Stocks, Gold Mixed

q0914.pngStocks started the day with a large decline, but after a bumpy ride up, were able to close the day little changed. Gold, on the other hand, started the US trading day with a big rally, but ended the pit session to close near unchanged, and to lose a couple of dollars in the electronic session. The volume on most indexes was very low. To the left is the Nasdaq QQQQ ETF. The bottom sub-graph shows the volume histogram bars. You can clearly see the decline in volume of the recent rally, as opposed to the increase in volume during the previous price decline. The only good thing I see regarding this volume pattern is the climactic sell-off day was accompanied by very high volume, which often confirms the washout day as a climax. It would be nice to see volume start to increase on the rebound. Light volume is to be expected at the end of August. But now it’s the middle of September and traders are back. Maybe after the Fed cut is out of the way traders will pile into the market, on one side or the other. Momentum on the Qs is still up. The open today was on the south side of the yellow three day pivot dot (article on that still upcoming), but closed well above it, and error bands still showing sideways direction.
q0914detail.pngThe chart to the left is a detail of the same QQQQ ETF. The yellow dots are the three day pivot, and the red and green dots are where the short term momentum indicator crosses its signal line. I wanted to show how erratic the daily price bars have been on this advance. On the hollow candle the open is on the bottom of the bar, and on the solid black candles the open is on the top of the bar. You can see the small tail left on the ninth bar back, followed by a downturn and a gap down, with no follow through. The market started to recover, then another tail was left on the third bar back. Yesterday the market gapped up, fell apart, then rallied back near the high and settled up for the day but well off the opening price. Today the market gapped down sharply and rallied back to where it closed yesterday. While the longer term structure remain positive, the short term is a bit bumpy to try to trade on the daily charts.
gold0914.pngThe gold market had a nice rally into the day session today, but soon gave way to profit taking, leaving a nice upthrust on the daily chart. Momentum turned down a few days ago, as indicated by the red dots. Also, today was the first day with a close under the yellow three day pivot dot. It would be normal for this market to have some sort of shake out, although it might be a bit too convenient to head straight down from here. There may be some backing and filling as that upthrust is tested before any meaningful sell-off might occur. The sentiment is very one-sided right now. I have a feeling the dollar might not keep sinking on an interest rate cut as everyone expects. If the dollar rallies in the face of an interest rate cut, a powerful, long lasting up-move in the dollar could occur that would send the gold market bulls scrambling for the exits.

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