I thought I would update where we are cyclically on the spy tonight. There is a lot of confusion and I am not hearing much bullish talk right now in the media. The middle range treasuries are in a huge ramp up as the hedgies panic into them at record low yields. It is amazing that the rich folks have any money left, the way they trust the hedge funds to find the best place for their wealth. Tomorrow we get a lot of data. TIC Long-Term Purchases, Empire State Manufacturing Index, Mortgage Delinquencies, NAHB Housing Market Index and the Loans Officer Survey.
So we should get some volume on the opening.
US$..we continued to grind a little higher as the indexes sagged into the close. Both gold and the dollar are rallying together. This is a tough level for the dollar and I question whether we can vee straight back up after such a big clunk, that would be some serious whipsawing. For now if you are not in lets see what we do with the 83 level.
SPY...as you see in the chart we went below the 1 month low we made at the end of July (green arrows) which should have been the first 1 month low since the 4 month low in June. That is the first time we have done that this early in the 4 month cycle since the crash lows. That is not a good sign because we have a one month low to make at the end of August. We have to ask, if the 4 month cycle is still up then why are we so weak? Remember the 4 month low we made in June was lower than the one in February. The other thing that has to be mentioned is the fact that we are approx 4 months from the last cycle high made in April (red Arrows). The next thing that will happen is a lower 4 month high.
Also note that we didn't take out the June high (blue line) so technically we are continuing the down trend started in April. The one month cycle can be unreliable, so it is possible that it has shifted, but a warning sign like this has to be taken seriously. Everything points down.
The only problem I see with shorting it is that all I see in the media is bearish. There is lots of talk of death crosses of the moving averages, head and shoulders tops, hindenburg omens and a declining macd. So you know the public is selling. That is scary. Who are they selling to?
The only fly in the bear's ointment is that if you discount the broken 1 month cycle as an anomaly, the picture is still bully. I hate being aligned with the public but for now I have to except the warning signals have merit. The bulls have to defend 107 although we can go to 106 one time. I want to see lots of steam on the next try up or it may be lights out.
XIU...no chart...because the xiu is so correlated and this is a cyclical analysis I will not repeat the exercise for the Canadian stock market. For the bulls to keep the rally alive they need to come in here with both guns blazing, the picture looks very weak and that has negative implications for the spy.
GLD...we have been looking for a 1 year low in this time frame and the question is have we seen it. I have represented the expected 1 year with green arrows. I want to point out the shift in the 3 month cycle that may have occurred in February, that's cycles for you. Now as we want to buy the 1 year low it comes back to haunt us (smaller yellow arrows). If we want to be in for the next 1 year up cycle, we have to start taking some risk now. Picking at lows. So far it looks like the next 1 month low will be higher than the end of July low, that is a good first step. As the week progresses we will learn a lot about the strength of gold but of course if we are not in and it runs, that won't do us much good. That is why I have been leaning toward silver just in case we pop up. I am looking for a few more days of firmness followed by a drop toward the end of the month. We will add to positions on that drop.
SLV...I made the slv chart a 2 year to show that 1 year cycles can be out by several months and to get a broader look at how things are shaping up. We are working off a 3 month low and may have a 1 year low in place as well. That is why I suggested long positions in slv because the two markets are correlated and if this is it, we will be in. The picture here is bearish as well but that can change if we find some traction. So we are long waiting for lift off, if it can't go then we step off and wait for the next trigger. Keep stops in place.
GDX...when we look at gdx we see the 3 month cycle clearly shifted in May. We also see that there has been a consistent 1 month low as seen toward the end of the month and that would line up better with the next 3 month low so we are getting conflicting signals. So far we have held the last 3 month low at 46 and it may not be taken out, but usually a 1 year low is pretty obvious in hindsight. Again we have a bearish picture and we need to get some confirmation with higher prices in the next few days. That is why I remain long with a stop at break even.
It will show it's intentions this week. The next 1 month low should be a good buy but I am in now just in case.
It will show it's intentions this week. The next 1 month low should be a good buy but I am in now just in case.
TLT..I think the 3 month cycles shifted to the right and we are back on track. The bulls remain in control. That is the trouble with cycles they can shift. The green arrow is the 3 year low, it came in early by 2 months. There is always the chance that this happens, that is why we use other things to make decisions. The reason for the shift was probably due to spread trades being placed, ie short the 30 year and buy the 10 year. If you look at the IEF etf chart you will see we had a perfect 3 month low and the retrace at the end of July was higher. Those spreads will have to be offset at a later date. The 100 level should not be seen again or I should say should not be broken again.
I can see a pullback starting later in the week in the metals, how strong we are early in the week will give good clues to how big it is. If we don't see steam then our stops may be in peril.
At times like this the risk reward is better so I don't mind getting stopped out from time to time.
We are also due a low at the end of the month in the indexes but I expect that we make a low here and rally for a few days to try and close the gap around 111.00. The picture is getting shaky for the spy but there is still a chance we phoenix.
Thought for the day: Indicators are like self help books, if they worked there would only be one of them.
Struggling?
You can beat the Fat Boy's computer but you can't do it using conventional technical analysis. Go to my blog, where I explain why.
Markets are manipulated, learn to think like a manipulator. If you are not with them then you are a victim.
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