The Semiconductors and Small Caps are considered leaders and have led the rally out of the Fiscal Cliff hype from Q4, 2012. Here is an update of their status.
SOX reversed at the upper resistance of 445 and has now dropped below the lower resistance at around 437. The RUT made short work of our would-have-been neckline (red) and shot higher this week. The bear case remains intact at the moment with the third red arrow showing a failure to make a higher high.
The real battle on the RUT now shifts to the EMA 40 and a new (green) neckline drawn in. Today goes a way toward nullifying some of the bullish signs we noted were trying to take effect yesterday. The view remains unchanged; grinding economic deceleration and a top of some kind (healthy or major) being made in the broad markets.
Gold and silver just got reversed hard and HUI is now right on the low tolerance zone for this rally. Any lower and it will have gone abnormal, at least to my preferred pullback parameters. A reminder (yet again)… I am trading. Investors are probably looking at the whole precious metals bear/correction process as an opportunity to find value. For traders, this move is/has been a quick opportunity because any real bottom is likely to be back tested at some point.
If HUI fails here, we look for a test of the recent lows and also the next downside target, which has been in the low 200’s at the secular bull trend line.
I am going to look for bearish positioning on the broad markets (with tight mental stops). I am also very heavy on cash, which is and has been best for most people in this environment in my opinion.