Let’s keep it simple. At the depths of the recent hysterical downside we noted that the forces pushing the market down were probably unsustainable largely due to hype (Semiconductor sector news with a side of Ebola). A bounce was likely.
We also noted that the market had broken its up trends and established new down trends and to nullify this it would have to rise to certain levels. We used what I called short-term micro management charts, as follows…
With yesterday’s up burst the Dow has nullified resistance #3.
SPX did the same…
And of course NDX, which along with momentum items like the Biotechs we had been allowing to test or make new highs even within a potential market topping process.
From the Wed. pre-market ETF update:
“US is on a savage ‘V’ bounce. The technician writing this notes that upside parameters are being violated. The human writing this keeps the words ‘bull trap’ in mind just in case.”
In crossing back above the MA 50’s markets have technically taken back the intermediate trends that were broken when they lost the MA 50’s and then went down to lower lows (to August) nearly across the board.
These are the daily technicals. On the weeklies most markets have not made new highs to the September highs, and that is now a parameter. This could all be part of a very long topping process but there is no longer an active bear signal, obviously, for shorter time frames.
Additionally, considering the seasonals that rapidly improve after October and impulsive capital flows into US stocks, the picture is antogonistic toward bears and indicative of bull happiness potentially for some time to come.
However, let’s keep this grounded with one final note… a subscriber who is a former institutional executive advises that most institutions produce their year-end reports at October 31. He was referencing the gold sector and the Tutes’ need to get gold miners off their books. But it works in reverse as well. They could also be getting what has been winning on their books.
This would appear to be less than sustainable. But the technicals will be what they will be. Right now, they incurred damage in October and have rapidly repaired that damage. We’ll continue to track as usual from daily and weekly time frames.
So, are large interests puking gold, silver and the miners to get this ‘garbage’ off their books? It sure looks that way. But not over thinking has served us well for years now and we should not over think this. The reality is that bearish is now transitioning to impulsive and that usually indicates a coming capitulation and opportunity.
But this has not been 2008 in that the sector has been dropping in quicksand for years now, whereas in 2008 it fell out of an airplane without a parachute. So any buying regimen (in 2008 mine was ‘buy support at HUI 250 then puke and buy again at support at HUI 150’) must use patience, unlike in 2008 when I was very impatient to take advantage of a combination of a crashed sector and outstanding macro fundamentals.
As noted for so long now, we do not have the fundamental end of things locked down yet. These fundamentals, like the downward prices of gold, silver and miners, are trying to swim higher in quicksand. In 2008 the fundamentals were propelled from a slingshot.
Any sector capitulation that comes without engaged fundamentals is only a trade until all ducks get in a row.
On the plus side, what is going on now is of sufficient intensity that I think the sector is finally, and emphatically going to renounce the charlatans that the 10 year bull market produced. These would be the ones who keep obsessing on gold in a vacuum, reinforcing to followers all the reasons gold is bullish without objectively considering the wide spectrum of macro inputs that are in play.