A quick roundup as one of the commitments I have this week is to go to court this morning and sit in a pool of people hoping not to get picked as a juror.
Using the SPX chart below as a guide, we see that US markets have now challenged the October lows (some held above and others poked below) and the test is on. It looks like a logical bounce is trying to get going in pre-market. Click graphic for live quotes…
1975 and 2050 are the key levels to watch on SPX. This market only goes bullish with a rise above these two resistance levels and then the 50 and 200 day moving averages. So, bounce aside, SPX is operating to a bearish plan.
As we have noted, people can play a bounce if they want to try it (I did some buying of watch list items yesterday), but another shoe may drop from one of the two resistance levels noted above.
That scenario is favored, though not as strongly as it was before SPX dropped all the way to its October test in quick time. I had thought we’d bounce at around 1975 and then take a next leg down to the test a few days or a week later. I ask those wanting to be bearish to consider the depths of negative sentiment that got hard wired into the market over the last week. That needs to be worked off by rally activity.
If October holds for a bounce as looks likely, the bull case gains an ally just by that fact as long as it remains true. The next story is going to be told at former supports 1975 and 2050.
As for commodities, they were down badly again yesterday. But I got belligerent and actually added to my crude oil position. This move has no technical backing to it but rather, a contrary orientation with a winter heating oil hedge component. So far, all the position is doing is serving me a paper loss.
As for gold stocks, a subscriber asks why, if the stock market is weak and the miners are negatively correlated, did they go down?
My answer, in case others are wondering the same thing.
“It is absolutely important that we not micro manage the miners on a daily basis.
There are other things in play like the miners’ technicals, forced selling by entities that are getting margin calls. All kinds of other factors.
That is why I have kept a cautious stance on the miners. Nothing happens one-for-one in real time.
In 2008 they went down day after day as their fundamentals went up day after day. I have tried to make these things clear. The miners have no preordained right to go up. This is a stock market and it has to go through its processes.”
I ask you not to focus on the gold sector as if it is the only sector out there. It is in a bear market and elements are coming into place for it to end its bear market. But everything is in motion right now. Traders sold the bounce and investors understand that it is a bear market and a process. That is the story and I am sticking to it.
I have to say that we are truly operating in interesting times once again and for a market participant, that is a blessing. Months upon months of going sideways does little other than drive people nuts or stultify them into a bland nothingness.
What is happening in the market now is not nothingness, it is somethingness, and it is in motion toward the answers we will need to move forward. The indicators spent months telling us this was coming and it is here.
People who only look at charts would tell you what I did above with the S&P 500 map. But change is at hand. I am going to ask all of us to have open minds about this change as it is not likely to produce the same results, one-for-one, as the big changes in 2008 did.
Our human minds seek to ‘quant’ everything into neat little packages, but with unprecedented levels of policy input, off the hook and out of control for so long now, the results almost have to be different. That is why we need to approach every decision point with open minds and slowly build the new narrative that is engaging right now, in real time.
The above is a long winded way of saying this is going to be really fun, but also challenging and demanding of hard work. I am ready for that work and hope you are too. Neither bull nor bear case in US stocks is proven yet. Deflation is everywhere and the media is all over it. Something is going to change up ahead and opportunities will be sprouting like weeds.
Right now, opportunity 1 is a bullish bounce potential. The objectives are SPX 1975 and 2050. Let’s manage from there.