A quick snapshot of two fairly contrary (as they should be) situations.
Here is the chart we used in Tuesday morning’s update to show that even with that big down day to come SPX was still safely above key support. Two days of hard testing of that area (incl. the SMA 50) followed. Support remains intact.
I drew in a trend line (although trend lines are much less important than lateral support/resistance) but per the previous update the first objective is the 200 day average at 2741. The second target, if things get extreme is 2800-2815.
SPX has now retraced 50% of the decline, which is a valid counter trend rally, but with the ferocity of the bearish momentum in December I’d still lean toward more bullish momentum and at least a ding of the 200 day moving average above the 62% retrace level. This grind at support could be the refueling stop it needs to get there.
Please understand that we are not managing a lasting bullish situation (unless SPX changes its trend) beyond the ‘V’ recovery rally. We are managing a counter trend situation, bullish short-term but still bearish longer-term. If first the SMA 200 and then 2815 are taken out and held only then does the situation change.
Opposite that are the gold miners, which are down trending on the short-term but up trending since September. Huey is still at support but hanging there like a rotting fruit below its 50 day average (note: the XAU index, GDX & GDXJ are all above their respective SMA 50s but GDX is perched below its SMA 200 in a similar way to HUI below its SMA 50).
I continue to be mentally prepared for a drop to or toward the lower channel line if the stock market relief rally resumes. Individual gold stocks are doing their thing (some looking good and others absolutely not) but the indexes/ETFs remain vulnerable short-term.
Yet if it does prove out that the stock market is on a bear market relief rally this leg down in the miners will have been a buying opportunity and the leg up in stocks, a selling opportunity.
If we are still on a counter-cyclical macro theme the relationship between SPX and HUI is playing out very logically. One is rising against its downtrend and the other is dropping against its uptrend.
That is the current snapshot of how things are playing out. If/as things change we will adjust with the markets. But as of now not a thing has changed other than counter trend tests of peoples’ resolve as the market will do.
