Market Notes

Well, that was a heck of a post-FOMC reaction.  As if the slightly redone wording actually said anything more than ‘we may raise interest rates by mid-year and then again, we may not.’

US Stock Market

I have been asked about a signal to short the US markets, and the last 2 days have brought that into view as we started the week at a decision point with most markets above their 50 day moving averages and now most of them are between their MA 50’s and MA 200’s.

The parameter to greater downside potential is a lower low to the January low.  The Dow has already done this, but it is up 60 points in pre-market, in a would-be attempt to paint that as a head fake.  Most other indexes are just above or well above the January low.

As for shorting, the NFTRH+ update on XLF on January 14 was one of the few index/EFT setups I could find as it violated its December low.  This led to the more bearish stuff that has gone on this week in other indexes.

Being a conservative individual as far as market management is concerned, I am waiting for a break down in the indexes and then a post break bounce as a classic short opportunity.  That would be similar to this ‘+’ short setup on SPY in December.  In that case, the parameter was a loss of the EMA 10 and a bounce back to it.

The current case is potentially more bearish, but again the January lows must be taken out first.  They would become the key resistance which, if it were to contain a post-breakdown bounce, would be the point to short.  For reference, that equates to 198 SPY and 1988 SPX.

I am short a couple items, but as of now that is against a reduced group of longs.  As noted in recent reports, if I see the wrong things my goal would be to get rid of most or all long positions.  Then, I’d like to be patient about establishing shorts, via setups.  That’s the plan, now we’ll see how reality works out.

Precious Metals

It is looking like the equivalent of HUI 210 and GDX 23, our original and best targets, were the best short-term sell point for traders, as noted at the time.  The potential remains however, for the upper targets of 224 and 24 respectively, along with gold 1320-1340 and silver high 18’s.  But it looks like lower supports can be tested first.

Given the bearish CoT data in recent weeks and the over bullish sentiment noted in NFTRH 327, a clean out is to be expected even if there is a new bull market beginning.  If the sector can register support levels, which we’ll note along the way, and sentiment gets cleaned up, the next push could bring on the highest targets.

Let’s review the usual weekly chart of HUI.  Again, I’ll call your attention to Comp 1, which saw a fairly steep pullback before Hammering back upward.  This is the shaded area in mid-2013.  HUI found resistance, unsurprisingly, at the old ‘205 parameter’.  Now it will look to find support.

hui

Here is a new weekly chart that cleans things up and expands the view (click on these charts to get a larger and clearer view).  Pending a test of support, we are still open for a final leg up (for this rally, not managing a new bull market yet) to the top line of the downtrend channel.

hui2

Finally, here is a daily chart of HUI that was used in a previous update.  It is very clear in its key support, in the event that HUI does not hold current support at the EMA 10.

hui.day

If CoT and over bullish sentiment get cleaned up and Huey hits the SMA 50, the probabilities are that a new, lower risk ‘buy the pullback’ signal would be in place.

Alternatively, in the lower probability that HUI reverses back upward now, 224 (+/-) would be a near-term target, from which a correction would be very likely (given sentiment and CoT).