As we work through the Santa seasonal and into the post-tax loss January effect *, the S&P 500 lurks below the target of 6180 (currently 6020 after having hit a high of 6100) while unsurprisingly spiking during Santa. A little hopeful joy to erase the post-FOMC angst. The target does not need to act as a stop sign and it also does not need to be registered. In short, we are right where we projected, still bull trending with a potential contrarian pivot point out there surrounding the presidential inauguration. It’s a general sketch. Don’t take any one thing as a given. We are sketching our way forward, not predicting our way forward.
* When tax loss sales pressure theoretically sees a bounce in the items sold and also small caps.
Silver is bumping its way up into the resistance zone, which acts as the neckline to a bearish pattern. With the caveat that holiday trading is less reliable, technically, and that bear patterns like this can easily fail, we’ll still note that silver remains vulnerable, even if it bounces to the dotted EMA 20, which it probably will do.
Gold has bounced to its EMA 20 and short-term resistance after having registered a 50% Fib pullback of the rally from the spring. The question now is will it seek a lower Fib (62%) and support coinciding with the 200 day average? It looks capable of that, but as before, the 50 day average will help decide (gold twice faked above it and failed).
The Gold/Silver ratio (GSR) maintains a constructive look, which means caution is indicated for other areas of the markets, especially and/or initially commodities and precious metals.
The US dollar index maintains its higher high breakout. In combination with the GSR the 2 Horsemen are postured to hurt many markets if they further the constructive look above and the bullish look here in USD.
GDX is not surprisingly making a little flag upward from support. However, if it’s a bear flag we’d be looking for point ‘C’ before too long.
The Santa seasonal was anticipated and it is doing Santa seasonal things. With each passing week in January we should be able to get back to more solidly dependable analysis. Right now, the analysis is looking for a top in the broad markets, and the precious metals, which had been primary participant in the broad rally, have been pointing toward correction.
With all of the negative macro indicators in play, we may have to adjust timing along the way, but as long as those indications remain in play and negative, not the conclusion that a bear market is out ahead. Meanwhile, if the precious metals are leading as they often do, they could find a bottom well before the broads do and that could be the beginnings of the new counter-cyclical macro.
