Monday, March 4, 2014
The End of the World is to Be Postponed
It seemed as if the world was ending at the open today. Headlines of Russia invading Ukraine dominated the airways and the internet. Yet, by the close it was clear that markets were surprisingly resilient. They absorbed and priced-in the news, forming hammer-like candlesticks, which indicates good buying pressure. Mind you, all stock indices still closed in the red, but objectively, the losses were muted.
Market Breadth Index, the $VMBI, closed in the moderately bearish territory. Its eMA is still in the bullish territory, albeit falling. The sell-off was not strong enough to trigger a bear alert just yet.
TLT gapped up at the open and gained 0.67% overall. It's only a hairbreadth away from closing above its February peak of $109.07 (dividends removed). This would be bullish for treasuries and likely bearish for the stock market.
Gold and gold miners were the clear winners. Both gold and the miners tacked on about 1.63%. Gold closed at $1350, while GDX finished at $26.30. Gold seems to have cleared the weakness of the past 3 days by closing above $1345.60. Next strong resistance levels are at $1361.80 and $1375.40. Overall gold is in a clear uptrend and it would take a close below its 20 day eMA to call this uptrend into question.
IYR gapped lower at the open, but managed to completely reverse the fall and close in the black - attesting to the strength of the stock market. It also closed above resistance dating back to July last Friday. This bull run is likely to continue. First support is set at around $67.
Emerging markets, especially Russia, took it on the chin today. RSX plunged by 6.87%, while EEM showed resilience and only lost 1.77%. We have exited our emerging markets trade for now. EEM should close above its 200 DMA for us to consider revisiting this trade.
We are long: GDX, IYR, TLT, DVY, ETV
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