Record high for S&P, indexes and gold up

q1005a.pngThe stock indexes, and just about everything else, was up sharply today, mainly on the employment report. The S&P made a new record high, the Dow falling just short of a high, and the Nasdaq a new recent high, but still far below the bubble peak of 2000. Volume was still relatively light. The chart to the right shows the QQQQ with the shorter term regression curve and standard error bands. I usually show the long term bands. This is the short term indicator that I use for trend determination on the trend page. You can see how nicely it tracked the previous down swing, and the current up swing. Also, the CCI is still above the bullish plus 100 line. The very short term momentum had turned down, but with the other bullish factors, there was no reason to think this uptrend was over. I did expect more of a retracement before the next leg up, but with an employment report anything can happen, and in this case the markets exploded higher.
q1005b.pngThe chart to the left is a close-up of the same QQQQ etf. The three day pivots (yellow dots) held most of the uptrend, until the close of three days ago. Yesterday the market tried to sell off, as it opened right on the three day pivot and then drove lower. However, by the close the market had recovered to close right under the three day pivot, and about where the session began. Today, momentum turned back up right on the opening gap, and well above the three day pivot, and prices drove higher all day. The S&P had a similar look, although the double stochastic (in the lower sub-graph) had been more oversold, as I pointed out yesterday. The employment report could have caused the market to move in either direction today, so it would have been difficult to guess a direction as of the close yesterday. In either case I was looking for long entry points. It would have been nice to have a sell off with a more comfortable entry point on support at lower levels. But we don’t always get what we want, especially when reports can move the market. This was a bullish report with a bullish reaction, so not much can be derived other than to just follow the trend and momentum until there is an opposing force.
gold1005.pngThe gold market also joined the party today, after some weakness early in the session. There are now two reference point drawn at the blue lines. As I pointed out yesterday, the double stochastic was in oversold territory, and all trends are up, so it was probable that there would be a test of the high. A failure of this test could cause the market to have some downside soon. It is an extremely crowded, one sided trade, as is the downtrend in the dollar. If you check the net commercial position in the CFTC Commitment of Traders report, you’ll find the commercials are only 22% long in Gold, and in the Euro FX they are only 18% long (at least as of last Tuesday). That means hedge funds, small traders, other large traders, are long 78% and 82% respectively, and on the other side of the trade to the commercials. The commercials can be wrong for a long time, but when extremes are reached, sharp reversals can occur. The COT report on the stock indexes is closer to even, so no extremes to worry about yet.