Stock indexes were sharply lower today. On the chart above I drew a red line from the buying tail on the candle from Aug 16th. That had been an area of some support in late November, and it seemed that the market was trying to reject that area over the last week or so. But the reversal down today seems to be negating that idea. Momentum had been up, so with the trend firmly down my thought was that prices could get a little closer to the blue moving average lines, and if so, momentum could get back into the overbought zone which would have been a good area to go short. There seems to be little chance of this now. The overall trend and price structure is much more important than the short term momentum. Unless this reverses back up quickly it looks like another leg down could occur. However, with the momentum (black line in subgraph) turning down from an already low level I will tread carefully on the short side. Sometime if the market is very week all you get is a hook of the overbought line by the white line, which is a five period double stochastic (black line is 10 period). I need to replace my bucking bronco bull in the upper left corner with a bucking bear, but I can’t find one. But then there’s photoshop. I’ll see what I can do.
Gold is absurdly overbought and did have a slight Tuesday turn-around day. It spiked up to a new high, then finally sold off a bit into the close of the Comex session, and then fell back under the $900 level after the Comex close. A good clue of a possible top was when CNBC broadcast a segment from the Comex floor. Also, there were many gold analysts giving their bullish opinions as to why this is a great time to enter the gold market, and then gave all the reasons why gold has already moved from $300 to $700 or so as if that’s the reason why it should go from $900 to $1200 or $2000 or whatever. Only one guy I heard tried to put some common sense on the air, but was mostly ignored by the reporter. But I didn’t listen to CNBC all day so don’t know all of what was said. I just think this market is very one sided to the bull side and fundamentals don’t justify this price. Recession is certainly not a reason for a high gold price. Perhaps the perception that the feed will push rates down to 1% again and not just trash but destroy the dollar is what is keeping the price where it is. I suspect it is mostly driven by speculators and hedge funds and the public piling into the etfs. I’m a long term bull on gold, but prefer to be in when CNBC isn’t reporting from the Comex floor. The Baltic Dry Index was down a little over $300 again today. The FXI China etf was down sharply today.