Stocks, Gold lower

q1003.pngStock indexes closed the session moderately lower today. The QQQQ chart to the left shows the persistent uptrend over the past couple of weeks, with the three day pivot nicely holding the price action. The adaptive CCI has also been over the plus 100 line, which shows the up trend still intact, even though there was some loss of upside momentum in the last couple of sessions. Today was the first day out of the last dozen with a close under the three day pivot (yellow dots). The S&P ETF held slightly above this pivot. The indexes are overdue to retrace a bit of this upmove. It will be interesting to see if the CCI can move under the plus 100 line and if price can move under a declining three day pivot, back down into the regression channel. A good long entry could then occur. Call option trades had nice percentage moves since the last upturn in momentum, however premiums were high when that occurred due to the previous sell off and increase in VIX. A buy setup here with lower volatility might have better priced options for the next leg. Of course, those selling puts on the prior upmove would have captured that decrease in volatility. I will be on the lookout for the next upturn in momentum, and stay on sidelines as long as trend is up and prices below the three day pivot.
fxi1003.pngIt is interesting that many of the bubble stocks are starting to come back to earth. The biggest bubble of all seems to be China. Commentators and young analysts (those still in school when the tech bubble popped) are sounding a lot like those commentators giving all the reasons why sky high multiples were justified in past bubbles. I remember this when the Japanese market bubble popped years ago, and the tech bubble pop at the beginning of this decade. All the reasons were given why sensible valuations don’t apply to this market, because this time it’s different. China is closed all week, and the stocks were still rallying here with their markets closed, at least until today. The chart to the right shows the recent uptrend, with the three day pivot holding the prices lows of the move, until today when prices opened right at the pivot, and then moved lower. The CCI is still over the bullish plus 100. I’m not implying this trend is over, but it is very crowded right now, and like I’ve been suggesting in gold, a good shake-out should not come as a surprise. Tops take time to build, and there is no technical evidence of that, at least yet.
Gold dropped a bit more. Also, many of the commodity related stocks have succumbed to some profit taking. These initial drops will probably attract those waiting for a pullback to buy. But after a series of drops and rallies, momentum could start diverging, and a top could be in place, at least for a more sustained downmove in many of these markets.