Jack Chan: 2016 Year-End Review and Forward Analysis for 2017

chancover1-1Technical analyst Jack Chan looks back on the precious metals and energy markets in 2016, as well as forward into 2017.
Submitted by Streetwise:


As always, I provide no predictions or forecasts for the future. As a successful long-term investor, I remain faithful to Warren Buffett’s life-long commitment in investing by observing his two rules.

Rule #1 – do not lose money
Rule #2 – do not forget rule #1.

Looking back on 2016

Our long-term investment model has switched back to favoring equities after placing us on the defensive in 2015. A false alarm in hindsight.

The growth sector as represented by $SPX also switched back to a major buy signal in late 2016.

The oil and energy sector as represented by $OSX had a major buy signal in early 2016, ending the major sell signal from 2014. The multimonth consolidation after the new major buy signal provided us with excellent entries, with a 40% allocation for the long term.

The gold sector as represented by $HUI had a major buy signal early in 2016, but it was a price spike and no entries could be made. No consolidation with no trendline support has been established so far to set up for a long-term allocation.

The copper sector also had a major buy signal in 2016. TECK went straight up, while FCX consolidated. We entered near the bottom of the consolidation range, with a 10% allocation for the long term.

All three sectors are on major buy signals at the end of 2016. The best opportunities were in the energy sector, where we took a 40% allocation intended to be held for the long term. These positions are up on average of 14.8% as of 12/31/16. We also took a 10% long-term position in FCX, a giant in the copper sector. FCX is up 23% as of 12/31. It was another profitable year.

Looking forward to 2017

Our long-term stocks/bond model switched back to favoring equities in 2016, therefore, I am looking for new opportunities to be fully invested in 2017.

The growth sector is in a super bull market with no overhead resistance. The major breakout in 2013 after a 12-year consolidation rendered this a young bull and should have plenty of upside in coming years. Any sharp correction with a spike in VIX will be buying opportunities in 2017.

USD remains on a major buy signal since 2011. As long as the dollar remains in a bull market, precious metals will be under pressure overall, although we may see some sharp bounces periodically.

$HUI is on a major buy signal, and we need to see a multimonth consolidation, with trendline support established, before considering any long-term allocations.

Crude oil bottomed in 2016 and a new bull market is in progress.

$OSX is on major buy signal with established trendline support. We look for new buying opportunities in 2017 at cycle bottoms.

All three sectors are on major buy signals.

On Sale At SD Bullion!