Stocks modestly higher on close, Gold sells off

spy0423.pngStocks indexes closed a bit higher today, although they giving back most of the gains in the after-hours session as I write this. In the last post written on Monday I was concerned about the gap up on fairly light volume. The chart on Monday was the QQQQ. Today I show the SPY with a similar situation. You can see the gap up last Friday on slightly higher volume, but with a lower close. On Monday the SPY rallied from the open, but was on shrinking volume. Yesterday there was gap fillage, and also was a slightly down day on slightly increasing volume. Today volume increase again, with a lower close than the open, with the etf down slightly for the day. The cash market was up a bit (and the net change at the top reflects the after hours price). The low of the day session re-tested the area of gap fillage. Momentum is overbought, and if this market rolls over and takes out the support at the area of the gap, there would also be a divergence in the momentum oscillators. This divergence would also be confirmed by volume, or I should say the recent high in price was unconfirmed by the lower volume. There could be some more work to be done on the downside. Of course with earnings coming out every day, if there are some surprises to the upside and the high is taken out, and if volume should increase, then the situation would look better for more upside. The four day decline would then look more like a bull-flag, and would be viewed a healthy pullback that found support at the closing of the gap. As usual, there are two sides to every scenario. I somewhat give the odds to the first scenario, that is a pullback to at least re-test the moving averages, and to pull back the momentum oscillators. The way this market flips back and forth quickly, it is best to be prepared to trade on either side.
gold0423.pngThe gold market bubble seems to be over for now. You can see on the chart to the right that the moving averages are clearly down. Price rallied back up to the moving average, momentum got overbought, and price came right back down. Note the huge divergence in the middle of the chart when prices went past $1000 and the momentum indicator turned down from a much lower level. At the high day CNBC was talking about little else but gold, and they had analyst after analyst talking about the next level would be $1200 or higher imminently. Now they’re saying the same thing about fertilizer stocks and oil and the falling dollar. I expect the crude and Euro chart to look like this soon. But I could be wrong. It’s just a hunch. The bubbles do pop eventually.

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