I started the year raving about the Russell 2000. What a brilliant run it has had and has still not given a sell signal on its medium term indicators. As soon as it gets close, it has another pop to the upside. Just have to wait.
In the meantime what a week of action we have had in the Australian market. Exactly on my time line, we suffered a severe case of vertigo falling quite sharply for three days and then on Friday it recouped a major part of that fall. The decline broke the absolutely perfect uptrend our market has been in since the low in November but despite Friday’s impressive rise which took it just back above this line, it has done quite a bit of damage.
However, (isn’t there always a “however”) there is a very bullish alternative which I must put out there just in case it actually comes to pass. The XJO hit 5081 on 20th February. It then had a correction but soon recovered to run on to 5163 before catching this week’s downdraft. All this action forms a perfect parallelogram which may well be a simple ABC correction. If this is the correct analysis, then the XJO will run on to around 5400. Now it has to pass quite a few tests before that target can be confirmed – the first and most important being that it (the XJO) CANNOT exceed the low set on Thursday. That happens and we have a correction on a much bigger scale. I still favour lower prices short term.
Interest rates popped higher here last week – in line with rates in the US.
It is interesting that a possible ABC correction as outlined above is precisely what I suggested in my notes last week regarding the SPX. However, it didn’t eventuate there with the Dow rising for ten days in succession. But despite this extended number of plus days, the overall rise has been grinding and there have been many times when a rise of that dimension could be achieved in just a couple of good trading days. Prices turned down marginally on Friday on HUGE VOLUME although it is hard to be sure just how much of this volume was associated with the end of quarter option expiry. So whereas the Australian market has gone sideways for nearly a month allowing the indicators to all come off overbought, New York indicators are still overbought with many divergences appearing – as an example the number of stocks in the NYSE above their 50 day moving average has gone from a peak of 93% to 83% at the moment. Unfortunately any encouraging signs being displayed in the local market have a high probability of being overwhelmed if New York rolls over.
Just to complicate matters further, AAPL which has been one of the biggest drags on the US market, is looking like it is close to breaking its downtrend.
There has been a few somewhat disparaging comments this week regarding the optimistic potential I have outlined for gold. OK I admit there is nothing confirmed. But there have been enough bullish signals for me to start looking for possibilities. I always love sentiment figures on all markets and at the moment sentiment on gold is at or near all time lows – that on its own is enough to make me sit up and take notice.
The bounce in gold early in the week left a gap – gold loves to fill gaps so of course it had to come back and fill that space. I mentioned last week that silver was in what I call my “zone” and unfortunately it is still locked in that tight range. I really need silver to perform as so often it is the lead market in precious metals. I think there are quite a few of us who follow all the charts associated with gold and gold stocks, who are watching these markets very closely.
The US dollar turned down sharply on Friday. That may help gold.
I have mentioned copper a number of times over recent weeks and the concern I have about the sideways pattern it is currently locked in. This past week it has been able to just remain strong enough to hold the bottom of this giant triangle. The problem is that when something is so clearly delineated, then everyone is aware of it and any break is likely to be swift and overdone. But perhaps it would be good to have a break so that we can clear the market of the overhang that has been causing such trading difficulties for months.
There are potentially some really bullish charts showing up on long term parameters in the US. All need some sort of correction in the short term but a bit of work at lower levels and we might have something really worth while coming down the track. Generally of a resource flavour. But I am stressing that I am thinking longer term so it is just something to think of out there and they do need a correction. Rest assured – as soon as I feel it is all confirmed, I will be making my projections very clear. And it will probably have a lot to do with the long term picture of the US dollar.
Two timing boxes that I have got coming up literally jump off the page around 9th April and 30th May. Allow a couple of days either side.
(20min delay)