At the beginning of January, my words for the first half of the year were “muddle through”. At the time I said that the alternative was “Armageddon”. At the moment it is hard not to think that perhaps I should have focused on the latter rather than the former. But in my defense, I was looking to sell in January and buy in March – and we are still in March!!!
Today I will try and highlight the picture as it stands at the moment.
Starting with the Russell 2000 but this time the weekly chart (semi-log scale). It has broken the uptrend but as we can see, there is quite good support in 1650 to 1750 zone. I think for now this support will hold. I have mentioned previously that this index tends to back and forth so to expect some indecision.
View attachment 5144407Turning to the S&P Index, here I am highlighting the daily close chart – again on semi-log scale. It broke topside during the January rally and the index is now following the upper boundary of the triangle lower. I think this chart is quite encouraging particularly with the high volumes that have gone through in the past few days.
View attachment 5144413In our market the XJO has now retraced the whole of the January rally in what appears, as mentioned previously, to be a rather nice ABC correction. There is support around 6900 and then again at 6800. Once we have a bounce, we should get a better idea of the situation.
And London. What an unbelieveable chart this has been. Late last year it was the London chart that encouraged me to think that we would have a January rally. And then as I laughingly mentioned a couple of weeks ago, could someone mention to them that I was happy with the rally, and it could have a correction now. Correction …. It quickly fell six hundred points back into the support zone. I would like to see it do a bit of work in this area.
View attachment 5144419Gold had a big rally at the end of the week as the words “banking crisis” suddenly dominated all the news. (Same old problem, companies failing to mark to market their holdings). I am including the long term monthly chart here so that we can clearly see the importance of this area.
View attachment 5144431Gold stocks themselves have been slow in attracting attention. As an example of this, look at EVN. Usually such a market darling but has lost ground recently. I would be happier if the buying was a little more pronounced in the actual gold stocks.
View attachment 5144434Once again ten-year bond yields. As we can see we have continued to hold in the support of recent months Very frustrating chart at the moment as it isn’t giving a very clear picture either way. Really want to see the downtrend broken.
View attachment 5144437So to finish, I am going to show the chart that is really worrying me – the US Dollar Index. Is this a big base. I hate calling any pattern a head and shoulders bottom as usually they rarely work these days, but could this be what is happening here? So…if it breaks up, what does it mean? Are interest rates going up again? We might worry about a banking crisis but this chart could be suggesting a debt crisis which I think is far more serious. So many countries hold so much sovereign debt in US dollars and if it starts to move up again in this environment, we could quickly have something far more serious on our hands.
I leave this for everyone to mull over.
View attachment 5144440A headline this week – lumber hits 33 month low. Doesn’t seem all that long ago when traders got a quick lesson in what happens when markets are locked limit up for a number of days and everyone was bemoaning the effect on inflation.
(20min delay)