Well, here came the short covering rally in the precious metals. By calling it that I don’t mean that it cannot turn into something more, but today was most assuredly driven by short covering as the US dollar unwound some of its speculative sponsorship. One can assume that large speculators took it on the chin on both ends, in the USD and in gold/silver as the Commercial traders had been aligned increasingly bearish and bullish, respectively.
Updating the charts we have used to gauge October’s little bearish ripple and projected bounce back.
A brief update on the headline US markets, namely the Dow, S&P 500 and Nasdaq 100.
Beginning with the latter, we note that Mark Hulbert’s Nasdaq newsletter writer sentiment data shows a very bearish sentiment profile, which is contrarian bullish.
Gold stocks are down again today and it is now decision time (for the sector if not individuals). That is because the parameter is to not make and hold a new low to the May low on a closing basis. We noted that a bounce is possible and if it is going to happen it should happen around here, at the May low with a similar over sold RSI. Either that or it would be broken with a lower low (that does not reverse quickly).
We noted last weekend in NFTRH that it was probably not a good thing that the VIX’s tech-related cousin, the Vixen was dropping in lockstep with the expected bounce in the Nasdaq 100. Here’s the weekly chart.
Much like you want to see a stubborn refusal to accept risk at a bottom, you want to see them buying back risk on a bounce at a top. Well, you want to if you are short, which I am.
Here is the weekly view of the index to which the Vixen is assigned…
*Note, I am going to post NFTRH+ dry runs at the site using the password for the week, but will not send a direct email, so as not to clutter the in boxes of those who are not interested.
I covered the short against the Nasdaq 100 today because, while it hit a very valid and anticipated bounce high last week (where the short was taken), it is FOMC week, Ukraine week and economic data week. Take profit.
I have shorts against gold and junior miners (which I’ll need to spend the next 45 min. or so deciding whether or not to cover), mostly because I did not believe the bounces last week amid the Ukraine hype, as noted here at the site in real time. I am holding those because I still hold some precious metals long positions. But as noted in NFTRH, there is much more work to do before they give any kind of a bullish signal.
Anyway, SPX is at support again. FWIW.
In fact, the Nasdaq 100 is almost too perfectly on plan. How often do we map out a bottom and a bounce target, initiate short positions (I hold QID) and see things continue to work out? Answer: These are the markets, so not often.
The setup seems almost too perfect in its tap and drop from resistance. Headlines trumpet Ukraine (and that is bullish), but they also note negatives from Amazon, Visa and Ford. That’s obviously bearish and in line with our bigger picture scenario of renewed economic contraction at some point.