Over the last few months, the message we have been passing on from the results of the leaders is overwhelmingly favouring Gold.
And August appears to carry forward that momentum, as the leaders sit on open gains of several hundred percent, with most exclusively trading the shiny metal.
But a few other stories are starting to emerge. As a trader, it has been impossible to miss how strong the move in the Nasdaq has been.
Today on Bloomberg, we are hit with the headline that Mark Zuckerberg’s fortune just surpassed $100 billion at only 36 years of age.
Further to this, the article goes in more detail about the five largest tech companies (Apple, Amazon, Alphabet, Facebook and Microsoft), whose combined valuations are about 30% of the US Gross Domestic Product (GDP).
Is the Nasdaq unstoppable?
The Nasdaq has been one of the best performing indexes in August, rising 359.2 points or 3.2%, which has helped Jeff Bezos, Mark Zuckerberg and Bill Gates all explode their net worth.
From a trading point of view, we can see four straight up days in August, helping those who like to follow the trend, push their accounts higher.
In particular, the overnight price action on the Nasdaq saw a strong move as captured in the daily chart below.
What was interesting, is the perma-bear, Harry Dent Jnr, in his video interview with Martin North, mentioned the Nasdaq is in a bubble, and he had opened a short position.
Despite suggesting he took a relatively small position, he must be feeling the heat on this position as momentum favours the bulls.
Silver on one of the most exciting moves of the year
Precious Metals have received a lot of airplay in 2020, and for a good reason.
Gold has been the sole focus of our Stage 1 and Stage 2 winners and a big part of the top traders in Stage 3.
But it would be remiss of us to ignore the bullish moves on Silver since the breakout on the 13th of July.
Since then, Silver (XAGUSD) has risen $11.11 or 59.47%. Even August has seen Silver rise an incredible 21.6%.
There was a great article on Kitco by Jim Wyckoff, highlighting the strength of the move in Gold and Silver and that he believes there are no clues to suggest we are near a top right now.
James Turk highlighted how Gold and Silver are benefiting from both China and Russia ditching the US dollar in the tweet captured below.
Bullish divergence creeping in on the US dollar
We love bullish and bearish divergence here at the Trading Cup and ACY.com.
In particular, bullish and bearish divergence can often provide some short sharp moves higher or lower, which is ideal when trading competitions are run monthly.
Right now, we are noticing bullish divergence starting to creep in on the US dollar index, as shown in the chart below. If you bring up the daily chart of USD/CHF, you will notice a similar theme of bullish divergence starting to creep in.
Conversely, we see bearish divergence across the EUR/USD, GBP/USD & the AUD/USD pairs.
Let’s make the point clear, we have no idea what the future holds, and technical analysis looks to view price and volume action to make sensible risk-reward trades. You can also lose more than what you start with when it comes to trading leveraged products like CFDs.
It will be interesting to see if the US dollar strengthens in the current oversold state and if the other majors weaken after their impressive run higher.
Do you fight the trend or trade with the trend?
The oldest saying in trading is ‘The Trend is Your Friend’.
Trading in the direction of the trend has been a time-tested way to locate trading opportunities and allocate risk to a trade for the possibility of a good trade.
Trending markets are often considered the most relaxed and most stress-free way to trade, as the possibility is you go long a position that continues to trend, thereby leaving your funds to ride in the direction of the trade.
But at some point, all trending markets get overbought.
The valuation gets too high.
Then no sooner was the trade a brilliant idea, than it is now considered too risky relative to the perceived upside potential.
Introducing the perma-bear.
In any bull market, you will always get those with opposing views to the current consensus.
When Oil started breaking through $130 a barrel many years back, many started opening short positions for the inevitable pullback.
Likewise, Bitcoin was once above $19,783 before many considered the cryptocurrency overvalued.
So, do you prefer to be a reversal style trader, selling strength and buying weakness, or do you prefer to trade in the direction of the dominant trend, going long only when a market breaks out into new short-term highs?
Remember, you have the chance to include both in your trading strategies.
Why not have two systems you design that allows you to follow the trend, but also keeping an eye on possible trend reversals, such as bullish or bearish divergence?
One way to become a more versatile, resilient trader is to include several styles of trading within your overall portfolio.
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