Big up day in Stocks, down day in Gold

spy0318.pngStock indexes rallied sharply today. The indexes gapped up right on the open and proceeded higher throughout the day making a nice trend day up. The price rejection yesterday was a real clue, as was the bullish reaction to the news. You can see in the S&P etf that momentum continued to move higher during the down-draft and retest of the previous couple of days. The white line, which is a half-cycle momentum indicator did move down, but the black line, or full-cycle is the main momentum indicator that I follow. The yellow line shows the price rejection of the low of the candle seven bars back that was overcome yesterday, and more important the price also overcame the intra-day lows from Jan 22nd. The gap up and follow-through today makes it look more convincing that this market wants to work higher. There are a couple of minor resistance points just above. I spaced the bars wide on this chart to better show how choppy this market has been. There have been wild swings and direction changes almost every day. Hopefully a trend will emerge from this and create a smoother trading environment. I’d keep an eye on that area where I drew the yellow line in case this thing falls apart again. But for now it looks like the path of least resistance will be higher, probably with some backing and filling along the way. Sentiment got extremely negative and it will be difficult for the market to turn that sentiment around. Most will believe this is just a bounce within the larger context of a bear market. As a technician I have to believe that to be the case as well, at least until there is more longer term evidence.
nq0318.pngHere’s a chart of the Nasdaq e-Mini futures with the adaptive CCI indicator below. For anyone who still trades the CCI method, and I know the numbers are dwindling, there is an inverted head-and-shoulders pattern that just formed. The very last tiny bar on the chart is the start of the evening session as this is being written. The price action today was the large white candle. The trend indicator (blue lines) is very close to crossing back up for the first time this year.
dollar.gifHere’s a chart that is very instructive. Click on the chart to enlarge and you’ll learn a lot about candlestick charting. It was too wide for my blog format. Use the browser back button to get back.
Gold was down sharply after the Fed announcement. The pit session won’t show the drop as the pit closed 45 minutes prior to the announcement. The dollar rallied and gold dropped over $20. The gold market is extremely overbought and sentiment way too one sided. However, trend is still up and this drop hasn’t yet done much damage to the technical picture. There is a bearish divergence on the etf that closed with the stock exchange times. A similar pattern emerged in the oil market yesterday, but today price recovered almost the entire drop. It is difficult trying to pick a top. Gold may work off the overbought condition and move must lower, but will probably do so in spurts, so I’d rather wait until the trend indicators confirm the trend change, and then selling the rallies. By waiting I risk missing a downmove if it crashes quickly, but I’ve been burned too many times trading momentum divergences. I’ll watch for now. The gold mining shares really got clobbered today, which further adds to the gold bear case.

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