Stocks down big, gold up big

q0108.pngStock indexes started the day looking like they were going to make a swing back to the upside. Sentiment has been getting more and more bearish, oscillators have been getting oversold, and some sort of bounce could be expected. There were some little tails being left on the daily bars as some of the indexes looked like they were rejecting probes into lower territory. Then the markets started to fall apart once again, and those potential support areas gave way and the indexes extended downward to close on their lows. The AT&T CEO was blamed for making remarks about customer service being shut off due to lack of paying their bills. I would think there was also some delayed reaction to some potential action with Iranians boats, which must have been the trigger for the oil and gold rally this morning. Whatever the cause, there was much damage done to the technical picture today. A bounce should still be expected at some point. I leave the eight second ride in the upper left corner, due to the nature of the price swings. The daily chart looks fairly smooth for a change. It’s now the intra-day swings that are like trying to stay on a mechanical bull. The yellow dots on the price chart is simply the three day simple average of the floor pivots. The oscillator under the price bars is the double stochastic, which does a fairly good job of keeping a trader on the correct side of the daily move as long as a trend is present. When the dots appear flat as they did near the left side of the chart, the market is often overlapping and range bound.
gld0108.pngThe chart to the right is the gold ETF. I once again draw attention to the triangle, as defined by the two blue converging lines. This was a classic chart pattern that caught the next leg of this bull move, without the need for any indicators. Since this triangle turned out to be a continuation pattern, some might expect the ultimate objective to be proportional to the preceding move. I haven’t found triangle to be very good at measuring a price objective. I would rather respect a good momentum divergence along with a close under the three day pivot. So far the momentum indicator has gone to a new high, so would expect some backing and filling with a move to higher highs in price. If this is accompanied by lower highs in the oscillator a correction could occur. Volume on the CBOT full size contract is running at about half of what it was during the push higher in November. This is somewhat ominous. Price momentum is obviously very strong, but sentiment is getting nauseatingly bullish. Correction in gold can be fast and furious and come out of the blue, especially when calls for ridiculously high prices are being seen by many analysts. Everyone seems to be expecting $1000 per ounce any day. They might be right. But it might not be on this run. Gold has a way of shaking out the bulls when expectations are universally accepted.

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