Stock index rally fails and stocks close lower, Gold up sharply

gold0219.pngThe gold market was up sharply today. In previous posts I mention the formation of another triangle, as can be seen by the yellow lines. I also mentioned that it looked like momentum was turning down. With my bearish gut feel, due to extreme bullish sentiment, and momentum oscillators looking like they were starting to roll down, I was thinking the odds favored a downside break. I also mentioned that the trend was still up. I was looking for any clue to a trend reversal. Today the gold market broke out of the triangle to the upside. The trend won over momentum (and my gut). It looks like they still want to pump more air into this bubble. I will await a confirmed downtrend before going short this market. Every break is met by more buying and higher prices. Bubbles can get blown up much larger than logic or fundamentals would dictate. When and if this market breaks it should be spectacular. Until then I will wait and watch, and look for clues. I’ve learned my lesson in trying to pick tops. I’ll wait for the trend change to be confirmed, but will also be very careful trading the long side in such an overcrowded and one sided market. If another upleg is to start with what looks like a breakout of a continuation triangle, I will only scalp pullbacks on the long side. One negative sign, if one can be found, is that many of the larger gold mining shares are quite a divergence from the gold price, at least so far.
qqqq0219.pngStock indexes started of the first day of trading after a three day weekend with a good size rally. That rally soon faded and stock indexes hovered around the unchanged level for much of the late session, with a downtrend accelerating in the final hour and a half, only to pare losses a bit right on the closing bell. The chart on the left is the Nasdaq/QQQQ, which shows a downtrend in the indicator on the price bars, although market action seems to be more sideways at the moment. The short term momentum, in the middle sub-graph turned down on Friday, and the double stochastic in the lower sub-graph is still pointing higher. It is not a clear picture at the moment. It appears the market is trying to retest the lows for a third time. If the lows hold this market would look more bullish, as three attempts to push prices low would have failed to attract selling. This is a bit premature, as the market trend is still down. I like to look for scenarios that could change the existing trend, and three drives to a low would be quite bullish. The S&P market would have a lot further to fall for a retest of lows. There is a triangle forming in that market and is too soon to tell if it is to be continuation or reversal, but daily and weekly momentum has turned up in the S&P against a downtrend in the price trend lines (I’ll show chart on Wednesday). Price structure is uncertain as it come into apex of triangle.
Oil was up sharply, testing old highs. This is another market where my gut feel is bearish but have no technical reason to go short. The dollar continues to chop around in a sideways channel.