Yesterday was an all-around weird day in the financial markets. Essentially everything was up -- except, importantly, the dollar. But stocks, gold, silver, bonds and a bunch of other commodities and markets saw good-sized upward moves.
Gold hit a 7-year high yesterday, with December gold futures closing at 395 after hitting 397 intraday. Even more impressively, silver futures rallied big yesterday, moving from 5.07 to 5.335. That's a huge move for silver.
The dollar getting roughed up really helped gold and silver, but amazingly, it didn't bother the stock market at all. One of these markets is going to be "wrong", and I think it's likely that stocks are the "wrong" ones here.
And here we are again at SPX 1060, right at the crucial 38.2% bear market retracement level. Although it's hard to imagine such an event without a sizeable correction first, if 1060 is captured and holds, then a swift trip to SPX 1150 could come quickly. My advice if 1060 is surmounted, and you're short (which we're not, by the way), is to cover up, take your lumps, and simply plan to at least go short again on a subsequent move back down through 1060. Essentially, you'll be in the exact same position you're in now, while avoiding the significant risk of watching a blow-off bubble re-inflate against you.
This 1060 price zone is so crucial now because above that level and the echo-bubble has a chance to inflate beyond all recognition.
However, it's going to be tough to for the market to follow up today's big white candle with another similar performance. The hourly trend has been stretched to the point where at least a pause usually occurs.
If there is another white daily candle slicing up through SPX 1060 on Thursday, then that will mean there is no "down fractal" as I've been postulating, and this incredibly persistent up fractal could be sub-dividing and heading for the stratosphere. With the VXO -- the old VIX -- at 16.99, then that would be a remarkable occurrence, certainly defying the odds. But I'm not putting anything past this echo-bubble anymore.
Conversely, a collapse right here will trigger cries of "head and shoulders top", and maybe even a little trace of fear will hit the market. Until we see such fear, and the real selling pressure that accompanies it, it's just too risky to bet too aggressively on the short side.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained 1 point to 4% full of negative sentiment.
SHORT-TERM: Moved into a sharp advance phase.
MID-TERM: Progressed 2 points on the decline side to 12% but Confidence moved the other way, gaining a point in the BULLISH direction to a bullish 3.
LONG-TERM: Regressed 4 points to 9% on the decline side with Confidence moving a point in the bullish direction to a bullish 3 here as well.
BOTTOM LINE: The developing decline phases on the gauges have not yet been able to gain any traction. Yesterday in this space I wrote, "We're ripe for a short-term advance phase.... If (it has) some real juice to it, then we'll reevaluate our somewhat bearish view for mid November."
Well, yesterday had some real juice to it. Enough juice? The COMP had Up Volume outpacing Down Volume by about 8/1. The NYSE was about 4/1. The top of the SPX's bearish wedge will be at 1066 on Thursday, advancing 0.59 per day. Given the market's recent propensity to continue to grind higher on Sentiment Fumes, I think it's best to anticipate that resistance levels will continue to break to the upside. At least until we start seeing some failures.
For now bullish Confidence levels and the tank's inability to fill with substantial negativty are keeping us honest. When a change of character does come it will be very recognizable on the dashboard.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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