The stock indexes opened lower and it was looking like it was going to be a big down day. I was bearish going into the opening due to the reasons given on the post from Monday evening. The indexes failed to progress to the downside and spent much of the session rotating up and down, especially the Nasdaq. The financials started accelerating to the upside late in the day, pushing the stock indexes higher in the last hour or so. Oil also fell adding to the bullish tone. The S&P chart that I posted yesterday found resistance at the longer moving average that held price on Monday, but in the last hour that level was taken out, with price closing slightly above the moving averages, but with the averages still in a downtrend. The Nasdaq chart above still shows the downtrend intact. However, the buying tail left on the candle six sessions ago (indicated by green line) seems to have held prices right at the open, with prices closing near the highs for the session, but still under both moving averages. Momentum is still pointing down. On the S&P the momentum indicator still remains pointing up, with the weekly momentum turning up from a very oversold level. Volume in both markets increased from the day before, but was well below the other large bar up from five days ago. I will still weigh the odds favoring the trend, which is still clearly down. Oversold bounces and short-covering rallies can be sharp and fast. The trend may well change to up, but the way I view the markets there just isn’t enough evidence yet.
The above crude oil futures chart shows the uptrend broken by the price structure, moving below the standard error bands, and below the moving average which also have now crossed down. I was hoping to get a rally back up to the averages with the momentum indicator getting out of the over-sold zone as a short entry point. There was a good divergence between price and the momentum indicator right at the top. I would have taken that signal a few years back. I now wait for the trend to change first, but I do miss many nice moves by being cautious.
The above gold chart shows the resumption of the uptrend, with a pullback over the last few sessions back to the moving averages. I’m very bearish on commodities in general over the near term, but that is based more on gut feel and sentiment. The price action in gold is up, at least for the moment. There was a very bearish head and shoulders pattern on the momentum indicators in the lower sub-graph that suggested this pullback. Many commodities have really been hammered lately. Corn looks like a classic bubble that has just popped, similar to what wheat did in the spring. Soybeans look like they are trying to join the downside. And the list goes on. The dollar looks like it is building a base, or at least finding support at recent lows on the attempts to push it down. If the dollar stops dropping and if oil should continue down, and other commodities keep falling, it would be difficult for gold to move higher. At least that would be a logical assumption. But the markets aren’t always logical.