US Stock Market
S&P 500 is +5% today in pre-market and I have not covered my short position on SPY, although for NFTRH+ purposes, the preliminary bearish trading target was 206 (SPY closed yesterday at 204.98). So that trade is complete.
I expect SPX to eventually move down to the support zone at 2000 +/-, where the decision would then be made as to whether or not we are going to test lower levels. So interim bounces could be additional shorting opportunities, as was Monday’s little joy fest.
Here again are NFTRH 329’s stripped down SPX charts (click to expand). Daily chart channel center matches lateral support shown above at around 2000. The channel bottom potential would be evaluated at that time.
The weekly, with its bearish MACD would want to eventually draw SPX to 1900.
Let’s throw the monthly in again for more perspective. The stock market can take a correction here, off of the bearish MACD signal (initial monthly trigger down, orange shaded), yet still not be broken from its bull cycle even at 1900. Then the question would be whether the MACD signal would be a bear trap as it proved to be in both 1998 and 2006.
US Stock Market Bottom Line
Just managing the S&P 500 for now to keep it simple. The market is bearish and short-term bounces are likely to fail. The 60 min. chart shows a level at 2070 that should not be exceeded in order to keep a comfortable bear case going.
Global Stock Markets
Euro 50 is relatively strong, right in line with our view of relative strength for Europe vs. the US. But daily MACD is going nowhere and this market may be one hard Euro bounce or rally away from taking a correction. In that event, supports are noted.
While the picture remains technically, bullish, it is now a long way down to support #2, which is the primary support level. Weekly…
STOX-SPX continues to reflect a weak currency’s stock market vs. a strong currency’s stock market. In other words, it is a casino play on currency devaluation. Again, if you think the Euro can bull, you would now be cautious on European stocks.
China 25 is back below the breakout line.
While I am not overjoyed with the performance of my new position in India (INDY), neither am I disturbed by it. The plan was to add pullbacks and that is what is going on now. If somehow this is the correction that takes the global macro apart (we’ll follow ‘stress’ indicators closely in NFTRH) that view would change. For now I am going to give INDY a little more room. It is my only equity market holding.
Commodities
Bearish until/unless the US dollar corrects.
Precious Metals
Gold failed the key 1167.30 parameter (Jan. 2nd low), made a lower low and now appears to be on the bottom retest express.
Silver has so far held its equivalent level of 15.51. The bottom in silver was a flash event as it declined and reversed from 14.15. I still believe that may have been something significant.
HUI came to the ‘higher low’ level we have noted recently. Will it hold a nice, neat line? These are the financial markets and this is one of the most volatile sectors within the markets. So, who knows?
I took positions on a couple miners into the close yesterday on the chance this could end the correction. But that remains tentative at best. Gold sector corrections don’t tend to end at neat points like the above.
GDX and GDXJ volumes were strong enough the last few days to signal a capitulation in progress. That combined with what should be rapidly improving gold and silver CoT data are positives. But knives were still falling as of 4:00 US eastern time yesterday and technically, the whole mess is bearish though still capable of keeping the long-term bottom story alive, pending the November lows.
US Dollar/Euro
Recall the big picture target for the Euro at 105 +/-, which is the bottom of a long-term down channel. The entire world is long US dollars. Its already over bullish sentiment must be off the charts with US and some global stock markets now starting to weaken (with capital coming out of financial markets seeking liquidity). NFTRH itself has been talking about high cash levels for risk management leading into this stock market correction.
While I am not making a bear call on USD, we can be on high alert for a blow out of some kind in USD (and going the other way, the Euro) in the coming weeks. Within that, everything that went one way in response to these currency pressures would be expected to go the other, at least for counter trend moves.
Bottom Line
US Stocks are now bearish until proven otherwise. SPX target is 2000 +/-, with lower potential.
Europe is relatively strong, as per our analysis for the last few months. STOX has notable support at 3300 and it might only be one Euro rally away from testing it.
Gold lost its ‘higher highs, higher lows’ parameter but silver has clung to its parameter. The miners may be in capitulation mode now, though the whole sector is still a falling knife. Macro fundamental wise, we want to see yield curves rise and gold out perform stock markets. These things are not yet happening.
USD is now an extreme star performer. Maybe THE premier financial star on the planet. It is likely in some kind of blow off mode, a reversal from which would change views on several markets. It was only last summer that nobody was paying attention. When it does finally correct, it will likely be a long correction.
