New York closed higher still keeping alive the possibility that trading since the high at the end of January was a large ABCDE pattern. But the market always leaves something to worry about …. I would like to see a bit more strength in the S&P. Overnight it seemed to be more intent on just closing the gap it left in the previous session. As I have mentioned recently the Russell 2000 has had the most bullish pattern for some time and overnight registered a new all time high. Obviously the smaller caps are very much benefited by the stronger US Dollar but I don’t think their market can make a substantial move led by the RUT. Of the nine sectors the best actual rise was in XLY (Consumer Discretionary). This is interesting because it has been one of the worst sectors for some time so a bit of a catch up there. Are US citizens about to start spending? Did someone actually get a tax cut?
After the sharp move up in interest rates in the previous session, trading was a little more subdued with the 10 year yield just finished a smidgen higher. The US dollar followed suit and also just ticked higher. I often find looking at the reverse ETF’s can give a better idea of a pattern and the reverse ETF of the US dollar looks like a low point with indicators very oversold. The crosses are very interesting again with the Aussie, Canadian and New Zealand all a bit better.
Silver was the best of the precious metals – this is a bit of a change and had a very positive affect on the gold/silver ratio. I have been complaining for ages that silver has been a drag on the gold price so it would be a jolly good sign if it could finally get its act together. Still, I can’t put too much importance on just one day of trading, so we will have to see if it can carry through but it was interesting that GLD (physical gold) was down but GDX (stocks) was up a smidgen. I do like to see stocks better than the actual metal.
There was one group in the commodity markets that took my eye – the whole soybean complex. All sharply lower but this weakness didn’t flow through to the other grains. Have soybeans got caught up in the trade restrictions currently going on? Worth watching this to see if this could develop into a problem.
XJO was unbelieveable yesterday – it rallied again up to the same line that has been restricting trading for the past ten trading days before once more turning down. Doesn’t matter how many years I have been drawing charts, I still never cease to be amazed at how markets know where lines are or gaps as well for that matter. Some sort of inherent memory. Our gold index came off sharply but is already getting back into support after its earlier very sharp rise. This sector, along with many other stocks, got very overbought on the new-found confidence we saw through late April/early May. Some consolidation would be good.
Still no clear path of money running into the spec sector and stocks seems to be able to manage no more than one or two days of enthusiasm. Need to see a definite trend of money in this sector but this has been missing for some time.
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