Thursday, February 27, 2014

It was a Big Day on Wall Street

Today the S&P 500 and the Russell 2000 indices finally managed to put in an all-time high on the closing basis. In combination with a strong market breadth index reading ($VMBI), this tells us that markets are headed higher in the short to medium-term.

Gold closed at $1331.70 with an inside day. An inside day happens when the entire today's range falls within yesterday's price range. An inside day usually precedes a strong move. A close above or below February 26 price range should clarify price direction.

Gold miners fared slightly worse then gold itself and are in danger of rolling over to the downside. A close below 20 day exponential moving average (eMA) may trigger a sell-off.

Treasuries gained strongly again, albeit on low volume. A TLT close above 109.34 could target a move to around $114.

Real Estate (IYR) has been range-bound for the past 7 trading day. It seems to be gearing up for its next move. Bulk of evidence is pointing to higher prices ahead.

Big move today in emerging markets! EEM gapped-up in the morning and gained almost 2 percent by session's end. A close above $39.87 would likely trigger a rally of about 7%.

Oil remained strong. A close above $103.45 would target a move up to $105 and possibly higher.

Natural gas collapsed this week by over 30%. A rebound is very likely, but all the signs, especially the volume patterns, point to a continued downside.

We are long: GDX, IYR, DEM, DVY, ETV, TLT

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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