Access free trading tips and analysis on major forex pairs, cryptocurrencies, and Indian NSE currency tips. Stay informed and improve your forex trading skills with Moneymunch.
On its way down from 168, GLD broke its first support level and came to rest on the second (200-DMA) from which it had a bounce. Last week, I suggested that it might find some resistance on the small horizontal red trend line, which it has, and which caused it to pull back three points. It’s difficult to see how it could have much more of a decline right away if the market is going to have a mid-correction rally, so we can probably expect the near-term trend to turn up again, perhaps reaching the top channel line (blue) before rolling over again.
If GLD does not have much of a rally from here – especially if the market does rally – it will be an indication that some decent weakness can be expected into the cycle low. In any case, subsequent action should form a P&F pattern which will help us determine the extent of the decline into the 25-wk cycle low.
UUP (dollar ETF)
UUP normally goes against equities and gold. The index appears to be extended short-term and eady to pull-back. This can be seen in the indicators, one of which is very overbought and the other beginning to show some negative divergence. If a short-term top is forming, this should help the market to find a short-term low.
Last Friday I suggested that price was involved in unfolding a terminal pattern: “Maybe price is unfolding a Triangle that should establish a bottom with the last thrust down, who knows if at the 0.618 retracement the PPT will step in.”
Instead of a Triangle price traced an Ending Diagonal, some good news came form Washington and price after testing the 0.618 retracement reversed to the upside, leaving in the daily chart a bullish hammer.
Therefore the wave structure off the November 6 peak is most likely over. This down leg, if my preferred count is correct, is the wave (A) of the last Zig Zag from the September 14 high. Therefore I am expecting a multi-day bounce followed by a lower low that should complete the corrective EWP (Recall that I am working with a Triple Zig Zag) from the September 14 high with positive divergences.
The internal structure of this bounce at the moment suggests that price may unfold a Double Zig Zag, in which case the common extension targets are:
1 x 1
= 1369
1 x 1.618
= 1380
A counter trend bounce always entails risks since the EWP can easily morph into something else, so next Monday I would like to see follow through to the upside or at least price should not breach the initial higher low at 1351.06.
In order to keep the ball running to the upside, bulls need price above the 50 wma = 1366.85 by next Friday, theoretically it looks like an easy task.
Therefore the extreme oversold readings of breadth & momentum Indicators + logical level for a short-term bottom (0.618 Retracement) + reversal pattern are the “ingredients” that should allow a multi-day rebound.
In the daily chart below I highlight the target box for the assumed wave (B) countertrend bounce with a range 1382 – 1402.
A weak bounce should fail at the 200 dma while a strong one will go deeper inside the box and two trend lines resistance could come into play.
So the good news for the short-term bullish case is that there are enough technical reasons that auspicate a larger rebound.
But the negatives are still more overwhelming, since in addition to an incomplete EWP there is no sign of a major bottom from breadth-momentum indicator, VIX and sentiment.
Bulls also have the bullish seasonality of a shorter Thanksgiving week, while volume is expected to shrink.
In any case we know the two potential catalyst that are needed for the resumption of the intermediate up trend:
US political agreement of the “Fiscal Cliff”
Spanish Bailout
In addition since the Operation Twist ends in December, the next FOMC meeting on December 12 will be a major risk event and could be another detonator for a Major Bottom of the equity market.
To become a subscriber, subscribe to our free newsletter services. Our service is free for all.
I clearly Updated on last Thursday in read line : “I will suggest to buy Nifty 5572-5606”
On Friday, the Democrats and Republicans made a joint and civil statement to the press following a brief meeting on the fiscal cliff. It signaled to the markets they are trying to begin this round of talks in a more professional manner, which was not the case in 2011. Therefore, something changed today…it was a step in the right direction. After the rare show of political civility, the tone of the markets improved immediately. The S&P 500 rallied to close 16 points off the session low.
Charts Mixed, But Improved
Since warning of slowing stock momentum on September 24, we have seen little to get us interested again in stocks. Friday was better. On the charts, let’s start with the good news; the S&P 500 found buyers at a logical level (see green arrow below).
A Rally…Then A Lower Low?
Based on numerous factors, we can envision a countertrend rally back toward the 1388-1448 range on the S&P 500. A similar A-B-C rally took place in May 2012. The rally began at point A, moved to point B, and then made a lower low at point C (see below). Markets often have symmetry and a move toward point B on the right is certainly one possible scenario for the next week or so. Keep in mind, point C would represent a low lower than Friday’s low of 1359. A good next step is to clear resistance near the pink line below, which sits at 1362 on the S&P 500.
Resistance Still Overhead
Another scenario is the S&P 500 holding below the downward-sloping trendline from the April and May highs (see red arrows). Stocks broke above the same trendline in August (see breakout below). Now the trendline may act as resistance; it sits near 1370 on the S&P 500.
Not Just Cliff…Europe Still A Problem
The biggest obstacle to a rally may be Europe. There is talk of another round of “haircuts” for holders of Greek debt, which sides with the “risk-off” camp. The German DAX is clearly in a downtrend and has broken some key support levels (see orange arrow).
To become a subscriber, subscribe to our free newsletter services. Our service is free for all.
our trading range screen for the 30 stocks that make up the Dow Jones Industrial Average. (Please view the description below the screen to learn how we calculate overbought and oversold levels.)
As shown, a whopping 23 of the 30 Dow stocks are now in oversold territory. The most oversold stocks in the index are Chevron (CVX), Disney (DIS), United Health (UNH), Microsoft (MSFT), Procter & Gamble (PG), Wal-Mart (WMT) and Exxon Mobil (WMT). Only three Dow stocks are above their 50-day moving averages — Boeing (BA), Bank of America (BAC) and Home Depot (HD). Home Depot is actually in overbought territory after doing well yesterday.
With the Dow now up less than 4% year to date, more and more of the names in the index are moving into the red for the year. There are now 10 Dow stocks that are down year to date, with Hewlett Packard (HPQ) down by far the most at -48.63%. Intel (INTC) is down the second most at -16.45%, while McDonald’s (MCD) has the third biggest declines at -15.02%. On the bright side, Bank of America (BAC) is still up 66% year to date, but at just $9.24/share, it has the second lowest weighting in the Dow behind Alcoa (AA).
To become a subscriber, subscribe to our free newsletter services. Our service is free for all.
After touching a new 2012 high following comments from Federal Reserve chairman, Ben Bernanke on Monday, Toby Connor of Gold Scents details why it might be time to book some profits in gold and mining stocks.
It’s been a great run over the last two months but it may be time to tighten stops on mining stocks. You can see in the chart below that at least during this stage of the new C-wave gold is still inversely tethered to the dollar index, as are miners.
Dollar Gold HUI Chart
During the period from September 2011 to July 2012, the dollar was moving generally higher out of its three-year cycle low and that forced a 10-month correction in the precious metals sector. It’s been my opinion that the three-year cycle in the dollar topped at that point, and should drift generally lower until the next three-year cycle low sometime in mid-2014 (with occasional counter trend rallies from time to time).
I’ve been expecting one more leg down in the dollar to test the February intermediate low before the first counter trend rally.
To become a subscriber, subscribe to our free newsletter services. Our service is free for all.
