Funny thing about the market; I’ve had this potential 17,500 target on the Dow since early in the year as it formed a bullish Ascending Triangle on this weekly chart we review often in NFTRH. Then the recent mini correction dropped it hard and I felt a little twinge of embarrassment about this chart. Now? Not so much.
This is what happens when market bounces extend off of corrections that came about amidst b/s like the Middle East and Russia/Ukraine tension (i.e. things that have nothing to do with the US stock market other than resetting over bullish sentiment to a healthier state). These bounce backs tend to fix technicals. The market can turn and drop tomorrow, but as of 3:00 on Tuesday, the Dow’s weekly technicals (if you discount MACD) are intact and targeting 17,500.
Yesterday HUI did exactly what we asked it to do in order to remain normal to the current plan. It dropped into the 224’s, filled the gap and has not made a lower low to the last green arrow. So it remains in a baby uptrend. I would not get too concerned about reading a rising wedge into a 30 minute chart, but it is inserted regardless to again play Devil’s Advocate.
The ‘bounce’ has been more powerful than I thought it might, bringing the prospect of the next up phase – indeed a potential melt up phase – into the picture. But one leader has been negatively diverging the rally of the last week…
The Dow is at a lower low to December and that is very bearish. But its amigos from the 2013 US stock party have not violated the December lows. FYI…
Dow is at the 50 day moving averages, which coincides with lateral support.
There is stuff going around about the old as the hills ‘3 Peaks and a Domed House’ on the DJIA. Unfortunately, I have found that to be of nearly as little value for the bear side as old favorites the ‘Jaws of Death’ and my ATF, the ‘Death Cross’ of MA 50’s below MA 200’s.
What I may find constructive for the bear side however is that the market is celebrating an industrial production data release into FOMC. The most bullish scenario would have been for the market to continue declining to clear the pipes for a strong Santa rally, at which point I’d have added more long positions. Watch the red trend line.
Now instead, I am having thoughts of shorting. Just thoughts at the moment, mind you.
Dow should not make a lower low or that would be err… bad. I just got done managing a similar (yet oh so different) situation on the HUI in the previous update.
For the Debt Theater Kabuki Dance to be like all the other ultimately bullish sentiment events of the last year, these markets need to get it together quickly. They were due for a correction but I’d be more comfortable for it to have been ‘organic’ as the most naive of bulls like to call our US economy, rather than having this stinking debt mess at center stage.
I hope the market finds support here because I unloaded my SPY puts but still have some longs. I would like to see the Dow bounce here at the 62% Fib retrace and visual support in order to get bearish again.
I think eventually this pig will go to the 200 day moving averages because lazy thinkers and various other dumb money needs to be punished. First, let’s get a bump to the 50 day averages.
People need to see and consider this because it is reality; it is what is indisputably happening right now, like it or not.
DIA-GLD ratio, monthly
People can avert their eyes, call me the most hated individual in GoldBugsVille or simply cancel from my service (they have done all three) because I have shown things like this that are gold-ugly and talk about the risk of not dealing in what is.
I too dislike what I think are some of the causes of the picture above, but the picture is what it is. Stocks are apparently entering a secular bull signal vs. gold (green MACD). Now, I am a smart enough chart twittler to know that charts do not rule the world, and the DIA-GLD ratio had also come to within a target zone. It hit 1.1255 before being repelled on gold’s post crash recovery. This is not shown on a monthly chart. The ratio is also getting quite over bought.
Still, the target allows for a little more upside and we’ll soon know if it is a grand new age of stocks vs. gold. I am watching for upside blow off targets to get short the market, so you know where I am at right now. But by being aware of the chart above, at least I’ll do what I do with eyes wide open and let the chart school me one day about how wrong I was if it comes to that.
I find it disturbing that the $RUT, which has been a negatively divergent leader broke the nice neckline I laid out for it in NFTRH 235. That is what I find disturbing.
Russell 2000 daily, from NFTRH 235
I find it less disturbing that the Dow bounced because that is exactly what we noted it looked like it was poised to do.
Dow daily, from NFTRH 235
Meanwhile, the Tranny is holding at some moving averages and under the dome we placed over its head this weekend.
TRAN daily chart, from NFTRH 235
The leaders had better get about the business of downside leadership fairly quickly or these damn bulls are going to… well, you know.
No silly, I have not become a hypester or sensationalist. The title is a play on the self-described “Most Frightening Gold Chart in the World” I found on the internet several years ago that long time readers may remember. It predicted a crash to the 200’s in gold just before it began its ramp to 1000.
This is but one chart that was included in the NFTRH update below. I hesitate to publicly post partial information from these updates, and when the one below becomes public you will see that it is very detailed and incorporates many different elements to form its opinions. Remember, it is only through hard work – not reading blog posts or somebody’s unsubstantiated opinions – that we really learn.
But this chart blew me away and I want to post it for people here. NFTRH and also I believe, this blog space have been watching the bottoming pattern on the DIA-Gold, SPY-GLD, etc. ratios as a nagging bearish caveat to the gold bug case. To paint a fair picture for stocks, DIA is used instead of the Dow because it factors in dividends.
DIA-Gold ratio, monthly
Well folks, look… the damned target has been achieved. But hey, charts don’t work. Must’ve been a strange coincidence.
While there is certainly no stop sign at the .11 target, this removes one major pain in the ass issue that I have had to look at for months upon months.
There is a lot going on now in the macro. Check your assumptions and be ready.