historical congestion range (see blue rectangle), which could provide strong support. If the price falls below this level, the bullish outlook may need to be reassessed.

Chart 5. Silver daily chart. Note the strong surge in silver. Is it topping or is there more room to run?

A slight difference in MFI shows a stronger price surge compared to slightly weakening momentum. I wonder if silver could be the topping though. As an industrial metal, silver is not only a numismatic metal, but also has other primary pathways. Nonetheless, it has a seasonal profile similar to Bitcoin and gold: summer weakness and year-end strength.

If the price tops out at current highs, silver would need to break below the swing low (see blue dotted line), which coincides with the 23.6% Fib level. A break below this line will likely find support at the 38.2% level, which coincides with previous resistance (see blue arrow). The next swing low, an ideal buying range for those looking to buy, will be near the 61.8% Fib level at $26.25.

Chart 6. Daily Gold Chart. Gold seems to be the topping. But there is a lot of clear support underneath it all.

Looks like a mid-century double top But whether this will lead to a correction or a much longer decline will depend on a number of factors, one of which is the Fed’s interest rate actions.

Assuming a correction, the blue arrows indicate clear levels of market-based support (and potential resistance-to-support transitions). This is consistent with the 38.2%, 50%, and 61.8% Fib retracements. Similar to the Bitcoin example above, we can see the MFI line falling in the overbought range, indicating some weakening of buying pressure. For a seasonal narrative, short-term weakness followed by strength towards the end of the year, a Fib level range between 50% and 61.8% could be a favorable entry. Buy when technical conditions, from patterns to momentum, indicate a strong bullish reversal.

takeout

Identify strong reversal patterns and signs of bullish momentum when you “buy the dip.” Despite the mixed opinions analysts may have about these three safe assets, they are all concerned about inflation, changes in Fed interest rate expectations, and strong buying by central banks (which is not only about gold, but also an indicator of the global economy and the US’s challenges). responded. dollar).

From a seasonality standpoint, these assets often see a slowdown in the summer months and are likely to see a short-term decline before gaining strength towards the end of the year. If you’re considering a long-term trip, this summer could be a buying opportunity. Keep an eye on your Fib levels.

How to access seasonality tools

There are several ways to access StockCharts’ seasonality tools.

• Click the Charts & Tools tab at the top of the StockCharts page, enter a symbol in the Seasonality panel, and click “Go.”
• Enter a symbol in the chart bar at the top of the page and select ‘Seasonality’ from the left drop-down menu.
• In your dashboard, under Membership Tools, click Seasonality.
• Below the seasonality chart are links to instructions and quick tips that provide more detailed guidance.

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.