Originally written on September 16th.
After the markets closed tonight and I downloaded my daily data on stocks, indices and ETF's I follow and ran a few charts, it just seems like I need to post a short one with FSO tonight before I collapse..
First off, let's look at the general market represented by VTI (Vanguard's whole market ETF)..
VTI is on an intermediate term BUY - but just barely. DIA action is sorry and QQQQ has been outperforming both since the first of September. I'm in a trade on QQQQ but I've steered clear of DIA and VTI. Something doesn't feel right here.
The Monthly chart of VTI is dropping under a downtrend since November of 2008. A lot of trading money can be made trading VTI within the monthly bars on the chart but the overall trend is trading a downtrend with mini-rallys here and there.. Not a confidence builder.
Now we get to see some real action.
SLV, one of the silver ETF's is kicking butt, getting way too far above the uptrend initiated last February using daily data. Way too far above it. There will be a reaction and sell-off here sooner or later, but since the MRO is locked in below zero and going down (today), it won't be for a bit. Things could turn around tomorrow but for now, just sing all the way to the bank.
On the daily chart, XAU has just vaulted through the top of a trading range that goes way back to the end of November 2009. This is not a bear move. It is trading way too far above the uptrend line going back to July of 2009 and that sets up a correction generally across the board in the gold and silver stocks. The only problem here is trying to guess when! Could happen in a day or a week - but right now, I've extended positions across the board and have nailed in very close stops below them that goes up day at a time. My core position will remain intact until the uptrend is violated, but my trading positions are standing tall with the nerves poking out in all directions! Returns on trading this year so far stand at 60% of invested capital and I am not one to be greedy!
This is the chart that lets me sleep a little easier between market close and open the next day. The weekly chart of XAU is on a "strength" call, the uptrend well intact and on a weekly basis, the Index is not - repeat not - that far above the trend. Therefore in the short term we might see a hickup but on the intermediate term, I don't think it will happen for a while. Remember, the MRO tells you which way the Index, security or ETF you are trading is moving - it does not tell you how long it will do it. There are clues, however, in the MRO action that indicate both the power of the move and the likely duration.
The fact that the MRO has rolled over and is diving below zero while the %R is reaching an overbought position gives me some confidence that things could keep going up for a bit. It's incredible how long some things can remain overbought when the time and market sentiment are just right.
Please also note (if you haven't already) that the 30 year Treasury yield is rising. It has been moving quietly higher over the past two weeks and is at almost 4%, having moved from near 3% earlier in the month. Whether this is a sign that the Fed and Treasury have lost control over the long bond and the precious metal markets I have not a bloody clue. All I know is that things seem to be happening faster and faster as the world catches on that they all have been screwed and will never get anything back for their Treasury bills and bonds but more paper seems to be moving markets in ways the Fed's are not going to like.
You might look for some intervention in the next week or two if they try and hammer things back into place with a burst of Federal Reserve buying of T-bills and Treasury selling gold. Time will tell and while I am not convinced the Feds intervene in the metals markets to any extent but if they do, it's almost time for them to do it. That they intervene in the Treasury debt market is self evident and happens all the time. That'll bite them in the ass one of these days and they will never understand why.
Have a great rest of the week! Sleep tight and keep your cool!
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