Tag Archives: spy

SPY Gaps Again

All I can say is that I had a lot of angst in birthing this pig a year ago and now have the same in trying to kill it. I really have got to reevaluate the way I go about viewing momentum and try to be more patient with existing trends and realize that the market that the Bureaucrats have created is prone to extremes before the turns finally come.

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SPY daily

It is going to be all the more satisfying when those gaps start filling after this move terminates. But I’ll be poking this thing short going forward and with a risk management style, can suffer 1000 little cuts along the way. Not a big deal. I’ll also trade a few bull stocks that look technically good along the way until everything looks about ready to come out of the oven.

Stock Market and Gold (SPY-GLD Ratio) Still on Message

And for believers in honest monetary systems, the message sucks.  The message is that people can be rewarded for speculation printed out of nowhere.  Rewarded?  They are getting rich!  Meanwhile, the keepers of honest monetary values are getting hammered.

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SPY-GLD ratio, monthly chart

Furthermore, if the measured target – which after all, has been staring us in the face for months now – is to be registered, it is valid to wonder whether will it come from an absolute moon shot upside blow off in equities or a final, bear-ending but vicious drop in gold.

Look, the Chinese proverb is our friend now.  We live in interesting times and we need to recognize that and adapt to it in our own ways.  I decided to throw out my gold bug hand book for the duration and I even play stock bull a little.  But there is very likely a climax somewhere out on the near-term horizon and it is going to be really interesting.

[edit] I am well aware of the Squid’s bear call on gold.  Here, we’ll let Otto have the floor on this one.  These clowns have a long history of either making the most dumb ass calls on gold or perhaps just maybe promoting an agenda to two.  Positive contrary indicator aside, it does not change the message of the chart above, which is itself not a directive, but a distinct technical possibility if not probability.

HUI as Road Map

In an earlier post I pulled the old HUI 888 skeleton out of my closet.  888 (AKA the 3 Snowmen) was a target measurement based on how the chart looked in 2010.  It can be liberating to take your worst call and publicize it for the world to see.  They tell me that you sell a lot of newsletters that way too :-) .  All market geniuses should try it once in a while.

Kidding aside, it can be a lesson in learning from mistakes.  Can this chart tell us anything of value today?

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HUI monthly chart (through 2010)

Well what have we here?  Oh yes, it is the Russell 2000, an index I used last summer to help stay on the bull path.

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RUT monthly chart

So if HUI was going to 888 I guess that the RUT is going to 1394…

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DIA monthly chart

…and the DIA is going to 197…

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SPY monthly chart

…and SPY to 216?

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HUI monthly chart (current)

Well that sounds all well and good, but if Huey has any sage-like advice to give today’s US stock market bulls, it might be something like ‘targets are just measurements, not directives’.  Huey might also say ‘get ready for a year-long grind that mashes up bulls and bears prior to some very bearish events to come’.

Another thought with respect to the gold stocks… I am glad that they are disconnecting from the broad US market.  If HUI were to find support here, they could be on their way higher if the regular markets simply grind it out for many months.  Alternatively, if the HUI crashes to the worst implications of the big topping pattern from 2009 to 2012 (it measures to 100), then you might extrapolate forward and wave bye bye USA a couple of years down the road.

Hey, why so gloomy?  It’s just a gold stock index.  Well yes, but the road map looks uncannily good.  Best that the gold stocks find support either here or at the next target of 250 and begin to point the way forward.

[edit] Postscript:

The gold stocks ended a secular bear and led the way out of the first broad US cyclical bear market early last decade.  They were among the downside leaders into the 2008 crash and they absolutely launched ahead of everything else that would eventually recover into what we called ‘Hope 09′ back then.  So the above corollary is more than a random jumble of charts with similarities.  ‘Hope 09′ is now 4 years on and anyone buying the US stock market as a committed investor now is likely to find disappointment or worse going forward.

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Gold vs. S&P 500 (SGOL.SPY Ratio)

The SGOL-SPY ratio is popping off a bullish divergence this week.  If it were not in tandem with the Cyprus and FOMC noise I might trust it more.  But for the moment, gold is making a move.

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SGOL.SPY Ratio daily chart

This can also be looked at as an asset sponsored by declining dumb money and a rising proportion of smart money vs. an asset market sponsored by a high proportion of dumb money and declining smart money.  Sorry bull apologists, but that is the story.

All this said, the chances for more short-term gold bug disappointment are notable given the backdrop this week.

VIX Filled the Hope Gap, SPY Next?

The VIX filled the post-Fiscal Cliff relief gap (down) as hope and greed broke out of its waiting place.  The stock market meanwhile, has not filled its gap (up) that occurred as legions of momo’s pile drove the market.

So, does the stock market avoid its date with the gap now that the VIX is satisfied or will things get worse?  We’ll know shortly, after today’s little bull display is over.

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SPY gap up, VIX gap down after Fiscal Cliff drama

Stock Market vs. Gold

The stock market vs. gold (SPY-GLD ratio) has a measured target significantly higher by this big picture monthly chart.

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SPY-GLD Ratio, Monthly

But it is very over bought by the daily view, which also can be interpreted to be at an interim target at the least.

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SPY-GLD Ratio, Daily

Yes, I get it that the crusty old gold bugs are an anachronism and life is all about texting, tweeting and buying all the stuff advertised on idiotic super bowl commercials.  I get it that the stock market is filling up with all the fools that never saw the financial crisis coming and are now relieved that it is finally in the rear view mirror.

I get it that all those hedge funds that chased gold have realized the error of their ways.  The crisis is over, there is no inflation.  They were the screw balls that messed up the CoTs and gave us the biggest warnings by the way.  Better these low lifes are flushed.  I get it.