S&P 500 (SPY) gapped down on Friday and closed below the mid-November low. This is an important break of key support. The door is now open for SPY to at the very least fill the gap-up from the early October that would be a logical place for some sort of a bounce. Very short term, SPY might rebound to the 200-day moving average around $205.24, but I think the bigger trend is down, so the short sellers might re-join the party at that level.
CHART OF SPY

IWM is the weakest of the big 3 major ETFs (SPY, QQQ, IWM). Today IWM broke below the November lows and closed near the lows. IWM also has a gap-up to fill from the early October, and from there, the August and October lows are just a few percentage points away.
      CHART OF IWM

​       Several sectors and industry groups deserve special mentions: Finance, Homebuilders, Retail and Biotech all either broke major supports, are gaining on their August/September lows, or have actually closed below them. These are important, aggressive parts of the stock market and weakness here doesn’t bode well for the rest of the market.

Correlations between the various stock sectors increase when the markets drop. If the general markets drop, it is very unlikely you would be able to wait things out in a defensive sector like Utilities or Consumer Staples.
STOCKS ARE HIGHLY CORRELATED

 Where could the investors hide during market corrections and bear markets? Traditional safe-haven investment class are the bonds, specifically, the US Treasuries. I think we had a bona fide breakout in TLT this Friday as it closed above the resent resistance level. The Federal Reserve may or may not raise the interest rates this coming week, but the chart of TLT is painting a picture of fear. The same can be said about the chart of Municipal bonds (MUB) – it hit another all-time high on Friday. If stocks come under more selling bonds are likely to benefit.
CHART OF MUB
CHART OF TLT 

The selling of the US dollar may have been overdone. Should Jane Yellen rise the interest rates, we may see the dollar strengthen again and re-challenge the rest attempt at the 52-week highs. Commodities will most likely come under more pressure (as if they need more pressure).
       CHART OF $USD

Gold is in the middle of a bear-market rally or at least a rebound of some sort. Last week’s gold rebounded very strongly following the steep rise in Euro. But for now gold was unable to build on this breakout. Gold might continue up to around $1100, possibly higher, I think it will depend on the Dollar.
GOLD CHART

       GDX is also rebounding with a rising wedge of sorts. We all know what the rising wedges in a bearish security mean –strong selling once the rising wedge is broken to the downside. A rising wedge is of course short-term bullish for GDX – while its rising. I am expecting short sellers to come in around the $16-17 area.
CHART OF GDX

Oil was an outstanding performer for the subscribers. Our open position in SCO (inverse double oil) is up almost 70% from the entry in early November.  Sign-up for our Trade Alerts Service here.
Oil is strongly bearish – it hit multi-year lows on Friday. I don’t see any signs of a bottoming action in $WTIC just yet. We could easily hit upper $20s in the near future as OPEC continues to flood the market with cheap oil.      
OIL CHART

Natural gas was not to be outdone and hit multi-year lows as well. In the past two weeks we had two hammer candlesticks printed on the chart of $NATGAS and neither one of them resulted in any sizable rebound. Again, I cannot overemphasize the dangers of bottom picking. At least the temporary bottom will come when it does. Once NATGAS rebounds, we can start looking for shorting opportunities again, until then cash is a position.
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)
 
 

​Never mind all the excitement about the economy and money printing in Europe, I am still getting a rather bearish feeling about the stock markets. Let us now take a look at some of the historical time periods and see if my concerns are grounded in solid data. We will take a “balance of evidence” approach to our studies and look at 4 indicators: Simple moving average crossover (50-day over 200-day), New Highs-New Lows percent, Bullish percent index, and Percent of stocks above the 200 day exponential moving average. If at least 3 of these indicators are bullish, we will keep a bullish bias, if at least 3 are bearish – bearish bias.
         The most common time period to which today’s market is compared is that of 2011 so lets start there.  
​In August 2011, $NYA experience a sharp drop followed by sideways action and several attempted rallies. Eventually at least 3 of the above indicators crossed into the bullish thresholds and a strong rally ensued. 

​In 2010 New Highs-New lows percent never even dropped below the -5% threshold, and it was only 4 month before we got the 3 out of 4 indicators into the bullish camp. Again a rally ensued.

​Contrast this now with the picture we had in 2008. All 4 indicators dropped into the bearish territory rather abruptly. There were several attempted rallies, one of them almost putting 2 out of 4 into the bullish mode. Ultimately the rally failed and a severe bear market started.

       What does the picture look like today in December 5, 2015?
Currently we have 0 of the above indicators in the bullish camp. Can this change in the near future? Sure it can, but until we see the actual evidence on the charts turn bullish, I will treat the current picture in the general market as bearish. 

CHART OF $NYA

Moving on to the Central Bank action. This Thursday when ECB announced a less robust QE package then the market was expecting, the Euro gained over 3.5% against the dollar! Does this change the long-term picture for the US dollar index ($USD)? Probably not. $USD is still in a long-term uptrend and it would take at least a 6% drop for it to break major support around $92 and to reverse its course.
CHART OF $USD

Bonds also came under selling pressure after ECB announcement. TLT was rejected at the (now apparent) resistance level marked by the declining peaks of previous attempted rallies. On Thursday TLT gapped down and continued lower, which represents a possible rising wedge break to the downside. If you are a bond bear, this is a welcome sign since it calls for more downside.
       CHART OF TLT
       Municipal bonds (MUB), on the other hand, were hitting all-time highs just before ECB, and corrected slightly. I think the uptrend in MUB is still unbroken and the fund looks bullish.
       CHART OF MUB

​Gold was a clear winner this week. Gold hit multi-year lows at $1045.40, but finished higher on Thursday. Then Friday we had a strong follow-through and a close above the broken support level. We may see more upside, provided the dollar doesn’t rebound. Some levels to watch for a reversal are: $1100 (previous broken supports and an attempted rally), and $1120 where the 50-day moving average currently is.
      GOLD CHART

Gold miners (GDX) had an even better week, gaining over 10%. Long-term GDX is still in a bear market, but there is now denying the fact that GDX again failed to close below the seemingly important $13 level. If gold holds up and the dollar doesn’t resume its uptrend, we could see further upside in GDX. Next level to watch is the broken support that now turns first resistance at around $15.60.
       CHAT OF GDX

Oil got no relief from the weakening dollar and lost almost 4% this week to close at $40.14. On Wednesday oil broke the rising bear wedge, so a retest of multi-year lows at $37.75 is very likely now.
       CHART OF OIL
       Energy ETF – XLE was one of the losers on Friday, even though the general market rallied strongly. XLE chart sports a possible Head and shoulders pattern and a possible neckline break on Friday. If this is indeed so, we could see multi-year lows retested in the near future again.
       CHART OF XLE

Natural gas hit multi-year lows again on Thursday at $2.131. Is this the bottom? Who knows, but I am not trying to pick it! I will be patiently waiting for a rebound to short again. A decent rebound should take $NATGAS to around $2.45 at which point it would present a great shorting opportunity (once the bear trigger is present).
       CHART OF $NATGAS

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