​I was looking over some historical charts of New York Stock Exchange composite index ($NYA) and found some amazing similarity to today’s picture. Back in January-February of 2008, $NYA traced out a very similar pattern to what we have right now. First in January 2008 there was a major support break, followed by a strong rebound. The trend and market breadth indicators have turned negative, but then gradually improved into late February 2008. Note specifically ITBM – Intermediate Term Breadth Momentum Oscillator. It turned positive and was above its 10-day exponential moving average (EMA). Then in late February, it crossed its 10-day EMA and continued down. The price of course followed lower.

​We have a remarkably similar picture in many of the indices right now. The ITBM is in the positive territory and above its 10-day EMA. However notice that this is the first time ITBM is positive following the support break in August. If ITBM rolls over here, we could easily get a re-test of September lows again. 

S&P 500 is showing a similar pattern as $NYA. Market breadth has improved further from last week, but it is still falling short of the bull market thresholds. Percent of stocks above 200-day EMA is still below 60, and so are the Bullish percent indices for all the major markets.
       Charts of SPY and $SPX

Bonds still outperformed stocks on relative basis. TLT gained 1.35% for the week, while SPY added just under a percent. Why would there be strength in bonds, if stocks seem to be breaking out? Fear is very much alive and well in the markets and bonds, especially US Treasuries are still considered to be the safest place to park your cash. I am bullish on bonds until proven otherwise.
Chart of TLT_

US Dollar index (as traded on Forex) may have held support this week. If it is indeed so, dollar could gain in the days and weeks ahead and put pressure on various commodities such as gold, oil and naturals gas – so lets look at them next. 
Fans of the yellow metal were happy this week as gold gained almost 2% and was able to close above the 200-day moving average for the first time since May. Could this short covering rally that started in July turn into an honest-to goodness bottom in gold prices? I will keep an open mind to that possibility. In the meantime I do not see much evidence to counter my hypothesis that the bear market in gold that started in 2012-2013 is over. Trend in motion stays in motion and long-term charts of gold are very much still bearish.
CHART OF GOLD

Gold’s extremely volatile brother – GDX fared surprisingly worse then gold itself. It tacked on only about ¾ of a percent. After the Wednesday’s 6.5% gain (yes GDX moves that much), the rally petered out and GDX ended Friday on a decidedly sour note. Sellers dominated Friday’s action into the close and I would not be surprised to see continued selling on Monday.
       As I mentioned last week, the market breadth for GDX still has a lot of work cut out for it. The AD-Lines for GDX haven’t been able to exceed even the August highs – a bearish sign. Bottom line – GDX is overbought and in a downtrend. If you read my previous blog entries you know what I am going to say next: it’s a shorting opportunity.
CHART OF GDX

Last week on Friday, oil ($WTIC) traced out what appeared to be a shooting star candlestick as higher prices were rejected at the 200-day moving average. Shooting star candle was confirmed this week with a follow-through lower. But then again, oil seems to have found support around $45 - close to the 50-day moving average. So for now, the prices seem to be stuck between these two lines. Long-term oil is bearish, so bearish outcome of this trading range seems more likely.
CHART OF OIL

Finally natural gas ($NATGAS) hit a 52-week low at the beginning of October and rebounded with a classic pattern of a rising wedge. A rising wedge pattern in a bearish security is a bearish continuation pattern. Thursday saw a decisive break of this bear wedge and Friday we had more follow-through to the downside. More 52-week lows are now very likely.
       CHART OF $NATGAS

That’s it for this week’s market recap,
Best Regards and have another great trading week!
 
Alexander Berger (www.MasterChartsTrading.com)
 
 

We are seeing incremental improvement in the market breadth. The AD-line and AD-volume lines for $SPX are now confirming higher highs relative to the mid-September highs. Also, we are seeing a decent number of new highs being set. Additionally, the percentage of stocks above the 50-day exponential moving average has climbed above the 60% mark. All of these are positive signs, but the longer-term trend and support breaks from August still dominate the chart patterns, so I am inclined to look for a short entry at this point of the game.
Chart of $SPX
​

Not surprisingly, bonds (TLT) sold-off this week after coming close to challenging its mid-August highs. Bonds are still in a bull-market, so this pullback is a normal part of market action. Should stocks come under pressure, bonds are very likely to benefit. The On-Balance Volume (OBV) indicator for TLT broke out above its August highs, while the price has not yet done so. This is suggesting that the market participants are accumulating bonds.
       Chart of TLT
​

Selling in the dollar is contributing to a rebound in various commodities. It should be noted, however, that the dollar remains in an uptrend and is not that far off from its 52-week highs. We could easily see a resumption of an uptrend in the dollar in which case commodities will come under pressure again.

Gold is benefiting from the weaker dollar and has gained 1.58% this week. It is again at resistance, but is now overbought (along with gold miners). It is still possible that gold could rally to the $1175 area where the 200-day moving average currently is. But there are lots and lots of resistance there. Long-term gold is bearish, so I think we now have a short setup.
Chart of gold
​

       Gold miners (GDX) are clearly overbought after about a 23% move. Did I mention bear-market rallies could be powerful? Could we run further up? Gold bulls will mention that:

1. GDX broke out above mid-August highs
2. On-Balance volume is showing a bullish divergence going all the way back to July
3. The Bullish percent index ($BPGDM) is currently at 30% after it bottomed out at zero a few weeks ago. Back in the beginning of the year $BPGDM topped out at 50%, so we have some room to run to the upside

While gold bears would point out that:

1. GDX is long-term bearish, so overbought readings (like right now should be shorted
2. Advance-Decline (AD) and AD-Volume lines did not brake out above mid-August highs while price did – this is a bearish divergence

We will see who will win this match, as for me; I am actively looking for entries on the short side.
Chart of GDX
​

Oil was the clear winner this week as it gained over 8%. Is this a true breakout? On Friday oil almost touched the downward sloping 200-day moving average and pulled back sharply. This formed a shooting star candlestick – a sign of reversal. I opened a half-sized position in SCO to play oil on the downside a few weeks back. For now my stop has not yet been hit, so I am keeping it open. Should we get any more upside, it will likely get closed out. Alternative scenario is for the dollar to strengthen again and for commodities of all sorts to come under pressure again.
Chart of $WTIC Oil

​That’s it for this week’s market recap,
Best Regards and have another great trading week!
 
Alexander Berger (www.MasterChartsTrading.com)