Gold extended its up-move out of the congestion today, with a relatively large range bar. The upmove of two days ago (Tuesday) took out a minor pivot drawn with the yellow horizontal line with momentum turning up. It was encouraging that the up-move held on the small consolidation day yesterday. Today momentum accelerated up and closed above the next pivot drawn with the cyan colored line. I had indicated that it felt like the gold market was coiling up like a spring. With trend channels sloping downward and downward market structure it looked like the odds favored a downside break, but for now the break is obviously to the upside. This is a market known for false starts and quick turnarounds as soon as everyone is loaded up on the same side of the boat. Emotions seem to be of a more hair trigger nature than other markets. The conventional wisdom is for a Fed ease and a lower dollar, with the resulting push higher in gold, as gold seems more dominated by dollar direction than by its own supply/demand fundamentals. Another encouraging sign is the gold mining shares made a nice move up to help confirm. I think they’ve lost their leading characteristic recently, but it is good to see the group exhibited strength. Silver is still in a clearly defined downtrend, as are some of the individual gold mining shares. But gold looks better than it did a week or two ago. There’ll probably be a nasty shakeout at any time to knock traders off the bandwagon, so if the next pullback doesn’t do severe damage, longs should be looked at on retracements.
The S&P seems to be sitting on the fence short term. It did break below the pivot, where I drew the blue line, and held slightly under it today, and is sitting right on the three day average pivot (yellow dot). The double stochastic moment, on both the 5 and 10 period have turned down with divergence, and the short term momentum oscillator in the bottom sub-graph barely crossed under its signal line, thus created that red dot you see on the zero basis line. Also, the trend of the regression curve and error bands are pointing slightly downward. The news regarding the Fed decision to keep rates where they are, or lower by 1/4 point, or 1/2 point is causing all the markets to flip back and forth rapidly. As long as daily chart remains under three day pivot and momentum indicators remain pointing downward, I’ll trade this market from the short side. If news caused a move back above the pivot drawn from blue line, and momentum indicators turn back up intra-day, I’ll trade from long side. I know this isn’t too definitive, but the market could jump either way with bar ranges narrowing and momentum indications not as strong as I would like to see.
The QQQQ/Nasdaq 100 still remains the strongest of the indexes. The short term momentum indicator in the bottom sub-graph did turn under its signal line, however with the uptrend still somewhat intact I would rather wait and just trade this from the long side. There was not much divergence on this momentum downturn, other than on the 5 period double stochastic, which is not a very strong signal. Prices are sitting right on the mid-point of the regression channel and the three day pivot. If markets break I will trade short side on S&P and await a reversal back up in momentum to trade the Qs from the long side.
I know I keep referring to indicators that I have not yet described in the indicators section of this blog. I plan to write and post articles on those soon. I also change the charts and indicators frequently. I can’t possibly show all the indicators that I look at every day or these posts would be too long. I try to pick out what is worth discussing. Sometimes one indicator explains the market better than another. This blog is new and I’m just finding my way.