Crude oil prices set their 2016 high of $42.49 per barrel on March 18, then last week briefly traded above their 200-day simple moving average for the first time since July 29, 2014, when the average was $99.88. Oil failed to hold its 200-day SMA, now at $40.77, on Friday in anticipation that Sunday's OPEC meeting would not freeze or reduce oil production. No deal to reduce oil output was reached.
On Monday morning, oil traded as low as $37.61, pushing stocks and bond yields lower and gold prices slightly higher. These three "flight to safety" investment strategies were enhanced.
The U.S. Treasury bond exchange-traded fund, the gold ETF and the utility stocks ETF have year-to-date gains of 9.4%, 16.2% and 13%, respectively, while the S&P 500 SPDR ETF (SPY) - Get SPDR S&P 500 ETF Trust Report is up just 1.9%.
The S&P 500 ETF is up 14.8% since setting its 2016 low on Jan. 20, while the bond ETF is down 2.5% since its Feb. 11 high. When stocks outperform bonds it's called "risk-on." When bonds outperform stocks its called "risk-off." This year has thus been a "risk-off" year, but recently the strategy has been "risk-on."
So what should investors do? Simply learn how to read technical charts and employ strategies to buy on weakness and sell on strength. By doing so you can capture portions of the shorter-term changing trends.
If you don't believe in market-timing, then forget the stock market: trade the volatility of the "flight to safety" ETFs.
Investors can trade the U.S. Treasury 30-year bond like a stock using the 20+ Year Treasury Bond ETF (TLT) - Get iShares 20+ Year Treasury Bond ETF Report , which is a basket of U.S. Treasury bonds with maturities of 20 years to 30 years.
Here's the daily chart for the bond ETF.
Courtesy of MetaStock Xenith
The bond ETF ended last week at $131.88, up 9.4% year to date and down 2.5% from its Feb. 11 high of $135.25.
The daily chart shows horizontal lines, which are the Fibonacci Retracement levels of the decline from the Jan. 30, 2015, high of $138.50 to the June 26, 2015, low of $114.88. This decline was a correction of 17%.
Note how this period began with the bond ETF trading above a "golden cross," which was confirmed on March 19, 2014, when the ETF closed at $107.26. A "golden cross" occurs when the 50-day simple moving average (blue line) rises above the 200-day simple moving average (green line), indicating that higher prices will follow.
On May 4, 2015, the bond ETF closed below its 200-day simple moving average, which marked the beginning of a correction (a decline of 10% to 20%). Once the ETF moved back above its 50-day simple moving average on July 21, you can draw the Fibonacci Retracement levels.
Investors could have captured a portion of the volatility between July 29 and Jan. 20 by buying on weakness to the 23.6% retracement of $120.44 and selling on strength to the 50% retracement of $126.68. Then on Jan. 25, a new "golden cross" was confirmed. This tracked the rally to the secondary high of $135.25.
Note how the March 14 low of $127.21 held the 50-day simple moving average and that the ETF is now above its 61.8% retracement of $129.47 on a renewed flight to safety.
Investors looking to buy the bond ETF should do so on weakness to $129.84 and $128.42, which are key levels on technical charts until the end of June and the end of April, respectively. Last week this ETF stayed below a key level of $132.45, which is in play until the end of 2016. Investors looking to reduce holdings should do so on strength to $137.39, which is a key level on technical charts until the end of June.
Here's the daily chart for the gold ETF.
Courtesy of MetaStock Xenith
The gold ETF ended last week at $117.92, up 16.2% year to date and down 3.6% from its March 4 high of $122.37.
The daily chart shows horizontal lines, which are the Fibonacci Retracement levels of the decline from the July 10, 2014, high of $129.21 to the Dec. 17, 2015, low of $100.23. This decline was a bear market correction of 22.4%.
Note how the gold ETF traded below a "death cross," confirmed on Sept. 19, 2014. A "death cross" occurs when the 50-day simple moving average (blue line) declines below the 200-day simple moving average (green line), indicating that lower prices will follow.
The gold ETF had an extremely volatile decline back and forth around these key moving averages all the way down to the low. The strong gap above the 200-day on Feb. 3 was reason enough to take a look at the Fibonacci Retracement levels.
Gold has been above its 50% retracement of $114.30 since Feb. 11, and has been trading back and forth around its 61.8% retracement of $118.14.
Investors looking to buy the gold ETF should do so on weakness to $114.90, which is a key level on technical charts until the end of April. A lower buy level of $104.71 is in play until the end of June. The upside potential for all of 2016 is $157.36.
Here's the weekly chart for the utilities ETF.
Courtesy of MetaStock Xenith
The utilities ETF ended last week at $48.89, up 13% year to date and down 2% from its all-time of $49.88, set on April 1.
The weekly chart for the utilities ETF is positive but overbought, with the ETF above its key weekly moving average of $48.05 and well above the 200-week simple moving average of $41.21.
The weekly momentum reading slipped to 90.70 last week, down from 91.01 on April 8, as both readings remain well above the overbought threshold of 80.00.
Investors looking to buy the utilities ETF should do so on weakness to $46.36, which is a key level on technical charts until the end of April. Investors looking to reduce holdings should do so on strength to $50.15 and $50.59, which are key levels on technical charts until the end of June and until the end of this week, respectively. The $48.60 level should be a magnet through the end of June, as it was last week. If this flight to safety trade ends, the downside risk is to annual levels at $37.30 and $31.90.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.