Wednesday, March 5, 2014
Markets are Resting Following Large Gains.
Candlestick patterns for S&P 500, the Dow, and the Russell 2000 Small Cap indices are starting to look like bull flags. Should such bull flags materialize a move to above 1900 for S&P 500 and above 16588 for the Dow are likely. This would put the Dow Jones Industrial Average in the all-time high universe. NASDAQ just kept plowing higher - reaffirming its underlying strength and the appetite for risk.
VIX Weighted Market Breadth Index, $VMBI, is confirming this rally with a highly bullish reading. We see no signs of selling pressure yet. Should such signs appear, we will take appropriate actions.
TLT rebounded slightly from yesterday’s large loss. We are slightly bullish on TLT right now especially with an employment report due out this Friday. Any miss on it could send TLT vaulting over and closing above $109.18. This would be bullish for treasuries and bearish for stocks.
Gold closed marginally higher at $1336.80. Gold is neutral to slightly bullish. A close below its 20 day exponential moving average (eMA), currently at $1313.96, could cause a sell-off to around $1280-1266 area. While a close above $1361.80 should continue this rally.
GDX volume patterns and Price Momentum Oscillator readings have deteriorated somewhat over the past 4 days. Depending on the Friday close, we may book some profits, but continue to hold GDX and will add to positions should the rally resume.
Real Estate is showing no signs of slowing down. The only concern was today’s candlestick - a Hanging Man. Hanging Man is identical to a hammer except the Hanging Man occurs at the top of the range - as is the case with IYR right now. Should we get a confirmation within a few days, we will reduce our IYR position.
Oil experienced a nasty decline closing below the 20 day eMA. The oscillators have rolled over and volume patterns have deteriorated. This decline is likely to continue to at least $99.99, but probably even lower to below $98. A retest of January low may be in the cards.
Natural Gas is in a real danger of plunging even more, to below $3.75, unless a strong rebound takes place very soon.
We are long: GDX, IYR, TLT, DVY, ETV
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