For the past four years, RIO have run into a bit of a brick wall in the $69 to $72 range. At the moment it looks like it is going to try and have another go at this important resistance area. Looking at the pattern that has been built this year, I do favour a topside break.
BHP has a somewhat similar pattern – just not a clearly delineated as RIO.
What could this mean for our market – looks to me as though the great rush we have had this year for funds to get set in mining stocks may not be over. Just don’t expect it all to happen in the next two days….
And not only that – my darling little XSR Index (the bottom end of the mining market) looks to be trying to have another go at breaking topside as well. Joy! Oh joy!!
The only trouble I have is that confidence has got a bit out of hand here in some of the recent runners. I always worry when traders start to think it is them that is clever and not the fact that the market is moving.
I have highlighted the Brazil market a number of times simply because I am having some difficulty trying to understand why it is at its all-time high but we are certainly not. They were up over 3% overnight. I know one can’t make definite comparisons like this but…..
New York continued higher but there are a few little niggling worries – again. Why was the VIX higher when the market was also higher? Not supposed to work this way. I mentioned yesterday that the volume has recently been a bit lower in the VIX which could be setting it up for a move to the topside. XIV the reverse ETF of the VIX was still nicely above the uptrend but the pattern overnight was a worry.
One indicator I follow on New York is what is called the “Fear and Greed Index”. Obviously, this indicator attempts to measure investor confidence – too high and we worry - too low and we buy. Last night up to 92 – I can’t find a spot on my chart when it got to this level. Now the Fear and Greed doesn’t necessarily mean we have to sell everything right this minute as history shows that markets can go on to reach higher levels but the indictor itself will make a lower high. Look at it as a strong warning.
Another thing – the Advance/Decline has only had one down day in the last seventeen trading days. Again, looking quickly at my charts, I cannot see another instance of such a run of positive figures.
And finally, an overbought/oversold indicator that I calculate myself has finally reached over bought on the SPX.
US dollar eased back. As mentioned yesterday, one could have expected a better attempt at rallying after such a long time being sold down. A failure here is going to be serious. Interesting looking at the Aussie dollar in overseas trading - each day it has rallied from an earlier low. I like that. A stronger Aussie would obviously be the reciprocal of a weaker US dollar.
Commodities were generally little changed. The very short-term charts of gold could be forming a reversal but still not confirmed. Looking at my very long-term chart of gold, it is easy to make the argument that this recent weakness has simply been a pull back to the break of the long term downtrend some weeks ago. But as I keep saying, just need a bit of time here.
(20min delay)