Stock rally continues, Gold up sharply, Baltic Dry down

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The Baltic Dry Freight Shipping index was down again today. So far it has made an almost complete retracement of the upmove from mid-June of last year. The double top, momentum divergences, and break of parabolic stops were noted at the time. I must admit I was thinking this was a bubble most of the way up on that last leg. Just goes to show it is best to put hunches and gut feel aside and wait for the technical indicators to line up. Also, this has been dropping in the face of renewed weakness in the dollar, so there seems to be more going on than just an inverse relationship to the dollar. If this continues it still has negative implications for world markets, especially China, which has had some of the air let out of its bubble, but not nearly as much as would be indicated by this index. Maybe more to come.
gold0124.pngGold rallied today in the day session, and is up even more in the after-hours session as I write this. The trend remains strong, and as I noted a couple of days ago, momentum returned to the upside from a very oversold level – at least as defined by the double stochastic. The day after momentum turned up the gold price retraced a bit, but as of now it is quite a bit higher. The high of the day session tested the all time highs of January 14th and 15th. It will be interesting to see if the test of those significant highs can be overcome. With the trend up the benefit of the doubt should go to the bulls, however, if price fails a very negative divergence and double top would form which could finally signal a correction in this market. My gut feel is very bearish short term, but I can’t ignore the bullish structure on the charts. However, a failure could change that in a hurry. A small clue could be to watch the gold mining stocks. So far most of them are still lower than they were at the previous gold peak. Watching gold stocks for gold price confirmation is probably not as accurate as it was before all the etfs and other ways to trade gold.
qqqq0124.pngToday I’ll post the QQQQ, as today it was a bit stronger than the SPY, playing some catch-up. The trend remains clearly down, however there is a momentum divergence as can be seen where I drew the blue line. The indicator in the sub-graph this time is the TRIX drawn with a signal line. Many indicators failed to diverge clearly during this decline. Also, the three day pivot (yellow dots) was surpassed on the opened, and that pivot held all day. Volume declined, as can be expected after the previous two wide range bars. Some might interpret the narrowing of the range to be lack of follow-through and somewhat bearish. The momentum divergence would indicate the probability of more upside, but it would seem logical to assume that selling will come back in, and either another leg down will happen, or perhaps a test of the previous low will be successful and a more meaningful rally will occur. Counter-trend rallies are the most difficult to trade. Of course it’s possible this could be a rare “V” bottom, but if momentum turns back down the easier trade would be to go in the direction of the trend, which isn’t even close to turning up at this point.