Stock index flat, gold up

dia1004.pngThe stock indexes closed little changed today ahead of the employment report. There was very light volume. The Qs opened under the three day pivot, sold off, and rallied back up to close a few pennies under the pivot. There wasn’t much to show on the chart, so instead will show the Dow 30 ETF, or Diamonds. Yesterday the DIA closed under the three day pivot, with the open today under the pivot as well. The price action during the day was up and down in a tight range, like a yoyo on a short string, with a close near the lower range, and sitting right on the upper standard error band. The double stochastic in the lower sub-graph is now in the oversold zone. The short term trend is up sharply, reflecting the move up since the sub-prime sell off, and the longer term trend looks to be rolling back up. The Qs are still in a strong position for long trades, but the Dow (and S&P looks similar) could set up for a nice long trade once short term momentum turns back up. It’s a guess which way the market will react to the report on Friday. Anything that could change opinion on the next interest rate cut would obviously be a market mover, and these indicators can’t guess something that hasn’t happened yet. However, with an uptrend in place and oversold momentum, I would favor looking to the long side. A negative reaction to the report could set up a decent sell off into support on the regression curve or error bands.
gold1004.pngThe gold market tried to continue the sell-off, but found buyers and rallied right back up to the three day pivot. Short term momentum, as can be seen in the double stochastic in the lower sub-graph, was oversold and is trying to turn back up. Uptrends as powerful as this usually attract buyers after sharp breaks, so this bounce was to be expected. There is no sign of a top yet. However, if a test of the highs of three or four days ago should fail, then there would be more evidence that a meaningful downtrend will start. So far this looks like a little shake out. My gut feeling is that this trade is way too crowded to support much more upside now, without first having a more serious shake out. But that’s just my gut. It is often wrong. That’s why I have indicators.