Market Update

US Stock Market

Nasdaq hit 5000, market sentiment became over bullish to an extreme and yesterday was a down day.  Indexes put a tail on their candles and closed above the low of the previous day.  SPX was the worst potential offender of the major indexes yesterday.  Had it closed below Monday’s low we’d have noted that as short-term bearish.

spx

Meanwhile, on the market leaders, the Semiconductors made a big pop on Monday, only to drop toward filling the gap, which it may look to do today.  This does not seem bullish, but if SOX fills the gap and holds Friday’s lows (blue arrow), fine.  A drop below that level could indicate a developing downside reaction.

Of note, our rough target for SOX is 750.  On Monday it hit 734 and that is pretty darn close.

sox

Biotech (BTK) looks like it is consolidating as opposed to correcting.  Let’s keep an eye on this one for near-term market cues.

btk

BTK has been a pure market leader since 2011.  Here it is vs. the Nasdaq100…

btk.ndx

US Stock Market Bottom Line

I have been sticking with the theme of trimming profits (ex. NFTRH+ trade idea, GOOGL yesterday) and replanting in other items that have constructive charts.  The other part of the plan has been NOT to short the market until we get a read on a correction or even something worse (considering Nasdaq 5000 headlines and terribly bullish sentiment).  Risk management has been through CASH management.

As for shorting and not being the world’s foremost short seller, I’d like to await a breakdown and upside retest as a classic shorting opportunity.

I’d also want to see some damage in the leadership of the Semi’s and the Bio’s in order to become more confident of a bearish phase.  That is because while over bullish sentiment is a bearish marker for the market, it is also something that goes with mania; and this market remains capable of bull mania.

Considering that the market is due and could start out negative again today, we can watch for further bearishness.  But for now I am in profit taking and cash increase modes.

Global Stocks

On the subject of cash increases, I took the profit on HEDJ as indicated might be the case in NFTRH 332.  I held FXI but that is very tentative.  Yesterday’s hard drop compromised the profit on this and I am not going to be overly patient with it.

On the bull side of the ledger, I initiated a starter position in India via INDY and also received a confirming email (to NFTRH 332’s bullish view) from subscriber FL (a very sound fundamental market and stock analyst) after his return from Mumbai.  The intention is to increase the position on weakness or strength going forward as events dictate.

Here is yet another piece on India for India bulls to consider…

India Rising: The re-awakening of this sleeping giant is the best news of 2015

I have backed off the Europe play due to over bought readings and the likes of the DAX and Euro 50 near resistance targets we have been noting.  General Emerging Markets continue to hold little interest at the moment.  As with US equities, cash can be used for risk management while laying in wait for future opportunities.

Precious Metals

Believe it or not, the GDX has already satisfied the minimum implication of a bounce out of the wedge in retracing about 50% of the decline from early February.  I had thought that it could bounce up to fill the gap near the MA 200, but the activity of the last 2 days (esp. yesterday’s drop below the MA 50) was obviously not bullish.  This must be reversed now to keep a bounce scenario going.

gdx

So I continue in ‘show me’ mode across the precious metals spectrum.  I still hold 4 items after taking a small profit on ARNGF.  But I am by no means a bullish sponsor of the sector right now.  Other items will be profit-taken, loss-limited as needed until the right blend of technicals and fundamentals comes about.

Gold should hold the 1200 level (at which it found support yesterday) to keep the bounce going.

gold

For silver it is the 16.15 level.

silver

Both gold and silver are resisted by the MA 50’s.

On the bigger picture, recall that gold is critical at 1167.30 (Jan. low) and silver at 15.51 (Jan. low).  These are important ‘higher low’ levels for the rally out of early December.  A loss of these levels eliminates the rally and opens up very bearish potentials.

Also on the big picture, it will be important to be in position to think like a predator at such time if the precious metals resume a bear phase.  That is why I am laying out ‘what if?’ scenarios in the first place… so that a) we keep our capital and b) we capitalize.

Precious Metals Bottom Line

The precious metals continue to be the area that I look forward to as the next big play, where my preferred method of management would be implemented.  That would be holding a new trend or bull market with somewhat less emphasis on trading.  But before that play, comes a patience play.  It is still ongoing.

Precious metals need to turn up here to keep the current bounce/rally scenario going.

Market Update Bottom Line

Technically, things remain much as they were illustrated to be last weekend in #332.  The US stock market has not yet made technical signs of a bear phase, is very extended into dangerously over bullish sentiment and operating on a bad risk vs. reward proposition.  It also retains its potential for manic (i.e. bull ending) upside (ref. silver 2011).

Global stocks can use a cool down as well.

Precious Metals are going to make us wait for what could ultimately be 2008 all over again, but on Quaaludes.  That was a great opportunity and it happened in a flash (after brewing for a year or more through degrading fundamentals).  When the thing crashed, fundamentals came flying in-line providing a table pounding opportunity to get bullish.

The current phase is much much slower and demands ongoing perspective on sector and macro fundamentals as well as technicals.  At this time, the fundamentals seem to be slowly… and I do mean sloooowly creeping toward positive over extended time.  They are not there yet and it appears that they will not be there until long-term yields bottom out vs. short-term yields and the curve turns back up.  With that we’d look for a gold out performance to the US stock market as well.  These are not yet happening.

We will of course continue to update regularly since this stands to be the next big contrarian play either sooner or later.

Commodities

I continue not to be interested until given reason for an interest.  Again, we will continue to track regularly.