Tuesday April 8, 2014
Blue Chips Hang On. Relief Rally is Possible in $QQQ.
The Dow and $SPX managed to stay above the 50 day moving average (DMA) and printed hammer candlesticks. This indicates that some buyers are returning to the markets. NASDAQ has been in a downtrend since the beginning of March making lower lows and lower highs. NASDAQ has now become rather oversold so a rally to the 50 DMA is not out of the question.
Market Breadth Index, the $VMBI, continues to be in Bear Warning. In the past there were instances of Bear Warning not dropping into Bear Confirmation and the markets rebounding. The $VIX has spiked somewhat and since $VMBI stands for VIX Market Breadth Index, it is dragging the market breadth down. Should VIX drop, a rebound rally is very likely.
TLT gained about a quarter of a percent, albeit on rather small volume. TLT just had a bullish MACD crossover, so more upside is likely. This would be bearish for the stocks.
EEM again retested the late December high at $41.85 and managed to close above that level today on high volume. More upside is likely. The topping candle from April 4 is still in play though and I would like to see the price close above $42.13
Gold bounced off the 50 DMA and closed just below at $1308. Depending how one looks at the daily gold chart, one could see either a rising wedge (bearish pattern) or a rebound from 50 percent Fibonacci retracement (bullish pattern). I tend to see the latter and a close above the 50 DMA would further land credence to this.
GDX pattern is very similar to that of gold, but it is slightly more bullish.
IYR closed above early March resistance at $68.59. IYR may be tracing out a saucer pattern and a measured move to around $70.89 is likely
Oil gained 1.62 percent to close above late March peak. This is bullish.
Natural Gas is rebounding. We will stop out our DGAZ position should gas close above $4.59.
Bottom line: Markets look precarious, but rebound is likely
Open positions: GDX, NUGT, IYR, TLT
Hedging positions: DGAZ, UVXY
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