Caution is Warranted
Weekly evidence is mixed: all indices closed in the red, while defensive assets got a strong bid. Yet, the Market Breadth Index, $VMBI, did not yet drop enough on the weekly chart to issue a Bear confirmation.
TLT completely ignored last week's bearish engulfing pattern and gained almost 2.5%. Strong support is again reaffirmed in the 105-106 area. Are bonds pricing in some anticipated risk down the road?
Gold and gold miners gained strongly on above average volume. Gold closed the week above the previous resistance from October peak at $1375. Next resistance is at $1434.
IYR held support at $67.49 and negated last week's shooting star candlestick. Real Estate is a traditional go-to asset in times of fear.
Oil confirmed last week's shooting star candle by closing well below last week's low, on high volume. Momentum seems to favor lower prices ahead
Natural Gas prices fell over 4.5% and closed below an important $4.563 support. We bought an inverse ETF (DGAZ) to ride this possible wave down.
EEM again rolled over to the downside. Emerging markets just can't get a bid. We closed our position in EEM for now.
A possible correction is unfolding. We have reduced our holdings in equities, while simultaneously increasing our stake in defensive assets and the hedging positions.
Open positions: GDX (added to position), TLT (added), IYR, DVY (reduced), ETV (reduced), DGAZ (new), EEM (closed position).
Hedging positions: TZA (small position), SDOW (small position)