Wednesday, February 26, 2014
Indices struggled above or near their highs. Russell 2000 small cap index made an intra day high, but closed just shy of an all-time high. The Dow and S&P 500 have printed yet another inside day. Two inside days in a row means that the market is getting ready for a strong move. Which way is it going to be?
Bulk of the evidence remains bullish: Price Momentum Oscillator, Stochastic oscillator, On Balance Volume, and our VIX Weighted Market Breadth Index ($VMBI), all point to higher prices ahead. The only “negative” is the fact that the Stochastic is in the overbought territory (this can continue for a long time, though).
The other negative is the TLT. Once again it gained today and we re-opened a small position in it. Treasuries are gaining most likely as an insurance against “turmoil” in the world (Ukraine, Venezuela). They held support for the 2 last weeks and if in the next few weeks TLT manages to close above $109.34, an up-move to about $114 would not be impossible. This will likely be a drag on the stock market.
GDX gapped down at the open, but managed to close with a spinning top candlestick indicating indecision. Gold miners have been on a tear since the late December, so a pause is in order. Our stop is set at $23.50 – just below the February 10 gap up.
Gold lost almost 1% today. It’s entirely possible that this may be a start of some sort of a correction. If yes, then first support is around $1300.
With positive news in the housing sector, IYR closed slightly up. IYR is coming up on resistance in the $68 area dating back to July 2013 peak. Momentum and volume patterns still favor the bullish side.
EEM is in a serious danger of rolling over. A close above $39.87 would be ideal to confirm this rally.
We are long: GDX, IYR, DEM, DVY, ETV, TLT