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.
USD is suddenly no longer wickedly over bought and held the EMA 10. It is not at all broken from its trend. But for a day at least, led by silver the commodity complex popped, including the likes of copper, oil, etc.
The theme has been that the USD can reverse and a counter trend trade in the ‘inflatables’ could get going. The USD has not yet reversed, but such a reversal would have to start somewhere.
The gold-silver ratio also took a hit in line with USD. Often when this takes a hit like this a short-term reversal ensues, and that could be a leader for USD. Let’s see what tomorrow and the next few days bring.
I took positions in a few items early on but did not chase anything that had moved appreciably. If a rally is real and more than just a flash of short covering, there will be additional opportunities. Also, for longer-term investors who do not trade a lot or do not care for speculation, remember the theme that missing the first 10 or 20% of a real bull market would be no great shakes.
On to the US stock market and the micro management charts we have been following…
Aside from the positions in Russell 2000 short TZA and NDX short SQQQ that were noted in NFTRH 311, I neglected to note that I had picked up some puts against SPY on Friday’s up day (apologies, but sometimes by the end of a 30+ page report I just want to get out of there, and nobody should be trading what this faulty trader is trading anyway).
Story time… This morning I woke up feeling with all my being that the market would be red today after Friday’s burst of joy, and what did I see in the futures? Up 1%+ ! I try to keep level headed but I almost blew a gasket on that one. Anyway, I thought “oh crap, I think I have puts…” but decided to hold through the shenanigans of what ever was pumping the market (easing China protests? Really??). This was a lesson learning day for me in patience. Often I take losses quickly, but something seemed fishy so I held on.
Anyway, for all I know Dow will be up 200 points tomorrow :-( but I live to fight another day (also added back the MLNX chart to go with XLE, TRF and a couple other longs). The Dow held at the EMA 10 and is still within the parameter I wanted to see for short-term corrective potential.
SPX is still at the first resistance point (after testing the upper one) and below the SMA 50.
NDX behaved well in staying within its channel.
It should be noted that the MACD’s are rolled over on all 3 of the above items. I am trying to keep these short-term micro management charts simple, but MACD is a big reason why I am even bothering with them (SPX and NDX) from the short side.
Other items of note: The SOX continues to have a short-term bearish look to it as does the Russell 2000. These were -.83% and -.91% respectively. Banks were -.36%, Transports -1.15% and Biotech was -1.46%.
Overall, I am satisfied that the ingredients are still in place for a continued decline in October to at least test some relevant support levels. These tests – if the short-term bear case proves out – will be evaluated as applicable for their potential as a buying opportunity or something less pleasant.