Stocks up big, gold and oil down big

q1128.pngThe stock indexes were the big star today, trying to climb out of the hole they have been in. In the comment yesterday I suggested that the Nasdaq/QQQQ didn’t seem to want to go any lower at this point. The big down impulse of about two and a half weeks ago has held so far, with the downtrend intact but momentum and prices holding up. It seemed like the path of least resistance for the moment was to try to test back up. So far that is what happened with a big gap up right on the opening. Prices closed right on that pivot where I drew the yellow dashed line. There have been a lot of overlapping bars during this sideways trend. Prices are testing the upside and momentum is up, so it looks like more upside should be expected. But it is always wise to look at the alternate scenario, so if prices fail here it is always possible to retest the lower level, although that seems unlikely at the moment.
The S&P actually had a slightly larger percentage move. As I’ve been saying here for weeks, I’m more interested in the Qs for the upside moves, and the S&Ps for the downside moves. The structure of the S&P market has been more clearly down. If the market had been down 300 points instead of up, I was prepared to go in that direction on the downside with the S&Ps. That view could change if the resistance line drawn overhead are taken out and re-tested successfully. That’s to be analysed latter. For now I’ll just focus on the Qs, as long as this rally doesn’t fail. Nothing would surprise me with all the volatility recently.
The gold market was off sharply today, although it recovered a portion of the loss when the dollar rally turned around. There’s still a very bullish divergence forming in the dollar index. Prices are just a bit above the lows and if those lows are taken out more work will be needed. Several bullish divergences have failed during this long downtrend. Eventually one will work and should signal a bottom. What would cinch it is a rate cut with the dollar not reacting as expected and going up instead of down and what should be bearish news.
Crude oil dropped sharply after a bearish momentum divergence. The trend is still holding up by a hair. If a downtrend is confirmed, rallies could be sold. Puts on the USO are available, although there are wide spreads. They have a fair amount of open interest, but the volume can be light, so limits must be used.

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